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Understanding the New Bankruptcy Law
from:On October 17, 2005, a new bankruptcy law went into effect. The purpose of the bankruptcy was to restore some fairness into the bankruptcy law in terms of who could qualify. Congress had become convinced that many people were taking advantage of the system under the old law in order to get out of paying debts they could afford to repay. The new law makes it more difficult to qualify for a bankruptcy, but it also places a heavier responsibility on the bankruptcy attorney.
The new bankruptcy law changed the old law in several important areas. For one thing, the new law resulted in more people qualifying for a chapter 13 filing rather than a chapter 7 filing. Under the chapter 7 filing, all of the debtor assets are liquidated and used to repay the creditors. In many cases, debtors have no assets except their house or car and so the creditor gets very little or nothing. A chapter 13 filing is a repayment plan which forces the debtor to repay as much debt as possible between 3 to 5 years.
The new bankruptcy law also established new calculation rules and made it more difficult to use the homestead exemption. The new calculation rule uses the IRS standard of living numbers to determine your net income figure. The IRS living standard amounts usually are often lower than what you actually spend. The homestead exemption refers to the fact the new law has placed greater restrictions on which state exemption you can use as determined by your length of residence. A bankruptcy attorney will carefully determine the status of your homestead exemption during the filing process.
Another addition to the new bankruptcy law is the requirement that debtors take a money management course and get 90 minutes of credit counseling. This process has been streamlined in that there are many ways to fulfill these requirements online.
One of the major changes in the new bankruptcy law is the establishment of an income means test. The means test is how the courts will determine if you should be allowed to file a chapter 7. Under the means test, your income will be compared to the state median income in the state in which you live. Then your income will also be used in a formula that will determine if you can pay at least 25% of your net income to pay off unsecured debt. If you can, and your income is over the median, then the court will probably make you file a chapter 13 unless you can prove you have unusual circumstances.
This is just a quick snapshot of the new bankruptcy law changes effective October 2005. Of course, there are many other complex aspects to the law that only an attorney is qualified to interpret. Though the new law is more stringent than the old, it still gives millions of people a fresh start.
Chapter Bankruptcy News
Houghton Mifflin files Chapter 11 bankruptcy - Reuters
 Toronto Star | Houghton Mifflin files Chapter 11 bankruptcy Reuters ... 21 (Reuters) - Houghton Mifflin Harcourt Publishers Inc, whose textbooks have been a staple in American schoolhouses for decades, filed for Chapter 11 bankruptcy protection on Monday after agreeing with creditors to eliminate $3.1 billion of debt. Houghton Mifflin files for bankruptcy protection Houghton Mifflin Harcourt Publishers Files Chapter 11 Bankruptcy Houghton Mifflin Harcourt Publishing Files for Bankruptcy |
Reno's Silver Legacy casino in bankruptcy protection - Modesto Bee
 News10.net | Reno's Silver Legacy casino in bankruptcy protection Modesto Bee By Dale Kasler With a big push from Northern California's Indian casinos, one of Reno's largest casinos has fallen into Chapter 11 bankruptcy protection. The Silver Legacy, once hailed as the savior of Reno's troubled casino industry, ... Silver Legacy the latest gaming property to seek a fresh financial start Reno's Silver Legacy Resort files for bankruptcy MGM Property Files for Bankruptcy |
Gunthers Transport owner files for Chapter 11 bankruptcy - Baltimore Business Journal
Gunthers Transport owner files for Chapter 11 bankruptcy Baltimore Business Journal The owner of a Hanover trucking company that federal trucking regulators forced off the road last year has filed for Chapter 11 bankruptcy protection. Mark David Gunther Sr., owner of Gunthers Transport and Gunthers Leasing Transport Inc., ... |
Notebook: Business tough, but Speedbowl out of bankruptcy - Norwich Bulletin
Notebook: Business tough, but Speedbowl out of bankruptcy Norwich Bulletin The track officially emerged from Chapter 11 bankruptcy Thursday when a Hartford judge issued a final decree regarding the Speedbowl's reorganization plan. “It's another step in the process,” Eames said. “It's not a huge celebration, although it does ... |
Fooled by pal Petters, restaurateur now bankrupt - Minneapolis Star Tribune
 Minneapolis Star Tribune | Fooled by pal Petters, restaurateur now bankrupt Minneapolis Star Tribune Earlier this month, as Petters' last direct appeal for a new trial was denied by the US Supreme Court, Vlahos was in US Bankruptcy Court in Minneapolis making a Chapter 7 filing to wipe away more than $11.8 million in obligations. Twin Cities Restaurateur Vlahos Files for Ch. 7 Bankruptcy Champps founder Dean Vlahos files Ch. 7 after Petters scheme |