The New Bankruptcy Laws Usher In New Challenges

The New Bankruptcy Laws Make it More Difficult to File Chapter 7 Bankruptcy

The most recent modifications to bankruptcy laws might cause it to be more difficult for you to file bankruptcy. If you're in a higher income bracket you'll no longer be allowed to utilize Chapter 7 bankruptcy.  Rather, you'll have to file under Chapter 13 bankruptcy and pay back at least a few of your creditors. If you want to file bankruptcy, you must take part in credit guidance prior to filing.  You're likewise required to go to further counseling in the discipline of budgeting and debt management.  The additional counseling is a necessity to get a release of your debts. And, since the law imposes new demands on lawyers, you might have a more difficult time acquiring a attorney to accept your bankruptcy suit.

Narrow Eligibility for Chapter 7 Bankruptcy

Under the past bankruptcy laws, you were permitted to choose the type of bankruptcy that looked best for you.  In most all cases that would be a Chapter 7 bankruptcy settlement rather than a Chapter 13 bankruptcy repayment. But, if you're in a high income bracket, the new bankruptcy laws won't let you to file Chapter 7 bankruptcy.

To find out whether you're able to file Chapter 7 bankruptcy under the new bankruptcy laws, you must first assess your "current monthly income" against the average income for a household of your size in your state. If your income is lower than or equal to the average, you'll be able to file for Chapter 7 bankruptcy. If it's greater than the average, however, you must pass a new test to file for Chapter 7 bankruptcy.  The new test is called "the means test."

The intention of the means test is to find out whether you have enough available income, after deducting certain permitted expenses and required debt payments, to make payments on a Chapter 13 program. To discover whether you pass the means test, you take off certain permitted expenses and debt payments from your current monthly income. If the money that's left after these computations is below a particular amount of money, you'll be able to file for Chapter 7.

Counseling Prerequisites

Prior to filing for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling with an agency accredited by the United States Trustee's office. The reason for this counseling requirement is that it helps you in finding out whether you actually need to file for bankruptcy or whether an informal repayment program will help you recoup your financial stability.

Counseling is necessary even if it's obvious that a repayment program isn't feasible for you.  You're expected merely to take part in the counseling.  You don't have to consent to any repayment plan the agency proposes. Even so, before you'll be able to file bankruptcy, you'll have to introduce any repayment plan the agency proposes along with a certificate proving that you completed the counseling.

Toward the conclusion of your bankruptcy case, you'll have to attend a another counseling session.  This counseling session is fashioned to teach you personal financial management skills. You can't get the discharge that wipes out your debts until you deliver proof to the court that you completed this requirement.

Lawyers May Be Tougher to Locate -- and a Good Deal More Costly

The new bankruptcy laws do add many complex demands to bankruptcy filings. Many of these brand-new demands impose more responsibilities on lawyers leading to bankruptcy cases being more time-consuming. Among the major new demands on attorneys is that they must now personally vouch for the truth of all the information their clients give them.  That extra requirement means that attorneys must spend a good deal of time on each bankruptcy suit.  So, they'll bill more to take each bankruptcy case.   The new bankruptcy law demands have actually squeezed a few bankruptcy attorneys out of the field altogether.

Many Chapter 13 Filers Will Need to Survive on Less

When you filed Chapter 13 bankruptcy under the past bankruptcy laws,  you had to devote all of your spendable income to your repayment plan.  The previous bankruptcy laws defined spendable income as that which you had remaining after paying your real living expenses. The new bankruptcy laws have modified this computation.  While you still must turn over all of your spendable income, if your income is larger than the median in your state, you don't get to calculate your usable income based on your real expenses.  Instead, you have to work out your disposable income implementing permitted expense sums determined by the IRS. And these permitted expense totals must be deducted from your average income during the six months before filing bankruptcy, not from your pay every month.

Additional Changes

There are additional changes that can impact you negatively if you're filing or looking at filing bankruptcy.  For plain-English guidance in the new bankruptcy laws, get a copy of The New Bankruptcy: Will It Work for You?

Best Way Out Of Debt - Debt Consolidation?

Debt consolidation loans are usually in the form of a second mortgage. The equity that has been accumulated in a home is used as collateral to get a second mortgage, and the proceeds from that second mortgage is used to pay off debts, many of which are unsecured debts.

I am neither advocating nor panning debt consolidation loans here. But before you get a debt consolidation loan in order to alleviate your financial woes, you do need to fully understand what you are doing, why you are doing it, what the cost could be, and if it will, in fact, solve your debt elimination problems.

Home equity is the single largest asset millions of families have if not the only assey they have. Equity is made up of the down payment that was made when the home was purchased, the amount of the principle of the loan that has been paid off, and any increase in the value of the home over the years.

Home loans, including second mortgages, are secured debt. The home is the collateral for the loan. If you fail to make mortgage payments, the loan can be foreclosed and you can lose the home. That's the way it works.  And instead of having debt elimination, you have no home!

When you take out a consolidation loan in the form of a second mortgage, you are very literally betting the farm (the house) that you can make the payments each and every month in full and on time. There is more. Unsecured debt is debt for which you have not pledged any collateral -- think credit card debt. When you charge a purchase to a credit card, you have not used any of your assets as collateral for that loan. And credit card purchases ARE loans. If you use the proceeds from a second mortgage to pay off unsecured debt, it becomes secured debt.

Loan For Bill Consolidation - Beware of Online Risks

Loan for bill consolidation allows you the benefit of a single loan instead of debts from myriad of sources. The non-variable interest rate options that you have with these loans makes them even more appeasing. If you obtain a secured consolidated debt, you can repay the debt faster or in a single installment too.

Are there any risks in getting such a loan service?

A bad credit history may not deter loan servicing companies from aiding you, but they may not be very accommodating in giving you low interest rate loans. This would only get worse if you declare bankruptcy.

Use good discretion while choosing a debt consolidation service

Good services best suited to your requirements are not easy to find, so you must spend a lot of time researching about them yourself. Most companies give a lot of information about the debt management and their services on the web, so it is a very good repository to get maximum information about these programs.

Online Frauds

Guard against online frauds while researching online. The reach and convenience of the Internet has made it a happy hunting ground for unlawful companies and profligate individuals to run fishy programs. Hence make sure that you do a thorough research before going ahead with approaching the institutions.

The most important thing to do while trying to clear all your debts is to zero in on a highly acclaimed institution with impeccable record. Hence, don't rely solely on information from the Internet. Community resources like a relevant ministry or department and banking institutions may provide you with other service companies to you consider.

Go For Authentic Services

By exploring multiple resources, you can differentiate between authentic services and shady ones. Make sure that the company is reliable, legal with a decent past success.

Sign up with a reputable, legal and dependable financial company for a loan for bill consolidation. With proper guidance you could break away from debt in a few years time.