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Bankruptcy Laws
By plrprousers | November 29, 2008
Significant changes in consumer bankruptcy laws took effect on October 17, 2005, with passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Before then, Chapter 7 was the most common form of bankruptcy in the United States, because in a Chapter 7 bankruptcy individuals are allowed to keep certain exempt property.
Many people spent years being careless with their credit and debts because it could be fixed with a quick filing for bankruptcy.
Today, filing for chapter 7 is not as easy as it was before, because they have added several new restrictions to it.
Previous to the updated bankruptcy law in 2005, people had the ability to select the code they wanted to file under.
Income did not matter.
One of the biggest changes is that now those with a higher income will have to file under chapter 13 and therefore pay off some of their incurred debt.
The law also imposed new restrictions on bankruptcy lawyers.
Because of this, some lawyers no longer are willing to take on clients wanting to file for bankruptcy.
In addition to the new income restrictions, there is also mandatory counseling that debtors must complete before and after filing for bankruptcy chapter 7.
Individuals that decide to pre-file, still have to complete the credit counseling requirement and people that post-file must complete a financial budget that they will use.
In light of our current economic situation, many feel these new standards should have been executed several years earlier.
These financial tools are designed to help people become better aware of their spending habits and to assist them in becoming more financially stable.
Similar to the changes in bankruptcy laws for chapter 7, filers for chapter 13 must provide income reports of their personal finances.
After paying for regular living expenses, any disposable income remaining must now go toward repaying any loans.
The IRS now determines the allowed actual living expenses, not the actual living expenses, if their income is higher than the median income in their state or per capita. Before filing for bankruptcy, you need to carefully consider all your options and become well informed on the legal aspect surrounding any new laws that may pertain to your personal situation.
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