Are The Modified Bankruptcy Regulations Going To Benefit You?
There are 2 sides to the changes in bankruptcy rules. It is going to be a lot harder to file bankruptcy under chapter seven and get a completely clean slate. For companies, relying on issuing credit, the brand new personal bankruptcy law is doing fantastic, decreasing personal bankruptcy claims from the thousands to double digits.
However, lawyers working with the actual people filing for bankruptcy say that the new law is significantly flawed because it puts a lot more monetary burdens on already broke customers and reduces potential debt repayment to small companies.
Under the new law it has become a requirement that the individual filing bankruptcy obtains credit counseling both before and after filing.
Individuals filing bankruptcy in general are not over spenders, but merely faced with temporary monetary disasters including medical expenses, layoffs, a divorce, gambling debts or any other crises. Before you are able to file bankruptcy, you're now required to complete credit counseling with an agency approved by the US Trustees office.
This credit counseling is created to help you determine whether or not bankruptcy is appropriate. As soon as you complete your bankruptcy, the law needs you to attend yet another credit counseling session. These are new requirements. Just before this law was passed, the law did not demand a person to go through counseling either before or right after the filing of bankruptcy.
Second, under the old law, a person could choose to file under Chapter 7 or Chapter 13. With the new law, the court will have a look at your monthly income and apply a means test regarding the state in which you live. If your income is less than or equal to the medium income, you'll be allowed to file Chapter 7 which in effect will give you a clean slate.
This medium income can differ from twenty-eight thousand dollars in Missouri to fifty-six thousand in Alaska. If your income is higher, you could be forced to file Chapter 13 unless you are able to demonstrate you don't have enough disposable income.
Under Chapter 13 you will not get a clean slate, but will need to make payments on your debts. Also, your attorney now has to personally certify that your bankruptcy filing is accurate. This implies more work for the attorney, with greater legal fees.
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"In the past, a bankruptcy offered a fresh start for the filer," said Columbia lawyer Gwen Froeschner Hart. "The new federal legislation offers language directed at helping lenders."
When you analyze credit card expenses for many individuals you'll see that they often consist of medical bills and day-to-day expenses for the elderly or those earning low or fixed incomes. Records reveal that 50% of credit card holders do not pay their full credit card bills each and every month.
33% of the population cannot afford medical insurance so they have to credit their prescription drugs. With the latest Medicaid cuts and rigid bankruptcy legislation, who knows what is going to happen to these folks.
There are some who say consumers are abusing creditors. The irony is that credit card businesses are begging for customers and providing significant amounts of unsecured credit, yet at the exact same time, lobbying for stricter debt controls.
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