If you have ever really struggled with your debts, claiming bankruptcy may have crossed your mind. Although there are repercussions of such a move, it has served to help many out who deemed it necessary. However, recently there have been some new laws put into place regarding bankruptcy. What does this mean to you and what should you know about this. Here is a simple outline.
In existence are two simple categories of bankruptcy, Chapter 7 and Chapter 13.
Chapter 7 is the method most often chosen. To simplify it greatly, if you declare Chapter 7 bankruptcy your debts are gone, but with it comes some credit issues to contend with for years to come, such as getting credit. Chapter 13 in actual fact helps the defaulter pay off some or all of the money owing. This perhaps is a little different to the bankruptcy that you have hard of. With Chapter 13, if you own a house, you can save it from foreclosure. Although they still need to make the continuing mortgage payments. Chapter 13 bankruptcy has similarities with debt consolidation in that it can make payments to a bankruptcy representative who then pays off their clients creditors.
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So then what are the new bankruptcy rules and what do they mean to you? To start, people judged to have high incomes will not be allowed to file for Chapter 7. This is determined by comparing their monthly income to the average income of someone with their household size in their same state. If they make more than what most do, they will have to get around more obstacles so to speak in order to be allowed to file for Chapter 7. The main concept they are trying to get at is to get people who have the money to file for Chapter 13 instead of Chapter 7 thus having to pay some or all of the money owed back. Those filing for Chapter 13 will also have higher amounts of their disposable income to hand over as well.
In order to sway people away from filing either form of bankruptcy it is also now mandatory to go through some approved credit counseling. Their advice is not set in stone for you to follow but the purpose here is to help out some and educate them on how to better handle their financial situation. Even if you are flat broke and can only file for Chapter 7 it is still mandatory. As a result of the new rules, it also makes it harder for lawyers to represent clients in bankruptcy cases due to more time required thus more money charged for the legal steps they have to take for their potential clients.
No one desires to file bankruptcy. Its consequences on one are not only devastating financially but mentally as well. However sometimes it maybe necessary but in order to make the bankruptcy system work better for all, some new rules have been applied. Consult a bankruptcy expert for more information regarding these rules or any other questions you may have.
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