A person who declares bankruptcy admits his incapacity to keep up with his payment obligations to his creditors. Once a person has been approved for bankruptcy, he will be discharged from the debts he owe his creditors.

Many people who are confronted with bad debt consider bankruptcy as a solution to their problem. In some cases, filing for bankruptcy could be the only practical step to take but this isn’t always the case.

In 2005, the bankruptcy law was amended and major changes in the bankruptcy process have taken place. Let’s discuss some of these changes:

Requirements on Bankruptcy Filing

In the past, anyone can simply file for bankruptcy and wait to get approved. Today, an individual must first complete a credit counseling course with a government accredited agency at least 6 months before he can file for bankruptcy. If the counseling agency recommends bankruptcy as the next step, that’s the only time a consumer can start filing.

What is this rule implement? It is to lessen the number of bankruptcy cases filed each year. Since some people use bankruptcy as a way to escape from their responsibilities, going through a credit counseling course would ensure that other possible solutions have been considered to help a consumer get out of debt.

Bankruptcy and Bankruptcy Attorneys

Under the new law, lawyers are responsible to ensure that all the information provided in the bankruptcy documents are true and accurate. Understandably, many lawyers or attorneys who specialize in bankruptcy cases have raised fees for their services. If you are contemplating bankruptcy, don’t forget to consider the costs.

Chapter 7 or 13?

A bankruptcy applicant must go through the “income Means Test” in order to determine whether he is qualified for a Chapter 13 bankruptcy or a Chapter 7. Remember that a Chapter 7 bankruptcy discharges the borrower from all debts while a Chapter 13 puts the borrower under a 5-year repayment plan.

If your income happens to be above the standard requirement, that means you are still capable to pay off your debts. Under the 5-year repayment program, a percentage of cash would be automatically deducted from your salary each month and sent as payment to corresponding creditors. For a complete information on the new bankruptcy process, visit the FTC’s website.

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About the Author
Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair and Building Ebook. NHBS also has a list of recommended bad credit credit cards.
Copyright 2010.

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