Bankruptcy Law Alterations

During 2005, personal bankruptcies were at an absolute record high. Maybe this, at least partially, was due to the alterations in bankruptcy laws that occurred in October, 2005. Nevertheless, it does clearly demonstrate the very sad fact that way too many Americans are allowing themselves to fall into financial troubles very fast. In most cases, the reason for these financial difficulties is the unwise use of credit to make unneeded, or often impulse driven, purchases.

During 2005, over 2,039,214 bankruptcy cases were filed in federal court, 30% exceeding the 1,563,145 that was filed in 2004 according to the information released by the Administrative Office of the U.S. Courts and published in USA Today. This increase was probably one of the results of the fact that the changes in bankruptcy law might’ve prevented many people that previously might have qualified to file bankruptcy under Chapter 7 from being able to actually do so. In the past years, bankruptcy had been filed at a relatively stable rate without any substantial fluctuations.

The changes in bankruptcy law involve the use of Chapter 7 in order to wipe out debts. Today, people which have income that exceeds the average and have $100 or more left over each month after paying their debts and expenses must declare bankruptcy under Chapter 13 which will require a repayment plan where debts will be repaid with an r-year plan filed with the bankruptcy court.

Under the new bankruptcy law, people must go through credit counseling in order to file bankruptcy in many cases. Even those people who might’ve developed financial problems due to events they were not in control of must undergo this required counseling. At times, people that lose their jobs or have huge medical expenses because of a spouse or child that might have a life-threatening medical problem, but this doesn’t waive the requirement for credit counseling in order to file bankruptcy under the new laws.

Recently, banks and credit card companies have wanted to see these changes to bankruptcy laws in order to prevent system abuse from being used in order to wipe out debts. Although this does place many people in a position of strong hardship, it does also prevent people that have a high income from running up with large debts only to have them wiped away by filing bankruptcy. There are therefore, as with every issue, two sides to the changes in bankruptcy laws. In order to avoid the need to file for bankruptcy, you must try to manage your money effectively and avoid having to learn all the details about these alterations in the bankruptcy laws.

Article Source: http://www.debtfinancearticles.com.

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