Bankruptcy Legalities

In 2005 the U.S. was introduced to new bankruptcy laws, which implemented with new bankruptcy laws that passed congress.

Before then, Chapter 7 was the most common form of bankruptcy in the United States, because in a Chapter 7 bankruptcy individuals are allowed to keep certain exempt property.

Many people spent years being careless with their credit and debts because it could be fixed with a quick filing for bankruptcy.

Today, filing for chapter 7 is not as easy as it was before, because they have added several new restrictions to it.

Previous to the updated bankruptcy law in 2005, people had the ability to select the code they wanted to file under.

It did not matter the amount of income you made either.

One of the biggest changes is that now those with a higher income will have to file under chapter 13 and therefore pay off some of their incurred debt.

The new law added certain limitations to be placed on bankruptcy lawyers.

It may be tougher now to find a lawyer who will represent you in a bankruptcy case.

Another change, is that now people planning to file for personal bankruptcy under chapter 7, must complete the mandatory credit counseling first.

Individuals that decide to pre-file, still have to complete the credit counseling requirement and people that post-file must complete a financial budget that they will use.

In light of our current economic situation, many feel these new standards should have been executed several years earlier.

They are designed to keep people aware of their spending and keep them on track.

There is also a change for chapter 13 bankruptcy filers and a new income demand of personal finances.

All disposable income left after paying actual living expenses must now go into their repayment plan.

The IRS now determines the allowed actual living expenses, not the actual living expenses, if their income is higher than the median income in their state or per capita. Before filing for bankruptcy, you need to carefully consider all your options and become well informed on the legal aspect surrounding any new laws that may pertain to your personal situation.