As you may or may not know, the credit card industry was able to have legislation passed approximately 3 years ago, making it harder to file for Chapter 7 bankruptcy and wipe away your debt. Below are some of the highlights on the new law. Pertaining to you the consumer.

1.         The law will not allow you to file Chapter 7 bankruptcy when you can afford to pay a small amount each month to your creditors.  The law is designed to stop you from being able to file a Chapter 7 bankruptcy.  This creditor backed bankruptcy law turns the Bankruptcy Courts into the credit industry’s tax supported collection agency.  Any person whose family earnings are more than the average for their state will not be allowed to file a Chapter 7 case if they will have as little as $166 dollars in discretionary income. Instead, the bankruptcy law will require that your bankruptcy case be dismissed or turned in a Chapter 13 bankruptcy repayment plan.

 2.         The amount the Bankruptcy Court says you can afford to pay might be based on income you no longer have.  The bankruptcy Court rules will assume you still make what you averaged over the six months before your bankruptcy case was filed.  Many people need to file bankruptcy after a job loss or illness.

 3.         The Bankruptcy Court may require you to adjust your living expenses to unrealistic low levels.  How much can you afford to pay each month?  Under the bankruptcy law, the Bankruptcy Court won’t ask you, the Bankruptcy Court will tell you.  The IRS’s expense guidelines will mandate how much the Bankruptcy Court will allow you to spend on living expenses for housing, utilities, food, clothing, transportation and other necessary expenses. 

 4.         Your bankruptcy case will take longer to prepare and will cost you more money. The bankruptcy law will require more work and effort to prepare your bankruptcy case.  That means it will cost you more money to be properly represented in the Bankruptcy Court.

 5.         You will be required to attend credit counseling before you are allowed to file bankruptcy.  What do credit counselors do?  Every one I have heard about makes their income only if you allow them to setup a repayment pay with your creditors.  That is why the major credit counseling service across America receive a lot of its funding from major financial institutions. Requiring you to meet with your adversaries before filing bankruptcy is hardly a good policy.  People should be free to seek independent advice.  Not forced to accept information from their bill collectors. 

 6.         Attendance at a personal financial management course will be required to receive a bankruptcy discharge (in addition to the credit counseling you were required to attend before the bankruptcy case was filed).  Regardless of the reasons for filing your bankruptcy case, you will have to attend a personal financial management course. 

 7.         Your tax records will be open to the public.  The bankruptcy law requires you to file your tax returns with the Bankruptcy Court.  By the way, who do telephone solicitors work for?  Under the old bankruptcy law they stayed private.  Under the new bankruptcy law they will have to be filed with the bankruptcy court and open to public inspection.

 8.         If you have filed personal bankruptcy in the past, you will have to wait longer to file bankruptcy again.  Also, your option to file a Chapter 13 case will be greatly restricted.   Illness, job loss, and other personal setbacks, can strike more than once.  Under the bankruptcy law you won’t be allowed to file another bankruptcy case within 8 years of a previous bankruptcy case.

 9.         More debts will “survive” your bankruptcy.  Some debts that you could have eliminated in the past, won’t be discharged under the bankruptcy law.  One big example are bills you were ordered to pay in a divorce case.  For example, if you were ordered to pay $15,000.00 in credit card bills by the divorce judge, you won’t be able to eliminate those in your bankruptcy case. 

 10.       Many people will be forced into a 5 year Chapter 13 bankruptcy repayment plan instead of having their debts eliminated in Chapter 7 bankruptcy.  Today most Chapter 13 bankruptcy payment plans last 3 years.  The bankruptcy law will require 5 year Chapter 13 cases for many people.  If you earn more than an average income you may not be eligible to have your bills eliminated in a Chapter 7 bankruptcy.  Instead, you may have to live under the Bankruptcy Court’s supervision for 5 years while you make monthly payments.

 11.       A bankruptcy case will no longer stop an eviction, even for people who plan to pay back due rent.  Years ago, a bankruptcy case could help you save your home.  A bankruptcy could stop an eviction and give you time to get caught up on your rent.  The bankruptcy law now will allow a landlord to kick you out even when you just need some extra time to get the rent current.

12.) The IRS and your State Department of Revenue may be able to have your bankruptcy case dismissed for missing the deadline for a tax return.  You might not even owe any tax, but the bankruptcy law will allow the IRS to ask the Bankruptcy Court to dismiss your bankruptcy case for being late with a tax return.  Not only will the bankruptcy law make it harder to file bankruptcy, it makes it harder to stay in bankruptcy.

Therefore, if you are thinking about filing for bankruptcy versus working with a debt reduction or debt relief company, you may want to re-think your options. Talk with a debt settlement company before talking with an attorney.