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Sometimes bankruptcy may be the only option. However, on April, 20th 2005
President Bush signed the Bankruptcy Reform Act, S 256 into law.
This new
bankruptcy reform legislation is now in effect
. This act's official title is: "The
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". The
Bankruptcy Reform Act went into effect October 17th, 2005. This bankruptcy
reform has made it more difficult to wipe out your debts with a Chapter 7
bankruptcy. It was passed through congress because of pressure from lending
institutions.

The incidence of bankruptcy has increased substantially in the past few years. The
12 month period ending June 30, 2005 saw a record of 1,637,254. This was up less
than 1% from the 12 month period ending in June, 2004, however, the fourth
quarter of fiscal 2005 saw an 11% increase in filings from the same quarter in fiscal
2004. In the 12 month period ending December 31st, 2004, there were just under
1.6 million bankruptcies filed of all types. Of this 1.6 million, the overwhelming
majority, 1.13 million, were chapter 7 bankruptcies. Over 449,000 were chapter 13
bankruptcies.

This trend prompted congress to try and protect creditors by passing the tougher
statutes. Some have argued that the creditors have brought this increase in
bankruptcies upon themselves by easing credit requirements and increasing fees and
interest rates for credit infractions. The problems in the credit industry that began in
2007, and the financial sector meltdown in mid 2008 might bear this out.

In 2006 the number of bankruptcy filings plummeted to only 617,660. Many experts
theorized this was because so many people filed ahead of the new law taking effect.
In 2007 the number of U.S. bankruptcy filings was on the upswing again, up nearly
40%, to a total of 822,590. This is still far fewer than the total bankruptcy filings
that were experienced in the years prior to the law taking effect.

Part of the new federal bankruptcy statute includes a  means test to determine
weather or not you will be able to pay some of your debts back. Repayment of some
of the debt is the primary intent of the new federal bankruptcy law. In addition, the
homestead exemption will be limited to only $125,000 on a primary residence
purchased in the previous 1215 days. This exemption has been one of the major
provisions of bankruptcy law that allow filers to shelter some of their assets.

Another shelter that has been used is education funding. Up to $5,000 can be
protected in this fashion, as long as the money was in the fund at least 1 year before
the bankruptcy was filed. Health insurance plans, some retirement plans and tax
deferred annuities can also be exempted. It is a very wise idea to consult a
bankruptcy attorney to determine what can be sheltered and what may be seized.

Different Types of Bankruptcy

A Chapter 7 bankruptcy is also called a straight bankruptcy. This type of
bankruptcy typically allows all, or almost all debts to be wiped away. The debtor's
property is turned over to a bankruptcy trustee for liquidation. It is then sold to
satisfy as much of the accumulated debt as possible.

Chapter 7 Bankruptcy Exemptions
Some property is exempt from this type of bankruptcy proceeding.  Exempt
property varies by state, but can include the primary residence and some other
property such as cars, or work related tools. There is also a federal list of exempt
property. Both state and federal exemptions should be examined thoroughly, with the
aid of competent legal counsel, to determine the most advantageous personal
property exemptions according to your specific situation.  Some states allow you to
choose from the state exemption list or the federal list. This process usually takes
about 4 months. Many times the bankruptcy filer has little or no assets to lose
anyway.

Some bankruptcy filers with substantial assets have been known to actually move to
another state in an attempt to shield assets from bankruptcy seizure. Florida and
Texas have been known for their favorable homestead exemptions for example. The
law normally only allows this sort of exemption if the filer has actually lived in a
home as their primary residence for 2 years prior to filing though.

Once you file for a Chapter 7 bankruptcy, you cannot do so again until 8 years after
discharge of the initial bankruptcy. It bodes well for debtors to make this decision
carefully and proceed correctly.

