Reference -
New Bankruptcy Law - Five Essential Things to Know
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.
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