Some laws to filing chapter 7 or 13 bankruptcy are common knowledge, such as the requirement for all filers to undergo debt or credit counseling to help better educate them on their spending habits. There is also the law stating that debtors with higher incomes will have to repay a portion of their debt prior to being allowed to file for chapter 13 bankruptcy. However, there have been laws recently taken into effect that are little known and need to be observed.

Chapter 7 Bankruptcy Restrictions
The most common form of bankruptcy just got a little more exclusive. Under the old rules people could decide which chapter of bankruptcy was best for them- most choosing chapter 7. However, those with higher incomes must now be aware that they may not qualify to file for chapter 7 bankruptcy and will be forced to file under chapter 13. The gauge they use to decipher “high income families” is to compare your current monthly income with that of the median monthly income of a family of similar size in your state. Another factor to account for is how you current monthly income will be calculated. It is not what you are currently making at the time when you file for bankruptcy but rather an average of your income from the six months prior to making your claim. This poses a big problem for those who are filing bankruptcy after recently losing a job.

Restrictions on Lawyers
Among the new laws lawyers much personally vouch for the accuracy of the information provided. Thus, time spend on each bankruptcy case will increase, in turn driving up your lawyer bill.

Can You Live On Less?
Under the old rules, those who filed for chapter 13 did have to devote all disposable income to a payment plan. The new laws make this a little more challenging. In addition to handing over all disposable income, chapter 13 filers will have to calculate that amount from an expense amount allowed by the IRS- meaning they get to dictate what your living costs should be. Keeping in mind under chapter 13 you are still required to calculate disposable income according to an average of what you had made over the last six months.

Value Your Property at Replacement Cost
In the past heirlooms and other property that a debtor might want to keep were expected to be of little value- deeming them exempt. However, new laws force you to value all property at retail value taking into consideration age and condition- a requirement that, in most cases, will inflate the cost of your property leaving you at risk of losing it.

Don’t Count on State Exemptions
The new rules entail that a bankruptcy filer live in a sate for at least two years in order to gain from a state’s exemption laws otherwise they can only claim those exemptions of the previous state in which they lived. The same goes for homestead exemptions only this requires over 40 months of residency.

This year President Bush signed a bill to change the bankruptcy law. This will go into effect this October of 2005. The new bankruptcy law will make it more difficult to file for bankruptcy. This may be bad news to individuals who are drowning in debt. On the other hand it is good news to business and individuals that work very hard to maintain good credit and not suffer from profit loss.

When the new bankruptcy law goes into effect it will be harder for anyone to file for chapter 7 and chapter 11 bankruptcy. Filing for chapter 13 bankruptcy will be your most likely option.

What is Chapter 13 bankruptcy? It is an option that is given to those who have any kind of steady income. Basically, anyone who has a job. It is a payment plan and not a way to wipe a way your debt. Which means the days of wiping the slate clean are over. However Chapter 13 does protect your assets. The court devises a payment plan in which you are to pay to a trustee that is appointed by the court. Usually the payments are to be paid off in three years time. There are some exceptions, but that is up to the courts to decide.

So now that the bankruptcy law is changing what are some things people should do to avoid debt?

One very important thing is to never live outside your own means. If you have credit cards don’t use them as if you will have the money every month to pay the minimum balance. Be prepared for the unexpected such as a loss of your job or loss of any other source of income. This is where some people get into trouble. Protect yourself and your assets by being insured. Some people get into debt due to unexpected medical expenses or property damage. When you don’t have a way to help cover these expenses you will find your self in some kind of debt.

Try and keep some money off to the side in case some kind of unplanned expense should arise. Have some kind of back up plan to avoid the need for bankruptcy.

One of the reasons for the bankruptcy law change is because of over use of the system. There are actually some people who pre plan filing for bankruptcy as they abuse their credit cards. It sounds hard to believe, but it is true.

One may ask how this is fair to the people who didn’t do anything wrong and still landed them self in debt? Unfortunately changes in the law aren’t always fair to those who did nothing wrong. As the old saying goes, ” It only takes one bad apple to spoil the bunch”.

The only thing we can do now is become more responsible about our finances. Take more steps to avoid the need to ever file for bankruptcy.

You are down with credit card debt. You need help desperately and are looking out for debt relief. This is a common state of mind of most American citizens reeling under the effects of recession. The need of the hour is some honest counseling and a correct understanding of New Bankruptcy Laws.

You may have been advised frequently to file for bankruptcy for debt relief. Well let me tell you frankly, it is easier said than done. You need to understand all the NUANCES of bankruptcy before taking the leap. Given below are a few complexities of bankruptcy.

It is a legal procedure.
You need to qualify for bankruptcy.
You will enjoy protection only on exempt property.
Exemptions are laid down by each state and vary drastically.
As per new laws if your income is above the median income level you will no longer be able to take the advantage of the fresh start.
Your advisors on debt relief may not tell you this but let me explain it to you. As per earlier laws you enjoyed two types of protection on bankruptcy. The first is on your current assets and the second on future earnings. Your personal assets that are specified by the state laws are exempt from obligation. Future earnings were also not under obligations so that you could go in for a fresh start after the completion of the proceedings.

Now here comes the caveat as per the new bankruptcy laws. As per the current reform bill if a debtor’s earnings are higher than the median level he will no longer be eligible for a straight bankruptcy. He will have to file for bankruptcy under a new version of chapter 13. Under the new bankruptcy laws the debtor will have to propose a repayment plan using a large proportion of his future earnings to meet his debt obligation. This arrangement will have to continue for almost five years.

So think before you take the leap and file for bankruptcy as debt relief. New Bankruptcy Laws may not be so friendly.

