Bankruptcy Legalities

In 2005 the U.S. was introduced to new bankruptcy laws, which implemented with new bankruptcy laws that passed congress.

Before that time, filing for chapter 7 bankruptcies was an easy way out of financial obligations.

Many people spent years being careless with their credit and debts because it could be fixed with a quick filing for bankruptcy.

Now that the law has changed, there are more restrictions for filing chapter 7.

Before the 2005 revision, filers could choose which code they wanted to file under.

Income did not matter.

The most obvious change was made in how a person files, based on their income; for example, people that filed for bankruptcy under Chapter 13 of the Bankruptcy Code, have the opportunity to repay some or all the debts in their name, in better terms, i.e. lower or no interest and that is unlike Chapter 7 which involves liquidation of assets.

The law also imposed new restrictions on bankruptcy lawyers.

It may be tougher now to find a lawyer who will represent you in a bankruptcy case.

In addition to the new income restrictions, there is also mandatory counseling that debtors must complete before and after filing for bankruptcy chapter 7.

Pre-filing, individuals must complete credit counseling and post-filing and also are required to complete some type of financial budgeting plan.

In light of our current economic situation, many feel these new standards should have been executed several years earlier.

They are designed to keep people aware of their spending and keep them on track.

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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