Are The New Bankruptcy Laws Supposed To Help You Out?
There are 2 sides to the changes in bankruptcy rules. It'll be a whole lot harder to file bankruptcy under chapter seven and get a completely 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.
However, lawyers working with the actual people filing for bankruptcy say that the new law is seriously flawed since it puts a lot more monetary burdens on already broke clients and reduces potential debt repayment to small businesses.
Under the new law it has become a requirement that the person filing bankruptcy obtains credit counseling both before and after filing.
People filing bankruptcy in general aren't over spenders, but merely faced with temporary monetary disasters including 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 ideal. As soon as you complete your bankruptcy, the law needs 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, an individual could choose to file under Chapter 7 or Chapter 13. With 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, you will be allowed to file Chapter 7 which in effect will give you a clean slate.
This medium income can vary from twenty-eight thousand dollars in Missouri to approximately fifty-six thousand in Alaska. If your income is higher, you could 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 a lot 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 attorney Gwen Froeschner Hart. "The new federal legislation presents language directed at helping lenders."
When 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 don't pay their full credit card bills each and every month.
33% of the population cannot afford medical insurance so they 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 consumers and providing significant amounts of unsecured credit, yet at the same time, lobbying for stricter debt controls.
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