Mirror of Justice

The New Bankruptcy Law and Some Key Changes

July 14th, 2009 at 08:53pm Under Discrimination Law

The new bankruptcy law that has come into effect has a few major changes that state how bankruptcy will be treated by the government and by the people. So it would be wise for any individual who is thinking of filing for bankruptcy to be well-informed of the new law and all the important changes in it.

One of the main changes is about mandatory credit counseling. Anyone who wants to file for bankruptcy will now have to undergo this counseling and it will have to be done by government-accredited counselors. This measure has been introduced probably to make people aware just how serious bankruptcy is. So many people think of getting into this without thinking about how big a step this is and what the consequences can be. With this counseling being mandatory, hopefully there will be a fall in people filing for bankruptcy and a rise in credit ratings of a lot more individuals.

The second change pertains to the ‘means test’ and it hopes to deter people from filing for bankruptcy just so that they do not have to pay their debts. With this, the government hopes to screen people who file under Chapter 7 to find out if they really are at the end of their tether and cannot pay their debts. It just makes sure that people take their liabilities a bit more seriously and do not resort to filing for bankruptcy just to get out of paying their debts.

There is a move for more to file under Chapter 13 where people can consolidate their debts and then repay them in regular amounts that they can afford. So people get a lot more serious about their debts when they realize that they cannot just be written off but that they have to repay them. However, they can do so in amounts which are more reasonable as far as they are concerned.

Another change is that there are not so many protections anymore. Earlier, filing for bankruptcy meant that the person was protected from all his creditors, no matter what. Now, this ‘automatic law’ has some provisions. Just because a person has filed for bankruptcy, it is not as though he cannot be thrown out of the house he hasn’t finished paying for or his license not suspended or that he can’t have divorce proceedings started against him. The law no longer renders creditors powerless and there is better justice all around.

The new law has a high priority for alimony and child support. So the first amounts are paid out here rather than to the creditors. Earlier, creditors were given first priority when the assets were taken over. Now, family members and their needs come before them. It’s one way of making sure that those who actually need the money get it first.

Those who file for bankruptcy have to attend financial-management lectures too. The attendance at these is compulsory. The debtors have to sit through workshops and seminars so they understand how to manage money. A fresh new start does not mean that their lack of financial management skills will be overlooked. They have to be equipped with these skills so it does not happen to them again. The government hopes that with this law, there will be no inclination to try and file for bankruptcy again.

The Chapter 7 Bankruptcy Law – the Pros and Cons

July 10th, 2009 at 08:53am Under Bankruptcy Law

It is better to realize as early as possible that going through a bankruptcy claim is not easy. People generally opt for it as their first remedy. You must know the bankruptcy laws well in order to decide.

The bankruptcy law has been crafted in a way to promote provisions that are a part of filling bankruptcy claims. It contains systematized laws that help the debtor to rid himself of any financial obligations that he has to undergo. The Chapter 7 bankruptcy law is in other words called straight bankruptcy. This law deals with the liquidation process. According to this, the one who is filing for bankruptcy has to surrender all his assets except those that are unaccredited or exempted to the lawyer or the trustee in bankruptcy.

The court must appoint a trustee in bankruptcy and he will be given charge of selling the assets or converting them into cash. Once the assets have been converted to cash the creditors are paid with these funds. Under the Chapter 7 bankruptcy law you are discharged from any obligation after a period of four months.

When can you apply the Chapter 7 bankruptcy law? It is applied when the debtor is left with no property to give up or lose. This is one of the most common bankruptcies that are filed in the United States by either individuals or business corporations. You could personally file bankruptcy by abiding with the Chapter 7 bankruptcy law or the court may impose it.

The Chapter 7 bankruptcy law will prompt a business man to sell all his assets and pay what he owes the creditors and finally close down his business. The procedures are very similar for individuals who have been forced to file under the Chapter 7 bankruptcy law, the only difference here is the individual will have no business to close down.

The advantages of filing a claim under the Chapter 7 bankruptcy law first and foremost are that any amount of debt may be cleared and as soon as you get out of the trouble you are in, you get a clean chit. The other advantage is that there is no particular amount of debt to qualify you for filing under the Chapter 7 bankruptcy law. As there is a protection that is granted by this law, the creditors cannot exert any authority over you. It is processed very quickly and you can be discharged from any debts in a short period, say in about four to six months.

The disadvantage of the Chapter 7 bankruptcy law is that you have to give up your whole property. Debts like taxes, child support, housing mortgages, students’ loans and car loans are not discharged under the Chapter 7 bankruptcy law. Along with you the co-signers will also be pulled in and asked to pay for your home loan. This law may be only availed once in every six years.

It becomes difficult to avail other loans because your credit rating gets damaged. Once you have filed for the Chapter 7 bankruptcy law, it cannot be withdrawn.

Tread cautiously if you are considering filing under the provisions that are based on the Chapter 7 bankruptcy law. All you need is to be protected and not end up with added problems.