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| Articles: (Updated Frquently) |
| The Facts About Personal Bankruptcy |
| By: Jay B Stockman |
The thought of personal bankruptcy is very frightening, however over 5.4 per 1,000 people have filed for bankruptcy last year, and this rate has been growing at an average of nearly 7 percent. Researchers have determined that the primary cause of personal bankruptcy is uncontrollable levels of consumer debt oftentimes coupled with an unexpected event, such as a major medical expense not covered by insurance, the loss of a job, divorce or death of a spouse. According to economists’ surveys, the classic bankruptcy filer is a blue collar, high school graduate who is the head of a household in the lower middle-income class with heavy use of credit. In order to protect both debtor, and creditor,
laws were enacted to provide equal, and fair measures to satisfy the objectives of all parties. The primary purpose of the laws of bankruptcy are: (1) to give an honest debtor a fresh start in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has property available for payment.
There are two types of structured plans for filing for personal bankruptcy, Chapter 7 or Chapter 13. Over two-thirds of personal filers choose Chapter 7 bankruptcy. Basically Chapter 7 requires the debtor to liquidate all non-exempt assets, and have them distributed among creditors. Some examples of exempt assets include equity in a primary residence, and a retirement program. On the other hand, Chapter 13 does not require liquidation, rather a debtor agrees to a specific payment plan, whereby a portion of any unsecured debts is paid, and the balance is forgiven. It must be stressed, that under both plans, certain debts are ineligible for bankruptcy protection. These debts include government student loans, child support, alimony, and income tax debt. These must be paid back in full.
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Some analysts are concerned that this unprecedented level of debt might pose a risk to the financial health of American households.
In an attempt to reverse the increasing trend in personal bankruptcy, the federal government has recently implemented sweeping bankruptcy reform legislation. On March 10, 2005, the Senate passed S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
On April 20th, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Bankruptcy Act of 2005). This act makes filing for bankruptcy more difficult through income-means testing, tougher guidelines for the homestead exemption, increased lawyer liability and required credit counseling.
About the Author
Jay B Stockman is a contributing editor for Online Bankruptcy Resources Visit http://online-bankruptcy-lawyer.com/ for more information.
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| New Bankruptcy Law – Five Essential Things to Know |
| By: Charles Essmeier |
Last April, Congress passed the Bankruptcy Abuse and Consumer Protection Act, the most sweeping reform of our nation’s bankruptcy laws in more than twenty-five years. Proponents of the bill argue that most consumers who file for bankruptcy do so simply because they do not wish to pay their bills. That is an arguable point, as studies show that most bankruptcy filers have suffered illness, injury or job loss. Regardless of the reasons, Congress has made the changes, and millions of Americans will be affected when the new law takes effect on October 15.
Here is a short list of the changes and how consumers will be affected.
Goodbye, Chapter 7 – Until now, most consumers have been permitted to file under Chapter 7 of the Federal bankruptcy code. Chapter 7 permits the court to wipe away most consumer debt, allowing the debtor to make a fresh start. The new law establishes a “means test.” Anyone with income that exceeds the median income for his or her state will have to file under the stricter Chapter 13 instead, which requires a repayment schedule of up to five years.
Attorney problems – The more complicated Chapter 13 filings will make it necessary for filers to hire an attorney. Most attorneys who practice bankruptcy law are already reporting dramatically increased business; some are even turning clients away. If you need an attorney, hire one now, as they are soon going to be very busy
More attorney problems - The law also leaves lawyers legally responsible for the accuracy of the information filed on their clients’ behalf. This has led most lawyers to increase their fees. Some, including those who do bankruptcy work on a pro bono, or free, basis, have decided to forego bankruptcy work altogether. In short, it will soon be more difficult and more expensive to hire an attorney.
Mandatory credit counseling – Congress has required that debtors obtain credit counseling from an approved agency within six months of filing for bankruptcy. As of now, this requirement is largely undefined, with rules, regulations, and qualifications for counselors still up in the air.
Expect to may more bills – Some obligations, such as student loans or taxes, must be paid in full even after a bankruptcy filing. The new law lengthens the list of debts that cannot be forgiven.
The new legislation, rightly or wrongly, makes it more difficult, more time consuming and more expensive for a debtor to file for bankruptcy. Consumers who are considering doing so should act now, as the regulations will soon become stricter. Bankruptcy should always be a last resort option, but if you cannot avoid it, you should act quickly.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to establishing credit, debt consolidation and credit counseling. |
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| Keywords: bankruptcy bankruptcy, our nation’s bankruptcy, most, passed the bankruptcy, new law, file for bankruptcy, more, bankruptcy work, credit counseling |
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