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What Has Changed In The New Bankruptcy Laws

     In the fall of 2005, a new bankruptcy law was introduced that makes it more difficult for debtors to get a fresh start under the Chapter 7, also known as liquidation, bankruptcy. With a number of changes coming into play with the new law, several stand out the most and are of the great concern to debtors.

    Previously, a debtor could file a Chapter 7 bankruptcy every 6 years. Under the new law, that time period has changed to 8 years before a debtor could file another Chapter 7 bankruptcy. Debtors are, however, permitted to file a Chapter 13 after filing a Chapter 7 case.

     Because of the new changes and additional paperwork involved, the bankruptcy filing fee has increased. For those who hire an attorney, you will notice an even higher price as lawyers are now charging higher fees for helping to complete and file the petition. In some cases, the filing fee can be broken down into installments, but attorney fees must be paid in full before filing the case. A Chapter 13 bankruptcy filing remains more expensive than a Chapter 7, but the cost of both has increased since the new law passed.

     Under the new bankruptcy law, filers are required to attend credit counseling from an approved agency. This means that before receiving protection from their creditors under the bankruptcy law, filers could be forced to wait until completing the counseling program. Under bankruptcy protection, creditors are prohibited from collecting or attempting to collect a debt. This means that any pending litigation will be stopped, along with any foreclosure and/or repossession. But, before being covered under the bankruptcy laws, the debtor must provide proof of having completed credit counseling.

     The old bankruptcy law was designed to give debtors a fresh start under the Chapter 7 bankruptcy, which meant that all debts are wiped away forever and the debtor is no longer required to repay them. A Chapter 13 bankruptcy was for individuals who has substantial income and/or assets and could repay a portion or all of their debts according to a court-approved repayment plan. Under the new law, however, it is more difficult for filers to qualify for a Chapter 7 bankruptcy because more debtors are being converted into a Chapter 13 if they have at least $100.00 of disposable income after deducting the necessary monthly expenses.

     The new bankruptcy law also calls for more responsibility from attorneys who help to file the paperwork. The former petition required that the lawyer be told everything by the debtor, but the new law expects that attorneys will do some investigating into the debtor’s situation to ensure that the petition is truthful.

     The information in this article is designed to be used for reference purposes only. It should not be used as, in place of or in conjunction with legal advice surrounding the filing of a bankruptcy case or the new bankruptcy laws. For more information and answers to any questions surrounding case filings and/or bankruptcy laws, consult a licensed attorney in your area.