Welcome to Bankruptcy Guide
How To Avoid Bankruptcy Article
. For a permanent link to this article, or to bookmark it for further reading, click here.
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.
How To Avoid Bankruptcy News
5 Ways to Avoid Filing for Bankruptcy
The B Word. We know what it is but don't like to say it, and we hope we never have to go through it. The mere thought of bankruptcy sends shivers down our spines and makes our bank accounts quiver in fear. It has its reputation as the ultimate nadir of personal finance.
Read more...Why Billion Dollar Law Firms Fail and How to Avoid Their Fate
Over at Above the Law last week, Mergers and Acquisitions specialist John Altorelli, talked about his escape from the Dewtanic, which is still sporting a schnitzy video splash page despite predictions that it could file for bankruptcy any day now.
Read more...How To Survive Bankruptcy
Bankruptcy is not the end of the world. You can survive it and come out on the other side more financially solid.
Read more...Phil Falcone's LightSquared preparing for potential bankruptcy filing: sources
Hedge-fund manger Philip Falcone's LightSquared Inc. venture is preparing for a potential bankruptcy-protection filing, as negotiations with lenders to avoid a potential default faltered, according to people familiar with the matter. The two sides still have until 5:00pm Monday to reach a deal that would keep LightSquared out...
Read more...LightSquared on verge of bankruptcy: report
LightSquared Inc. a venture of hedge-fund manager Philip Falcone was teetering on the verge of bankruptcy Sunday as talks with lenders to avoid going bust have faltered.
Read more...