How Are the New Bankruptcy Laws Going to Affect You?

Posted under by admin

As of October 17, people filing bankruptcy are going to see some significant changes in the laws. The Bankruptcy Abuse Prevention and Consumer Protection Act will make it much more difficult for people to have all their debts cancelled by filing Chapter 7. This will probably affect the hit middle-class people the hardest. In most cases you will not be able to get out from under everything, but you will have to file Chapter 13 and reorganize your debts and pay your creditors back. The repayment period has been increased from 3 to 5 years.

I believe this is a good move on the part of the government. After spending several years in the collection and credit card industry, I believe the bankruptcy laws were being taken advantage of in many cases. The ones I feel will suffer the most is people with substantial medical bills and the victims of the past year’s hurricanes.

You will only qualify for Chapter 7 if your median income is lower than the average income for your state. The amount you will repay under a Chapter 13 will be no less than the amount they would have received under a Chapter 7 including the return of the underlying assets.
IRAs up to $1 million dollars are exempt and rollover IRAs are completely exempt. One the biggest changes for retirement plans is being able to repay them under the new law. If you think you can shelter income by buying a large vacation home, you better have lived in it for 40 months before you file or you will have a limit of $125,000.

Another thing that is going to change when a person goes to file bankruptcy is the cost. Costs for filing are expected to increase by as much as 50 percent due to the strict verification of the client’s personal information.

One last thing, before you can file you will be required to complete credit counseling. In the past, bankruptcy used to be straightforward. Now the process will require more time and money to complete.