A
Chapter 13 bankruptcy is a reorganization. This form of bankruptcy requires
some of the debts to be repaid. One of the big effects of the new, federal
bankruptcy statute will be to force more bankruptcy filers to use this form of
bankruptcy protection instead of the chapter 7. If your income exceeds expenses,
you will most likely be required to file this form of bankruptcy. The repayment term
is typically between three and five years. If you have non-exempt property you want
to keep, this is the type of bankruptcy you would want to pursue. This bankruptcy
option allows you to make up missed payments and become current on your existing
debts. It also leaves open the option to file a chapter 7 bankruptcy at some point in
the future if your situation doesn't improve.

A
Chapter 11 bankruptcy is a special type of bankruptcy for large businesses or
corporations. It allows them relief from their creditors while they either reorganize
to attempt to continue operations or terminate business activities. To successfully
file a chapter 11 bankruptcy, the business must face overwhelming and
unmanageable debt that has no chance of being repaid. This must be determined by
a bankruptcy court.

Bankruptcy is a daunting task and should not be taken lightly. It can be very
expensive to retain qualified legal representation. This comes at a time when the
bankruptcy filer has little or no money. However, this is often money well spent.
Not surprisingly, many bankruptcy attorneys will not accept credit, but some will
accept credit cards.  

It is possible to download the necessary bankruptcy filing forms from the Internet.
This can save a substantial amount of money, however the filer must still cover all
the necessary details and ensure they are filing the proper type of bankruptcy. It
would be terrible to unnecessarily lose some personal property, like a home or car,
because of a minor error in filing. Even if you don't retain a specialized bankruptcy
attorney it is a good idea to at least get the assistance of a legal aid organization and
do as much research as possible. They can look over the filing and offer general
advice to help avoid catastrophic errors.

NOTE: In the UK there is the Individual Voluntary Arrangement, which allows debts
to be negotiated through a special counselor. The private debtor gets many of the
same advantages of a Chapter 13 bankruptcy in the USA.

Can Your Mortgage Be Changed to Help Avoid Bankruptcy?
If you are contemplating bankruptcy because your mortgage payment has risen or
you've lost your job and are having trouble paying your mortgage, you may be able
to get your loan modified. Loan modification is a program where the lender agrees to
restructure the terms of your loan. The payments decrease substantially. Often this
is enough to allow you to avoid filing bankruptcy.

Find out if you're eligible for a mortgage loan modification, and if it can help protect
you and your property.
Click here now.

It's possible your credit may be salvageable, and you may be able to avoid
bankruptcy altogether. Few people have the time or expertise to effectively pull their
credit back from the brink on their own if it's truly bad, however. In many cases
there just isn't the time. In addition, many people simply don't feel comfortable
dealing with attorneys and collection departments. If your credit just has some
bumps and bruises, you can do much of the work required to raise your credit score
on your own. On the other hand, if you have really bad credit, some guidance by
true experts will greatly assist you to get your credit back to where you can get
good rates on mortgages, refinances or vehicle loans. For most people, making
mistakes when trying to stave off bankruptcy or improve terrible credit are just too
costly.

This kind of help avoiding bankruptcy can save consumers substantial amounts of  
money, in addition to possibly helping them avoid the stigma and long term
inconvenience of a bankruptcy. That is why it has become a rapidly growing
industry. With the recent problems in the sub-prime mortgage market, this trend is
sure to accelerate. In light of this, it's vital that you use a company that has the
depth of experience in both the legal and credit fields that will give you the kind of
help you need for the minimum cost. A good value is essential here. After all, if you
have money troubles already, you don't need higher bills to add to your problems,
you need your problems solved, and fast.

Lexington Law is one such company. Their name is widely recognized as being a
leader in this field. They have the experience (over 20 years) to get your credit back
to where you can get a refinance or new mortgage. It's possible they can even help
you avoid bankruptcy. That's important, so you won't resort to sifting through
today's difficult sub-prime market. In addition, you'll have a much easier time getting
better rates on your credit cards, which will save you even more money every
month. If you are contemplating bankruptcy, but haven't declared it yet, you need to
avoid it if possible, and they may be able to help. They have  free, no obligation
consultation so you can make sure their help is right for you. Find out now, their
help is available 24/7.
Click here now.
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