Subscribe RSS FeedAfter the recent economic recession in the US, people suffered from severe disasters like job loss, wage cut and unemployment. As a consequence, people are facing severe financial crisis which has lead to an incessant increase in the bankruptcy rate. According to the Federal Reserve report, 1,593,081 personal bankruptcy cases have been filed in 2010. Some debt laden consumers are also enrolling in debt consolidation and debt settlement programs to eliminate their debts.
The people who are struggling to pay off their debts were not contented with the changes made to the bankruptcy laws in 2005. The altered bankruptcy law can make the filing procedure difficult for the debtors. When the indebted consumers file bankruptcy, the credit card companies incur huge loss. The companies can’t retrieve the owed amount when the debtor files petition under chapter 7 bankruptcy.
Here are some of the changes made to the bankruptcy laws:
Eligibility criteria for Chapter 7 bankruptcy:
You will not qualify for chapter 7 bankruptcy if your income exceeds the state’s median income. Your chapter 7 bankruptcy petition will not be approved if you are able to pay more than $100 monthly. Therefore, people will not be able to file bankruptcy due to the changed law in spite of having insurmountable amount of debts. However they are forced when they are left with no other options, they are forced to file it. Nevertheless, with the change in the law, chapter 7 bankruptcy is no longer a feasible option for people to file chapter 7 bankruptcy.
Know about the changes in Chapter 13 bankruptcy law:
If you file chapter 13 Bankruptcy, your disposable income is used to wipe off your debts. A debtor’s disposable income is calculated by deducting the allowed expenses amount determined by the IRS from the current monthly income, in case the debtor’s income is higher than the state’s median income.
Compulsory credit counseling session before declaring bankruptcy:
According to the new law, the debtors are required to undergo a counseling session before filing a petition for bankruptcy. The government has encouraged the credit counseling agency to impart financial education to the debtors. The counseling session will help the debtors to make right choice whether bankruptcy will be suitable for their financial situation.
Effect of the changed law on child support and Alimony:
The new changes in the law ensures that the family of the people filing under chapter 13 bankruptcy, will get the prime importance before the creditors while designing a payment plan. Therefore, child maintenance and alimony will be the primary focus before anyone else.
Therefore, the changes made to bankruptcy laws will force people to try out other debt relief options before filing bankruptcy.
Tags: US Federal Reserve, United States, median income, payment planRelated posts:
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