If you have intentions of filing for bankruptcy, erasing your debts may not be as easy as before with the new bankruptcy laws that have brought about certain major changes in the process. These amendments are initiated by the Bankruptcy Abuse Prevention And Consumer Protection Act of 2005 have made it more difficult for people to write off their debts by this process. The changes were made due to the numerous complaints from banks and other financial establishments who feel that they were being taken advantage of by compulsive shoppers, gamblers and other unscrupulous persons under the present laws.
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Changes Under The New LawsAccording to the new bankruptcy laws, you need to take credit counseling courses within three months of filing your case.
The applicants also need to take a "means test" to determine whether their income excludes them from filing.
Your credit card billing statements have to show accurate information regarding how long it would take to pay off the balance while making minimum payments.
Under the old rules, people filing for bankruptcy had the liberty to choose the type of bankruptcy that they wanted i.e. either liquidation in the form of Chapter 7 or repayment by way of Chapter 13. According to the new law, those who are above a particular income limit are prohibited from filing under Chapter 7.
The new laws have placed additional requirements on lawyers, the main one being that the lawyer has to personally vouch for the accuracy of his client's information. This, in turn, leads to additional time being spent by lawyers on bankruptcy cases and hence, mean additional expenses that are passed on to the client in the form of increased fees.
State exemptions in the state in which you are residing can be availed of only if you have been living there for at least a couple of years.
Alimony and child support payments get first priority under the new laws.
What Is The "Means Test"?
The "means test" is a requirement under the new bankruptcy law which has to be undergone in order to file under Chapter 7. If your current monthly income is less than or equal to the median income of an average household of your size, then you need to pass the "means test" to be eligible for Chapter 7 bankruptcy. The main aim of the "means test" is to determine whether you have enough disposable income on hand after meeting the allowed expenses and debt payments, to make payments on a Chapter 13 payment plan. If the income left over on your monthly income after deducting the permitted expenses and debt payments is below a certain amount, then you can file under Chapter 7 according to the new bankruptcy laws.
If you have intentions of filing for bankruptcy, erasing your debts may not be as easy as before with the new bankruptcy laws that have brought about certain major changes in the process.
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