Bankruptcy: What the New Law Means to You

On April 20 of this year, President Bush signed a bankruptcy reform law. When this law goes into effect in October of this year, it will be much more difficult for Americans to use Chapter 7 bankruptcy to get a fresh start on their financial lives.

Under current law, you can choose to file either a Chapter 7 or Chapter 13 Bankruptcy. In a Chapter 7 proceeding, you are allowed to keep your exempt property, such as much of the equity in your home. Most of your other debts, such as money owed on credit cards, are discharged.

In comparison, a Chapter 13 Bankruptcy is a reorganization bankruptcy. In this type of proceeding you agree to pay off your debts over a period of three to five years.

The result of the new law is that fewer people will be able to file for Chapter 7 Bankruptcies and will be forced to file for Chapter 13 Bankruptcies, instead.

Major Changes

Possibly the biggest change to bankruptcy law is that there will now be a qualifying test. Under this two-part test, you will first be required to apply a formula that exempts certain expenses such as food, rent, etc., to see if you can afford to pay 25 percent of your "non-priority unsecured debt" (credit cards, medical bills and the like). Second, your income will be compared to your state's median income.

If your income is above your state's median income, and if you can afford to pay 25 percent of your unsecured debt, you will not be allowed to file for a Chapter 7 Bankruptcy.

You may be able to file for a Chapter 7 Bankruptcy if your income falls below your state's median income but you can pay 25 percent of your unsecured debt. However, if the court believes you would be abusing the system by filing a Chapter 7, you can be required to file for a Chapter 13 Bankruptcy, instead.

More differences

If you file a Chapter 7 Bankruptcy today, the court will determine what you can afford to pay based on what you and the court determines are reasonable and necessary living expenses.

Under the new law, the court is required to apply living standards that are derived by the Internal Revenue Service to determine what is reasonable to pay for rent, food, etc., and how much you should then have left over to pay your debts. The IRS regulations are more stringent and if you want to contest them, you will need to ask for a hearing in front of the bankruptcy judge. This can easily mean more time and expense.

Tougher exemptions

When you declare bankruptcy today, your state may allow you to keep all or much of the equity you have in your home. However, the new law places tougher restrictions on this exemption. So before you file, be sure to discuss this with a knowledgeable bankruptcy attorney so that you will know exactly how much of your home's equity you can expect to protect.

Credit counseling

Here's another tough restriction. Under the new bankruptcy law, you must meet with a credit counselor in the six months before you apply for bankruptcy. You must also attend money management courses ? at your expense ? before your debts are discharged.

Since the new law makes it so much tougher to declare a Chapter 7 Bankruptcy, you might think about filing now, before it goes into effect. Before you do anything, make sure you talk to a good bankruptcy attorney. Also, be sure to keep in mind that it takes a couple of weeks to file for bankruptcy. This means that if you want to take advantage of the current law, you should plan on filing at least by the beginning of September of this year.

For FREE help with debt and credit, subscribe today to Douglas Hanna's free email newsletter "8 Simple Steps to Debt Relief" at http://www.all-in-one-info.com

---

How to Negotiate Debt Settlement

People over extend themselves financially as a result of a change in their lifestyle. In today's economy were company mergers, and such; creates a displacement and hardship... Read More

Bankruptcy As An Option

If your financial worries are preventing you from sleeping at night, then you may have considered bankruptcy in hope of a little relief. Usually, consumers only turn... Read More

The 5 Secrets to Getting Out of Debt Fast

As they stare down at a teetering pile of bills, so many consumers wonder how they racked up such a large debt. The answer boils down to... Read More

Solutions to Single Mothers in Debt

As a single mother, lets admit it, times get tough. You are fortunate enough to have your children that mean the world to you, but it doesn't... Read More

Debt Handling Solutions

Sometimes debt can seem overwhelming. In those instances, or even before things get that far out of hand, get back to basics and try some of these... Read More

The First Step To Getting Out Of Debt: Make The Commitment!

These days, getting into debt is easy.Unfortunately, getting out of debt is not so simple for most people. But you can do, if you go about it... Read More

What Does A Bankruptcy Trustee Do?

Once you file bankruptcy a court appointed bankruptcy trustee will oversee your case. The new law also requires that the bankruptcy petitioner to take a debtor education... Read More

Mr. Cheapies Frugal Budget Tips

So you feel like a hamster spinning your wheel? The faster you run, the faster the wheel spins. Just when you get a raise, you notice the... Read More

Student Loans Can?t Be Swept Away Through Bankruptcy

Bankruptcy is in the news these days, as Congress has finally overhauled the Federal bankruptcy law after years of talking about it. The credit card companies, rightly... Read More

What Is A Chapter 13 Bankruptcy?

Many consumers that are bogged down in debt frequently turn to bankruptcy as a form of restoring their financial status back to a zero balance. Unfortunately many... Read More

Is There A Way Out Of Your Debt Problems?

Do you have multiple debts? Do you have just one large debt which you could afford, but your circumstances have since changed? Are you finding it harder... Read More

What Is A FICO Score?

Your FICO score or credit score as it's commonly called is a very important calculation that can control whether or not you are eligible to receive credit... Read More

Eliminating Credit Card Debt

The overwhelming task of eliminating your debts can often seem like an uphill battle. Without the knowledge and expertise of a professional on your side, unfortunately, the... Read More

Deal with All Your Debts with Care!

Lots of people take a large ammount of loans and suddenly they discovered that they're in debt and life seems pretty gloomy for them, in this situation... Read More

Take Careful Consideration Before Filing Bankruptcy

Filing bankruptcy is not fun! It is a last resort if you are interested in keeping an active and acceptable credit report. Bankruptcy is the condition of... Read More

Eliminate Your Credit Card Debt, But How?

Can a debt consolidation loan eliminate your credit card debt? A consolidation loan might (or might not) be the key. There are several things you must consider... Read More

Mandatory Credit Counseling for Those Considering Bankruptcy

Most Americans are aware of the sweeping changes in U.S. bankruptcy law that were made by Congress recently. These changes, strongly supported by the credit card industry,... Read More

How To Get Out Of Debt

If you have found yourself in a position where you are in serious debt and cannot think of a way out of the situation, then take a... Read More

Taking The Plunge Into Bankruptcy

Bankruptcy is one of the most difficult things a person has to do. The decision to file bankruptcy is a hard one. Is it moral to wipe... Read More

Craving For Financial Freedom

Have you ever felt trapped in a Rat Race and wished to retire quickly but rich?Have you ever felt that you are spending way too much time... Read More

Debt Relief with this Simple Formula

Is there a way to get out of debt without getting a second job or having to increase your income in some way? Can the average person... Read More

Are You SURE Your A Bad Debt?

Many people who seek the advice and guidance of debt counsellors are driven to them in the first place by fear and ignorance ? two powerful emotions... Read More

Get Debt Free

If you once have been caught in the debt trap, how do you come out of it and be debt free? We are different and each of... Read More

Turning Bad Debts into Good Debts through Investing Fundamentals

If you've ever earned enough money to put some aside, like most people you've probably invested it with an eye toward security ? since, perhaps, you can't... Read More

Bankruptcy: What You Need to Know

Personal bankruptcy is a legal way to give people with overwhelming debt a fresh financial start. Many people do not realize that there are five types of... Read More

Bankruptcy: What the New Law Means to You

On April 20 of this year, President Bush signed a bankruptcy reform law. When this law goes into effect in October of this year, it will be... Read More