|
Tougher Bankruptcy Laws Take Effect October 2005
By James Dimmitt
In just a few short weeks, President Bush's Bankruptcy Abuse Prevention and Consumer Protection Act will take effect. In a nutshell, the new law, which goes into effect on October 17, 2005, makes it more difficult to cancel your debts under Chapter 7 Bankruptcy protection. Instead, consumers will find themselves having to file for Chapter 13 Bankruptcy protection and paying back their creditors over a five year period.
Here's a look into some of the major changes that will affect consumers choosing to file for bankruptcy after the new law goes into effect -
Qualifying - Chapter 7 or Chapter 13?
To be able to qualify for protection under Chapter 7 bankruptcy, consumers will have to face a means test. The means test determines if your household falls above or below the median income in the state where you reside. Those whose total is greater than the state median income will not qualify to cancel debts under Chapter 7 protection and will alternately have to file under Chapter 13 and pay back your creditors.
The major intent of bankruptcy reform is to require people, who can afford to make some payments towards their debt, to make these payments, while still affording them the right to have the rest of their debt erased.
The amount you have to pay back under Chapter 13 protection will be greater because instead of a 3-year pay back period, that time frame is now extended to five years - to ensure your creditors get paid.
Credit Counseling
Anyone filing for bankruptcy under the new law will be required to go through mandatory credit counseling. Be careful before choosing a credit counselor as this field is filled with people looking to line their pockets while emptying yours.
To find a trustworthy counselor, check to see if there are any complaints against them or their organization filed with your local Better Business Bureau. Secondly, find out if they are certified by the National Foundation of Credit Counselors or the Association of Independent Consumer Credit Counseling Agencies. Finally, find out if they have not-for-profit status. Personally I recommend Consumer Credit Counseling Services as they meet all three of the above criteria. They can be reached at 1-800-888-2227 and can connect you with a local office.
The Cost Factor
Filing for Chapter 7 protection under the old laws normally cost under $1,000. You should expect to pay more under the new laws as filing fees have been increased by $60. Additionally, your attorney will be required to double check all your financial information which will take more of his or her time. Also there is greater liability imposed on the lawyer which may cause their liability insurance to increase, which gets passed on to their clients in the form of higher fees. Under the new law, many are expecting fees to increase between 25-50%.
Why Were the Laws Changed?
The bottom line is that major commercial creditors lobbied hard for reform. Companies like CitiBank, MBNA, and other credit card issuers actively contributed proposed amendments along with generous financial support to reforming the bankruptcy laws - and in their favor, according to many consumer protection groups.
© 2005, http://www.yourfreecreditreportnow.com About the Author James is editor of "TO YOUR CREDIT", a free weekly newsletter with tips to help you manage your personal finances. Subscribe today and receive his ebook "IDENTITY THEFT- How To Avoid Becoming the Next Victim!" and other free bonuses by visiting http://www.yourfreecreditreportnow.com.
Article Source: http://www.simplysearch4it.com/article/9939.html
If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/9939.html" as shown above and make it hyperlinked. |
Some other articles by James Dimmitt | The Benefits Of Laddering Your CD Investments If you've decided to stock some money away in a certificate of deposit, why not reap the highest benefit over time by laddering your CD investments? What's a ...
Why Consumers Need A Nationwide Credit Freeze Now What do a shoe retailer, an online discount broker, and a popular clothing retailer all have in common? All three - DSW Shoe ...
Looking For A Safe Investment? Try A Certificate Of Deposit If you are looking for a safe investment and you have between $100 -$1,000 to invest, you should consider a certificate of deposit or CD. When ...
Avoiding College Credit Card Traps Congratulations college freshman! You’re about to embark on one of the most exciting times of your life. By now your parents, siblings, and friends have offered you all kinds of advice on how ...
A Budget Doesn't Limit You, It Gives You Freedom Mention the “b” word, as in BUDGET, to a friend and they’ll look at you like you have a third eye growing from the middle of your forehead. For most people the ...
Consumer Action: Putting The “Freeze” On Credit Files In the wake of 40 million MasterCard, Visa, Discover, and American Express accounts recently being breached, consumers and legislators are scrambling for ways to protect their personal and financial information ...
|
|
| |
|
|
|