Understanding The New Bankruptcy Code
Looking forward to you reading the following article and a big thank you for choosing this topic, great choice indeed.
Until recently, the bankruptcy code in the United States allowed many people to file Chapter 7 bankruptcy and discharge their debts without any form of repayment. While the option of repayment existed, most people chose to erase their debts rather than go through the hassle of paying their creditors back. Due to the ease and accessibility of filing Chapter 7 bankruptcy, the number of filings rose to an all-time high in the United States. Unfortunately, this only added to the financial woes that society was already experiencing. The need for bankruptcy reform was imminent.
The new bankruptcy code resulted in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, but changes in bankruptcy code are not new for citizens of the United States. Congress was authorized to make changes to the rules and regulations that govern the relationship between debtors and creditors since 1801. Since then, the legislators have amended the bankruptcy code many times. The 2005 changes, however, created the most significant changes in the code in nearly two decades.
In April of 2005, President George Bush signed into law some new regulations to be added to the existing bankruptcy code. Under the new bankruptcy regulations, debtors who file for any form of bankruptcy protection must meet several requirements. Firstly, debtors who file for new bankruptcies are required to complete a financial counseling course. Since a large number of bankruptcy filings are due to irresponsible personal finance management, the counseling course is designed to help people recognize and change their spending behaviors. This also helps to deter future bankruptcy filings because statistics show that many people who file bankruptcy will do it again in the future.
Another amendment that coincides with the BAPCPA is that debtors must acquire the signature of an attorney. Bankruptcy proceedings are not complete unless a lawyer puts their signature on the debtor's petition. Whether it is a state-appointed bankruptcy lawyer or a private attorney, bankruptcy petitions will not be considered until a reasonable investigation is completed into the circumstances surrounding the bankruptcy. Included in the investigation is a "means test," which is typically conducted by the bankruptcy lawyer. This test compares the debtor's income to that of the state's mean income to decipher if the debtor is even eligible for bankruptcy.
Other restrictions of the new bankruptcy code make it more difficult for debtors to file Chapter 7 bankruptcy to simply have their debts discharged. With the new regulations, the majority of cases are forced into a Chapter 13 bankruptcy that requires debtors to repay their debts with a scheduled payment plan. This process involves a court-appointed trustee to handle the finances of the debtor and a certain percentage of their regular income is delegated to the creditors. Repayment schedules are typically arranged so that the debts are paid within five years. Under the old bankruptcy code, however, it was much easier for debtors to file Chapter 7, which simply erases their debts without any form of repayment.
The recent changes to the United States bankruptcy code took effect in late 2005. These new regulations are directed toward debtors who have accumulated a large amount of debt and simply want to have their financial slate cleared. Since the new guidelines were enacted, debtors are required to complete a course in money management as well as agree to an investigation into their finances before a bankruptcy can be completed.
Thanks for taking the time to find this site and its article. Try searching our other articles.
Technorati Tags: Bankruptcy, Bankruptcy Code, Understanding The New Bankruptcy Code
