What are the recent changes if in bankruptcy law?
It seems that more and more people are struggling to pay their bills these days. Bankruptcy is one option that you should consider if your situation is severe enough. However, many people are under the impression that they can no longer file for bankruptcy due to recent changes in bankruptcy law.
Yes, Congress did make some changes in the bankruptcy laws, but it did not eliminate bankruptcy as a possible solution. You might be surprised to find out that you can still qualify for bankruptcy protection.
The new bankruptcy law is known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Yes, I know that’s a mouthful. You don’t have to know every detail of the bankruptcy code – you can leave that up to your lawyer. What you need to know is that this law makes declaring bankruptcy a more involved process, but most people who would have been eligible before will continue to be eligible.
The most important change in the code has been the means test, which is supposed to help the bankruptcy court decide whether your application is legitimate. Those with a relatively low salary will have an easier time getting through the process and will be able to avoid the means test.
If you have a higher annual salary, though, you will have to go through the process of proving your income and expenses. If the court doesn’t think that chapter seven bankruptcy is justified in your situation, then you may be forced to deal with chapter 13 and create a payment plan.
The goal of a means test is to make sure that people who make more money are not taking the easy way out by declaring bankruptcy. Other changes include mandatory credit counseling and financial management courses. Essentially, Congress, along with your creditors, wants you to do your best to prevent any financial disasters in the future.
You also must make your federal income tax returns available to your creditors if they desire it. Again, the goal is to prove that you’re unable to pay your bills with your current income while being able to put food on table.
One more thing you should consider about the new bankruptcy law is the increase in lawyer fees. Because the law is more complex, it will probably require more work from your attorney. This could result in higher costs, which is why you should prepare as much as possible before entering a bankruptcy law office. The more you know beforehand, the less work your lawyer has to do.
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