The New Bankruptcy Laws – Chapter 7 and Chapter 13

Certain amendments have been made in Bankruptcy laws in the US. The new laws prevent deceitful people from exploiting the system and thwarts citizens from filing bankruptcy without seeking out other options.

Changes In Chapter 7

Under the new Bankruptcy laws, it’d now be tougher to file for bankruptcy. Besides, certain filers that come in high-income class cannot use Chapter 7 bankruptcy any more. Instead, they would be required to repay a small amount of their debt under Chapter 13.

According to the new laws, debtors need to obtain credit counseling first and then file for bankruptcy. Even if you know that it’s not feasible to come up with a repayment plan or you don’t want to repay due to some unfair practice, you would still need to undergo counseling. In case the counselor formulates a repayment plan, you need to get a certificate proving that you have finished with the counseling and would have to submit both the certificate and the plan to the court. You can file for bankruptcy only after doing all this.

As a bankruptcy case now has become a tough nut to crack, it’s harder to find competent lawyers who can guide you. Thanks to the changes in bankruptcy laws, it has become a costlier affair to represent clients, not mentioning the time it takes to build a case. This has made a direct impact on the fees of lawyers, which have gone up, obviously.

This is not all. The new laws mandate the lawyer to personally assure that all the information provided by their clients is accurate. This means that lawyers need to do a thorough research before representing their clients. It’s like tightening the noose of string around the neck of the lawyers. Some of them have stopped representing bankruptcy cases altogether.

Changes In Chapter 13

As per the old law, people filing for bankruptcy under Chapter 13 had to hand out their entire disposable income (the money left after paying all actual living expenses) to the formulated repayment plan.

Now, according to new bankruptcy laws, filers have to consider disposable income not by their actual expenses, but by their “allowed” expenses as indicated by the IRS, in case their income exceeds the median set in their state. Also, the “allowed” expenses have to be deducted from the average income of the filer during a time period of 6 months before filing for bankruptcy, and not from the actual earnings every month.

The new laws have left debtors in the lurch, as more of them are at risk of losing their property. Therefore, it has become all the more important to find a good attorney who understands each aspect of the new bankruptcy laws and saves you from the debt demon.