How to File Bankruptcy and Comply with the New Bankruptcy Laws
Thousands of Americans file bankruptcy every day
. Their reasons for seeking protection through the Federal Judiciary courts are as varied as the people needing financial relief. The most common causes of personal bankruptcy include overwhelming credit card debt, medical bills, and attempting to stop foreclosure.
In order to
file bankruptcy debtors must obtain legal counsel. Although there is no law requiring individuals to hire a lawyer, few people can adhere to stipulations of the Bankruptcy Abuse Prevention and Consumer Protection Act which took effect in 2005.
BAPCPA is often referred to as the
new bankruptcy laws. The Act was intended to prevent debtors who racked up massive debts and later filed for bankruptcy protection under Chapter 7. Also known as 'fresh start' bankruptcy, Chapter 7 requires debtors to liquidate assets to pay outstanding debts. Remaining balances are discharged and debtors are given a clean financial slate.
Today, few people qualify for Chapter 7 and instead must petition the court seeking protection under Chapter 13. Known as 'reorganization bankruptcy' Chapter 13 requires debtors to repay outstanding debts over an extended period of time.
Under BAPCPA, debtors must undergo the 'means' test which compares their gross income to median income levels of their state of residence. This tool is used to determine the amount of debt which must be repaid. Additionally, debtors must obtain credit counseling through an agency approved by the U.S. Trustee.
Debtors attend a 341 creditor meeting which grants them the opportunity to meet creditors and establish a payment plan. In most cases, creditors do not attend the meeting. Instead, they submit creditor claims to the court. The debtor's representing attorney can enter into negotiation with creditors to reduce the amount owed.
The Chapter 13 payment plan is submitted to the judge for approval. Once approved, debtors must submit payments to the bankruptcy Trustee who in turn distributes payments to creditors until debts are repaid.
The primary problem with Chapter 13 payments is they are over and above normal living expenses. Debtors who are already struggling to make ends meet often find they cannot meet the financial obligations imposed on them through bankruptcy.
When borrowers default on
Chapter 13 payments, creditors are permitted to petition the court to request bankruptcy dismissal. If the request is granted, debtors fail out of bankruptcy and lose court protection. Creditors can commence with collection action including foreclosure, obtaining court ordered judgments, and wage garnishment.
Failing out of bankruptcy can be particularly harmful to borrowers who file to stop foreclosure. Debtors often fail to realize that mortgage lenders can commence with foreclosure proceedings at the point where they left off prior to submission of the bankruptcy petition.
People oftentimes wait until the last moment to seek bankruptcy protection when facing foreclosure. If lenders filed a Notice of Default and foreclosure would have occurred 3 days prior to the bankruptcy petition they can potentially foreclose on the real estate within 3 days after the judge dismisses the bankruptcy petition.
While personal bankruptcy can be a saving grace in certain situations, it should only be used as a last resort. Debtors should research bankruptcy alternatives to determine if solutions exist that can provide the same results without the drastic consequences. Common bankruptcy alternatives include debt consolidation and debt settlement.
If bankruptcy is the only available option, debtors should work with a qualified attorney and be proactive in taking measures to ensure they comply with their Chapter 13 payment plan. Bankruptcy lawyers are listed in print and online telephone directories, as well as through the American Bar Association website at abanet.org.
How to File Bankruptcy and Comply with the New Bankruptcy Laws
By: Simon Volkov
Learn Solar Panel Building Techniques Insane Footage - Dog Doing Back Flips! Why Unrelated Viral Marketing Wastes Your Valuable Time Wedding Limos in New York Considerations for Your New York Limo Service A Good New York Airport Limo Service Counter-Strike: Tips and Tricks for New Players Why Solar Fountains? The Old No 1 Up Cash Gifting Program Compared To The New Gifting System Highest Rated New York Injury Lawyers: Your Ally For Serious Injury Cases Womens Clogs The New Trendsetters How To Get A Ton Of New Spa Clients Wind Power Sector Strategy And Goals Of Chinese Energy Department Green Technology Is The New 'efficient'