Copyright 2005-8
All rights reserved.
5 Things You Should Know About Bankruptcy
Last April, Congress passed the Bankruptcy Abuse and Consumer Protection
Act, the most sweeping reform of our nation’s bankruptcy laws in more than
twenty-five years. Proponents of the bill argue that most consumers who file
for bankruptcy do so simply because they do not wish to pay their bills. That
is an arguable point, as studies show that most bankruptcy filers have
suffered illness, injury or job loss. Regardless of the reasons, Congress has
made the changes, and millions of Americans will be affected when the new
law takes effect on October 15.

Here is a short list of the changes and how consumers will be affected.

# Goodbye, Chapter 7 – Until now, most consumers have been permitted to
file under Chapter 7 of the Federal bankruptcy code. Chapter 7 permits the
court to wipe away most consumer debt, allowing the debtor to make a fresh
start. The new law establishes a “means test.” Anyone with income that
exceeds the median income for his or her state will have to file under the
stricter Chapter 13 instead, which requires a repayment schedule of up to five

# Attorney problems – The more complicated Chapter 13 filings will make it
necessary for filers to hire an attorney. Most attorneys who practice
bankruptcy law are already reporting dramatically increased business; some
are even turning clients away. If you need an attorney, hire one now, as they
are soon going to be very busy

# More attorney problems - The law also leaves lawyers legally responsible
for the accuracy of the information filed on their clients’ behalf. This has led
most lawyers to increase their fees. Some, including those who do bankruptcy
work on a pro bono, or free, basis, have decided to forego bankruptcy work
altogether. In short, it will soon be more difficult and more expensive to hire
an attorney.

# Mandatory credit counseling – Congress has required that debtors obtain
credit counseling from an approved agency within six months of filing for
bankruptcy. As of now, this requirement is largely undefined, with rules,
regulations, and qualifications for counselors still up in the air.

# Expect to may more bills – Some obligations, such as student loans or
taxes, must be paid in full even after a bankruptcy filing. The new law
lengthens the list of debts that cannot be forgiven.

The new legislation, rightly or wrongly, makes it more difficult, more time
consuming and more expensive for a debtor to file for bankruptcy.
Consumers who are considering doing so should act now, as the regulations
will soon become stricter. Bankruptcy should always be a last resort option,
but if you cannot avoid it, you should act quickly.

©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including End-Your-Debt.
com, a site devoted to
establishing credit, debt consolidation and credit

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