There has really never been a more advantageous time for consumers to try and eliminate unsecured debt. Creditors are very concerned about collecting and most have government money to make eliminating some of your debt financially feasible.

Check out the link below to locate legitimate debt relief companies in your area:

http://www.legitimatedebtsettlement.com,/‘>Free Debt Advice

There are 2 sides to the changes in bankruptcy rules. It will be a lot harder to file bankruptcy under chapter 7 and get a totally clean slate.

For businesses, relying on issuing credit, the new personal bankruptcy law is doing great, reducing personal bankruptcy claims from the thousands to double digits.(In the short run).

However, lawyers working with the actual people filing for bankruptcy say that the new law is seriously flawed because it puts more financial burdens on already broke clients and reduces potential debt repayment to small businesses.

And then of course you have the credit card companies charging high interest rates which in quite a few cases caused the bankruptcy in the first place.
According to some financial specialists, much of the debt people accumulate is a result of keeping up with the Joneses and not thinking ahead.

For 80% of clients counseled each month, the debt is credit card related and averages $32,000 – a result of six to eight cards. Consumer credit organizations say the new law provides debt-reducing strategies for those considering filing bankruptcy and curbs abuse.

Under the new law it has become a requirement that the person filing bankruptcy obtains credit counseling both before and after filing for which that person will be charged..

So now the consumer would then know the advantages and disadvantages of declaring bankruptcy. Yet it seems merely another expense for an already financially stressed individual.

People filing bankruptcy in general are not overspenders, but merely faced with temporary financial disasters such as medical costs, layoffs, a divorce, gambling debts or other crises. Before you can file bankruptcy,you are now required to complete credit counseling with an agency approved by the U.S. Trustees office.

This credit counseling is designed to help you determine whether or not bankruptcy is appropriate.

Once you complete your bankruptcy, the law requires you to attend another credit counseling session.

These are new requirements, before this law was passed the law did not require a person to go through counseling either before or after the filing of bankruptcy.

Second, under the old law, a person could decide to file under Chapter 7 or Chapter 13. Under the new law, the court will look at your monthly income and apply a means test relating to the state in which you live. If your income is less than or equal to the medium income then you will be allowed to file Chapter 7 which in effect will give you a clean slate.

This medium income can vary from $28,000 in Missouri to $56,000 in Alaska. If your income is greater, you may be forced to file Chapter 13 unless you can demonstrate you do not have enough disposable income.

Under Chapter 13 you will not get a clean slate but will have to make payments on your debts.

Also, your attorney now has to personally certify that your bankruptcy filing is accurate. This means more work for the attorney, with higher legal fees.

Advantages of declaring Bankruptcy:

Legal protection from creditors
Takes care of all or most debt
In some cases, can keep home and car
May stop complete financial ruin
Provides a fresh start

Disadvantages of declaring Bankruptcy:

Bad credit
May have to repay partial debt load and return collateral to creditors
May lose assets, including house and car (If the house is worth more than a certain amount).
Bankruptcy becomes public record, and
Remains on credit record for seven to 10 years

“In the past, a bankruptcy offered a fresh start for the filer,” said Columbia attorney Gwen Froeschner Hart. “The new federal legislation offers language directed at helping creditors.”

If you analyze credit card expenses for most people you’ll see that they often include medical bills and day-to-day expenses for the elderly or those earning low or fixed incomes. Records show that 50% of credit card holders do not pay their full credit card bills every month.

33% of the population can’t afford medical insurance so have to charge their prescription drugs.
With the recent Medicaid cuts and rigid bankruptcy legislation who knows what is going to happen to these people.

There are some who say consumers are abusing creditors. The irony is that credit card companies are begging for customers and offering large amounts of unsecured credit, yet at the same time, lobbying for stricter debt controls.

The word bankruptcy seems to be simple for everyone who is caught under the credit debts and wants to get out of these debts at once. But first we have to see that someone filing for bankruptcy is eligible or not. Filing for bankruptcy and getting approved involves some important steps and laws which are made by federal governments. The new bankruptcy laws have made it quite difficult for a consumer to file for bankruptcy. And it is seen that the new bankruptcy law is making debt settlement industry popular.

In the previous years many financial institutions suffered a heavy loss due to increase in bankruptcy cases. Observing the financial loss the federal government made changes in the bankruptcy law and some are as follows.

According to the new law, consumers have to measure monthly income. The consumer also has to pass a mean test. The purpose is to evaluate the expenditures of consumer’s household and normal life and the amounts of debts consumer is paying monthly. If these all-outgoing amounts are less than your income, then consumer can file for bankruptcy other wise can not apply for bankruptcy and then the only option left is to go for debt settlement.

According to new law some agencies are nominated to evaluate the financial position of the consumer. To apply for bankruptcy, consumer must have to attach the report for that agency. If the agency declares that the person is rich enough to bear his expenditures and debt installments easily then the option of debt settlement will also be ended.

It is quite tough these days to qualify all the steps amended in new bankruptcy law made in 2005. That is why it is observed that the new bankruptcy law is making debt settlement industry more popular. If someone files for bankruptcy and fails then he has to pay forcefully and it will be a bad impact on negotiation deals with the creditor. And these days the lawyers are much expansive to file bankruptcy. Rather than hiring an expansive lawyer for filing bankruptcy, demolishing financial future, passing different tests of qualifying and to present you in front of a court and face questions of court is quite tough. Whereas the process of negotiations with the creditors is quite simple and risk free. So this trend has been seen that new bankruptcy law is making debt settlement industry popular.

If you have over $10,000 in unsecured debt it may be a wise financial decision to consider a debt settlement. Due to the recession and overwhelming amount of people in debt, creditors are having no choice but to agree to debt settlement deals. To find legitimate debt reduction help in your state and get free debt advice then check out the following link.

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