Filing Bankruptcy? Better Hurry to Beat the New Bankruptcy Laws
New Bankruptcy Laws 2005, effective October 17, will make
it more difficult to discharge your debts by filing bankruptcy.
Changes to the law in the form of The Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005, are due to
complaints by the banks and other financial institutions who
cite abuse of the bankruptcy laws by financially irresponsible
consumers.
Worries, however, abound that the New Bankruptcy Law will leave
the most vulnerable in society - namely, the elderly, low income
families and single mothers - with no protection against
unmanageable debts due to job loss or other unforeseen
circumstances.
Changes to the law in the form of the new bankruptcy laws of
2005 are as follows:
1. To escape the new law, your income must be below the
median of income for families of the same size in the state
where you live
2. You will be required to undertake a means test (based
on income and expense) to ascertain whether or not you qualify
for "debt forgiveness" (provided currently under Chapter 7
Bankruptcy)
3. If the bankruptcy court believes you have enough spare
income each month to set aside for repayment of debts, you may
be required to file Chapter 13 Bankruptcy, which will mean
automatic participation in a debt repayment plan over 3-5 years
4. Under the new bankruptcy law, you'll be required to
undertake debt counseling under Section 106
Under Chapter 7 bankruptcy, you are allowed to protect part of
the equity of your home from creditors, as determined by the
state laws where you reside. From the date of the changes,
however, the new bankruptcy law overrules some of these
exemptions. Subject to filing time limits, the exemption for
your home is limited to $125,000.
The new bankruptcy laws of 2005 also affects businesses who
file for bankruptcy.