Will Changes In Bankruptcy Laws Affect You?

There are 2 sides to the changes in bankruptcy rules It will be
a lot harder to file bankruptcy under chapter 7 and get a
totally clean slate
For businesses, relying on issuing credit, the new personal
bankruptcy law is doing great, reducing personal bankruptcy
claims from the thousands to double digits(In the short run)
However, lawyers working with the actual people filing for
bankruptcy say that the new law is seriously flawed because it
puts more financial burdens on already broke clients and reduces
potential debt repayment to small businesses
And then of course you have the credit card companies charging
high interest rates which in quite a few cases caused the
bankruptcy in the first place According to some financial
specialists, much of the debt people accumulate is a result of
keeping up with the Joneses and not thinking ahead
For 80% of clients counseled each month, the debt is credit card
related and averages $32,000 – a result of six to eight cards
Consumer credit organizations say the new law provides
debt-reducing strategies for those considering filing bankruptcy
and curbs abuse
Under the new law it has become a requirement that the person
filing bankruptcy obtains credit counseling both before and
after filing for which that person will be charged
So now the consumer would then know the advantages and
disadvantages of declaring bankruptcy Yet it seems merely
another expense for an already financially stressed individual
People filing bankruptcy in general are not overspenders, but
merely faced with temporary financial disasters such as medical
costs, layoffs, a divorce, gambling debts or other crises
Before you can file bankruptcy,you are now required to complete
credit counseling with an agency approved by the US Trustees
office
This credit counseling is designed to help you determine
whether or not bankruptcy is appropriate
Once you complete your bankruptcy, the law requires you to
attend another credit counseling session
These are new requirements, before this law was passed the law
did not require a person to go through counseling either before
or after the filing of bankruptcy
Second, under the old law, a person could decide to file under
Chapter 7 or Chapter 13 Under the new law, the court will look
at your monthly income and apply a means test relating to the
state in which you live If your income is less than or equal to
the medium income then you will be allowed to file Chapter 7
which in effect will give you a clean slate
This medium income can vary from $28,000 in Missouri to $56,000
in Alaska If your income is greater, you may be forced to file
Chapter 13 unless you can demonstrate you do not have enough
disposable income
Under Chapter 13 you will not get a clean slate but will have to
make payments on your debts
Also, your attorney now has to personally certify that your
bankruptcy filing is accurate This means more work for the
attorney, with higher legal fees
Advantages of declaring Bankruptcy: Legal protection from
creditors Takes care of all or most debt In some cases, can keep
home and car May stop complete financial ruin Provides a fresh
start
Disadvantages of declaring Bankruptcy: Bad credit May have to
repay partial debt load and return collateral to creditors May
lose assets, including house and car (If the house is worth more
than a certain amount) Bankruptcy becomes public record, and
Remains on credit record for seven to 10 years
“In the past, a bankruptcy offered a fresh start for the filer,”
said Columbia attorney Gwen Froeschner Hart “The new federal
legislation offers language directed at helping creditors”
If you analyze credit card expenses for most people you’ll see
that they often include medical bills and day-to-day expenses
for the elderly or those earning low or fixed incomes Records
show that 50% of credit card holders do not pay their full
credit card bills every month
33% of the population can’t afford medical insurance so have to
charge their prescription drugs With the recent Medicaid cuts
and rigid bankruptcy legislation who knows what is going to
happen to these people
There are some who say consumers are abusing creditors The
irony is that credit card companies are begging for customers
and offering large amounts of unsecured credit, yet at the same
time, lobbying for stricter debt controls

Tags | bankruptcy, chapter, claims, credit, curbs, declaring, filing, financial, layoffs, personal, repayment