Filing Bankruptcy – 2005 Law Changes – New Things To Consider

     Filing Bankruptcy is an important decision to make. The ramifications of filing or not filing are far reaching in your ability to get good credit offers, recover your finances from disaster etc. There is also no cookie cutter formula to guide you into whether you should file bankruptcy or not. Although with the new bankruptcy law from 2005 there are definitely some rules and guidance that dictate how you file and what type of bankruptcy you may be able to file. See Chapter 7 Bankruptcy – What Is It for more information.
     Especially true is that it takes more planning and effort to file than it used to before the bankruptcy law changes in 2005. The changes were designed to reduce fraud and abuse in the system, but still provide a way for those people and entities who need to enter bankruptcy protection the opportunity and process for doing so.

Petition Filed – Automatic Stay – Creditors Stop Calling
     The Automatic Stay is perhaps one of the most appreciated parts of the bankruptcy process for an individual who has fallen behind on their bills and is getting calls from collectors. Once your bankruptcy attorney has filed your paperwork with the bankruptcy courthouse clerk you will immediately be off limits for the most part from the collectors. The Automatic Stay essentially stops all debt collection proceedings. It will also temporarily stop any foreclosure proceedings or evictions that might be underway which might give just enough extra time to get something worked out. For the specifics of your situation, you will need to consult with your bankruptcy attorney.

Credit Report – Bankruptcy Stays On For Up To 10 years
     This is a huge consideration for filing bankruptcy. If you have a bankruptcy discharged it will stay on your credit report in most cases for 10 years. This could have a negative impact on your ability to get some types of credit – or to qualify for the best credit card offers, or the best mortgage offers. It does not necessarily prevent you from getting credit, but it sure can have in impact on the terms, amounts that you can borrow, and the interest rates that you will be offered.

Bankruptcy Can Reduce Stress
     A strong balance however to the notation on your credit file for 10 years is the sudden ability to recover from a rough and stressful situation that could drag on for a period of time much longer than 10 years. If you owe a lot of money and you are barely making ends meet and always stress and worry about keeping all of your payments together and paid on time you may be missing out on some aspects of quality of life. This is a gut check for you – would you rather spend your life stressed about just making it by, or drawing a line in the sand, learning from your lessons, and starting over? Only you can tell, but a bankruptcy is a good argument for alleviating some of the stress in your life so you can enjoy it more.

Bankurptcy Fraud and Abuse
     Fraud and Abuse of bankruptcy were thought to be a major problem by the credit card companies and other creditors as the U.S. came into the 2000’s. With this in mind, they put tremendous pressure on Congress to amend the U.S. bankruptcy laws which happened in October 2005 with the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act. Here are some of the major changes to the Bankruptcy laws with this new Act:

One important stipulation of this Act was to initiate a means test which deeply analyzes an individual’s ability to pay back the debt they owe. In other words, does this person even need to file bankruptcy or not.

The second aspect of this new law addresses abuses in the system by individuals who could pay back their debt but were able to file under Chapter 7 to have their debts discharged in the form of an income means test. Further the income means test dictates whether a person files a Chapter 7 or Chapter 13. In the past, it was easier to file a Chapter 7 even when someone had pretty good income. With this new test in play, someone with good income will most likely be forced into a wage earner program under Chapter 13 so that they can pay back some of the debt they owe.

A third piece of this Act extended the period of time between the first discharge Chapter 7 and a second Chapter 7 filing that a debtor makes to be 8 years. Coupled with this extension is that it now limits how often someone can file a new bankruptcy filing if they had a previously dismissed bankruptcy filing. This time extention seems to have been put into place to reduce the amount of abusive filings that were intended to just slow down debt collection efforts where there was no real intention on the consumer to either complete the bankruptcy or payback the debt.

     Hopefully with the information contained in this article some more of your questions have been answered, or you have some additional place to turn for answers. If you need more information about bankruptcy to help you make a decision about filing bankruptcy please see our complete list of bankruptcy articles and or contact a bankruptcy attorney in your area. One thing to remember is that if you decide to file bankruptcy that you are not alone – many people have done so in the past and many more will in the future. I’m sure if you asked around you would be surprised who has and they just don’t talk about it.