It seems that every time you turn around, the bankruptcy laws are changing. The latest change in the laws governing bankruptcy has caused some confusion for people. The law that changed the way people file for bankruptcy happened back in 2005. The new bankruptcy law now has stricter rules for people wanting to file bankruptcy. People who would normally file a chapter 7 are now finding that they will have to file a chapter 13 bankruptcy.
Chapter 7 allows all debts to be forgiven sometimes with a liquidation sale to pay some money to the creditors or if there is no property for liquidating, the creditors receive nothing. Chapter 13 requires all secured debts to be paid for first and if there were any time left on the payment plan, the unsecured creditors would receive some money. The period for repayment plans is three or five years. Chapter 13 also allows the trustee to take half of your income tax return every year that you are actively participating in the repayment plan. The income tax money goes to the unsecured creditors, who in some cases receive nothing.
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The bankruptcy laws were changed to protect the creditors you were forgiving millions of dollars in debt every year. The lawmakers felt that consumers were going into debt knowing that they could not pay. It was an abuse of the system. The new laws also included mandatory money management and credit counseling. The credit counseling takes place before you file for bankruptcy and the money management takes place right before your debts are discharged. You must attend both meeting or you cannot file for bankruptcy or have your debts discharged.
The laws were approved to protect the creditors. In the end, bankruptcy laws have cost consumers more for filing, counseling and lawyer's costs.
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