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Bankruptcy can be defined as either the legal inability to pay debts or having already legally declared bankruptcy. While bankruptcy filings decreased in 2006, according to the Administrative Office of the U.S. Courts, more than 1,000,000 individuals and businesses will still file for bankruptcy annually. For some, it's an absolute necessity, and for others it is seen as an easy way out. Whatever the reason individuals and businesses have for filing for bankruptcy, there are many complicated laws and recent bankruptcy reform acts to consider.
Bankruptcy reform is aimed at consumers who overspend and try to avoid paying their debts, banks that over market their credit cards, and lawyers who operate bankruptcy mills and take advantage of hardworking citizens under financial distress. There are also numerous provisions in place aimed at protecting consumers, penalizing abusive creditors, ensuring child support payments, and discouraging bankruptcy abuse by debtors. It also includes bankruptcy provisions affecting small businesses, municipal governments, and family farmers. Newer laws and changes can be found in more than a dozen areas of bankruptcy, under bankruptcy reform, including the areas of credit counseling, debt relief agencies, multiple filings, prohibited advice, notice to debtors, disposable income, adequate protection, liens, pension and profit sharing, priority for support payments, student loans, and tax returns, to name a few.
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted in 2005, and is sometimes referred to as the "New Bankruptcy Law". It\'s aim was to make it harder for debtors to file for Chapter 7, it instead lead them to file for Chapter 13 bankruptcy. Some of the provisions of this bill include the presumption of abuse, which was a method that calculated a debtor\'s income and then compares it to the debtor\'s state median income. Any debtor\'s income that is above the median is subjected to a means test. The means test is another provision of the BAPCPA, and it helps to find if the debtor has abused their income and are spending more than they need to.
Another provision of the BAPCPA is a waiting period between filings, which was extended. This is so a debtor can be denied a discharge if they had already received a discharge in the past 8 years of the present filing case for a Chapter 7 case. Before this it had been six years between discharges. There are also now credit counseling and debtor education requirements for those who are filing for bankruptcy, meaning they have to fund and go to the class. Further actions cannot be taken until after classes are complete.
BAPCPA also limited automatic stay applicability for eviction proceedings, meaning it won\'t stop the eviction from happening if it had been in process before the bankruptcy was filed. It limited the time of an automatic stay, or relief from collection proceedings unless it is proven that the present case being filed is being done so in good faith. Stricter notice requirements also now have to be applied, meaning the debtor has to give effective notice to the creditor about how they were going to file for bankruptcy. Another provision is the expansion of exceptions to discharge, which gives the creditor more protection. Fraudulent credit card use presumption was also expanded. The ability for debtors to avoid liens was also limited, and certain definitions were changed to limit household goods and electronic equipment. Limits on homestead exemptions and exemptions in general were implemented.
There are more requirements for people who are filing for bankruptcy that make it more costly and difficult, with more additional filing requirements and fees. The amount of paperwork increased and this raised filing fees. There are increased attorney liability and costs. Attorneys now have to conduct and investigation on the debtors filings and are personally held liable for any inaccuracies, meaning attorney fees have increased. There are increased compliance requirements for small businesses that are trying to file for Chapter 11, with the deadline being shortened. Also, there is an increased amount of debt repayment under Chapter 13, which increased the amount of debt Chapter 13 filers have to repay.
Because there are so many laws, rules, and provisions to consider, if you're considering filing for bankruptcy, it's best to contact a bankruptcy lawyer or attorney. An experienced bankruptcy lawyer or attorney can help you understand bankruptcy laws, your legal rights, and they can help you with your claim – beginning to end.
A bankruptcy lawyer will know the ins and outs of the legal system, and they will be able to discuss the different types of bankruptcy and advise you on which one is best for you. Keep in mind that there are several types of bankruptcy including Chapter 7, Chapter 11 and Chapter 13 (the most common types) and Chapter 9, Chapter 12, and Chapter 15 (less common). Married couples tend to utilize Chapter 7 and businesses typically utilize Chapters 7 and 11.
If you are ready to contact a bankruptcy lawyer to explore your options for debt relief, visit the American Bar Association ( ABA ). The ABA features a lawyer locator which allows the user to search bankruptcy lawyer profiles in your local area. Access to the site and profiles is free.
With over 1.1 million people filing for bankruptcy in 2008, these restrictions, while burdensome to some, in the end help out the U.S. economy as a whole. This will become more obvious as more people are likely file for bankruptcy as their financial situations worsen.
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