The New Bankruptcy Law - Its Impact on Bankruptcies

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, more commonly called the 2005
Bankruptcy Act or New Bankruptcy Law, made significant reforms to the current US Bankruptcy code.
Its purpose is to prevent perceived abuse by customers especially those individuals who file for
bankruptcy just to avoid paying for unwanted debts. An example of these changes is that before
individuals are eligible to file for bankruptcy relief, they must go through a mandatory credit
counseling program for six months. After that individual has filed for bankruptcy, a financial
management course must also be completed.

An individual's eligibility to file for Chapter 7 and Chapter 13 bankruptcy has also been changed
under the New Bankruptcy law. To determine which chapter you are eligible to file for, the
bankruptcy court uses the means test. This means that it compares the your state's median income
to your average income over the preceding six months. You can only file for Chapter 7 Bankruptcy
if your income falls below that median. If not, however, further measures in the means test will
help you understand whether you need to file Chapter 7 or Chapter 13,

Therefore, before you file, it's more important than ever to know the full extent of your
circumstances. Your current income sources, debts, monthly living expenses, the deeds to any real
estate or other major property that you own, records of any large financial transactions for the
last two years, and tax returns should be properly recorded, filed and cataloged to make the
process easier and to avoid any penalties or even disqualification. You'll need the guidance of an
attorney to review your assets because not all property is exempt from being seized as part of the
bankruptcy process. Don't forget to secure the necessary forms to be used as well as to file a
petition. Because any other information brought forth by your creditors could jeopardize the
success of your bankruptcy, it's very important that you are detailed and truthful on this
petition. 

If you're filing for Chapter 13, you must also create and submit a repayment plan. Your leftover
money after your living expenses and how that will be divided with your creditors should also be
considered and planned carefully. You must be prepared to pay back child support and taxes in full
while your unsecured debts (like medical bills and credit card debt) are partially paid.

An automatic stay is granted to all your debts when you file for bankruptcy. Once you have
officially filed, any foreclosure proceedings currently in the works at the time of filing and all
communications from creditors will be stopped. However, this temporary relief comes at a price.
The court will appoint a trustee to manage your case and all of your property that are not
protected by the exemptions. Although the New Bankruptcy Law allows for a more merit-based, albeit
confusing, bankruptcy filing, it is still in your best interest to speak with an attorney to
clarify some questions and to guide you correctly through the entire process.
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If you can no longer pay your creditors, you may choose to file for bankruptcy. Get a fresh start
- by liquidating assets to pay your debts or by creating a repayment plan. Based in Oakland,
California, Claude D. Ames Law Offices can provide the legal representation that you need for
Chapter 7 and Chapter 11 bankruptcy. Please call (510) 652-1300 or visit his website:
http://www.claudeamesarbmed.com

Posted by J. Randall Frier http://jrandallfrier.com/