New Horizon Business Services Inc.

Filing for bankruptcy is a provision given to people with debt problems for a chance to make a fresh start. Recently, a new bankruptcy process has been introduced which makes filing for bankruptcy more difficult than it was in the past years. This was done as a response to the number of people filing for bankruptcy.

According to researchers from Lundquist Consulting, there will be more than 200,000 people who will be filing for bankruptcy. However, a great percentage of this number only want to get rid of their obligations to pay their debts.

Today, filing for bankruptcy will require higher fees to bankruptcy lawyers since they would have more duties and responsibilities in filing and processing documents. Under the new bankruptcy law, the bankruptcy lawyer will be held liable if any false information is found in his client’s case.

Therefore, bankruptcy lawyers will be required to pay penalty fees. In account of this, some lawyers may even increase their charges by as much as 100 percent. Obviously, consumers who are facing financial difficulty will have a harder time shouldering these expenses.

In the past years, people who filed for a Chapter 7 bankruptcy have easily managed to get off their debt. Much to their creditors’ dismay, these people were discharged from their debts. With a Chapter 7 bankruptcy, a borrower’s assets that qualify for liquidation will be given to his lenders. However, borrowers who do not have such assets get away with their debts while their lenders to settle for nothing.

With a Chapter 13 bankruptcy, the bankruptcy court puts the borrower in a repayment plan for up to five years. This allows lenders to impose at least 10% interest to give borrowers the opportunity to pay back their debts more easily.

However, since the new bankruptcy law has been implemented, consumers who are filing for bankruptcy will be screened and only those that truly qualify will enjoy these bankruptcy provisions.

In order to file for bankruptcy, an individual must first undergo credit counseling with a government accredited credit counseling agency. Through credit counseling, the individual will be given financial management advice and training.

Afterwards, a bankruptcy judge will be the one to decide whether a person is qualified for Chapter 7 bankruptcy or not. The judge's decision will be based on a two-part income means test of the consumer who filed for bankruptcy. Here, the individual's capability as a borrower will be carefully examined based upon his expenses and his ability to pay his debts from what's left of his monthly income. If the individual fails these tests, he may still be allowed to file for Chapter 13 bankruptcy.

With these new changes in mind, filing for bankruptcy should not be sought unless in desperate circumstances. As much as possible, seek other options first before thinking about bankruptcy. Bear in mind that a record of bankruptcy can damage your credit history for a long time. When experiencing serious debt problems, ask advice from a reputable financial consultant or an attorney before making any decision.

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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 2009.

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