Bankruptcy: What does the new law for you

On 20 April this year, President Bush signed a law reforming the bankruptcy law. When this law came into force in October, was much more difficult to obtain for the Americans to use Chapter 7 bankruptcy for a fresh start on their financial life.

Under the old law may choose to file a Chapter 7 or Chapter 13 bankruptcy. May as part of a procedure of Chapter 7, keep your property free on how much equity in your home. Most of your otherDebt, as money is due on credit cards rejected.

In comparison, a Chapter 13 bankruptcy reorganization in bankruptcy. In this type of procedure you agree to pay your debts for a period of three to five years.

The result of the new law is that fewer people will be able to file for Chapter 7 bankruptcy and will be forced to file for Chapter 13 bankruptcy, but will be.

Big changes

Perhaps the biggest change of failureLaw is that there is now a matter of a qualifying exam. As part of these two tests, it must be first be necessary to apply a formula, certain expenses such as food, rent, etc., to see if you can afford to 25 percent of your "non-priority unsecured debt to pay "(credit - cards, medical expenses and the like). According to the income, the median income is for your condition are compared.

If your income is above the average income in your state, and if you can afford the 25 percent of unsecured debt, you paywill not be allowed to enroll in a Chapter 7 bankruptcy.

You can register for a Chapter 7 bankruptcy if your income is below the average income in your state, but you can pay up to 25 percent of unsecured debts. However, if the judge finds that abuse the system of filing a Chapter 7, you can no obligation to enroll in a Chapter 13 bankruptcy instead.

Other differences

If you filed a Chapter 7 bankruptcy under the old law, theCourt would be able to determine what you are, what you found and the judge charged, afford all reasonable and necessary living expenses.

With the new law, the court is bound by the standard of living, which are obtained from the Internal Revenue Service to determine what is reasonable, for rent, food, etc., to pay and how much you would have left to pay your debt. IRS rules are more stringent, and if you want to deny, you must ask for a hearingthe insolvency court. This may simply mean more time and effort.

Tougher exemptions

If you logged in the event of bankruptcy under the old law, could you state you have allowed all or most of the shares you hold in your home. However, the new law sets stricter limits for the exemption. So before you file, you should discuss this with a bankruptcy attorney so you know exactly how much equity in your home you expectprotect.

Credit Counseling

Here's another tough restriction. With the new bankruptcy law, you must respond with a credit counselor in the six months to file for bankruptcy. But from what I read, many of the consultants "certificates" are fully guaranteed and not with any new cases.

You must also be in money management courses - at your expense - taken in front of your debts.

Before doing anything, you should talk to aGood bankruptcy lawyer.