The New Bankruptcy Laws – The Challenges

Posted on | August 26, 2008 | Leave a Comment

The new bankruptcy laws have been introduced and many are aware about the new underlying provisions. These new laws really paved the way for a drastic change in filing bankruptcy. With these laws, the option of filing bankruptcy has become more stiff and difficult to avail of.

Here’s an overview about the new bankruptcy laws.

The whole idea of the new bankruptcy laws was to limit bankruptcy filings and help to protect both the creditor and debtor. Filing bankruptcyis not an easy solution nor is it something that a person should do just because they do not want to repay debts. With that in mind the new bankruptcy laws changed the face of bankruptcy for everyone.

The new laws help to ensure people can not rush into filing bankruptcy. The new procedure now entails concerned individuals to have clear understanding on the implications of filing of bankruptcy. Moreover, eligibility in filing Chapter 7 bankruptcy has already been restricted to a set of income group.

Thing to Consider About Filing

Filing bankruptcy is not the final solution of your financial woes. Your financial problems will still exist even after filing. All bankruptcy can do is help you get debts under control. It will not solve your financial problems.

The new bankruptcy laws work hard to make sure that people understand this concept. With the counseling requirement, you will learn the right way on how to recover from your debts and how to avoid similar financial problems in the future.

Bankruptcy is hard on you and creditors. Your credit will suffer due to filing. Creditors incur loses in dealing with debtor’s bankruptcy option. This is the reason why the new laws have limited access to filing of Chapter 7 bankruptcies which can erase debts and impose instead filing of Chapter 11 option which requires debt payment.

Income Limits

The new bankruptcy laws require a means test which will determine the income of the filer.If the income level is deemed high enough,a person will have to file Chapter 7 Bankruptcy and repay debts. Lower income filers will still be able to file Chapter 7.

The said means tests consider various factors in assessing whether a debtor can repay debts under court sanctioned repayment procedure.

Counseling Requirements

A counseling requirement forms part of the new bankruptcy laws.

The counseling sessions are required before filing and then again before the bankruptcy is finalized. Both the stages of filing and approval require counseling sessions. These classes are mandatory no matter what type of bankruptcy is being filed.

The new bankruptcy have been carried to address apparent abuses of the system and procedure. Creditors benefit greatly from the lower number of Chapter 7 filings under these laws. Filing of Chapter 11 Bankruptcy has become a requirement.

Filing bankruptcy should always be your last recourse if all possible ways to settle your debts have been exhausted. It is something that willtaint on your credit record for a while and can prevent you from obtaining credit in the future Additionally, you can loseassets through the process that are seized to pay off debts. However if you are heavily indebted, resorting to filing of bankruptcy may ease up your burden since it helps you get grip in putting your finances under control.