company bankruptcy laws
Bankruptcy Law Changes Designed To Hold Debtors Accountable
Under pressure from retailers and other companies claiming losses from increased bankruptcy filings, congress took steps a few years ago to make it more difficult for individuals to file for bankruptcy. Initially, bankruptcy laws were designed to help people, whose financial debt got out of control and were meant to be a method of giving them a new start.
However, over the years many were taking advantage of the bankruptcy laws to continually file bankruptcy as often as allowed by law to get out of paying their financial obligations. This overuse of the system led to more stringent rules to protect creditors often the loser in cases with people who worked the system to their advantage. New laws were designed to prevent those from simply getting out of their obligations.
For those who fall into out-of-control debt, the bankruptcy laws exist to help them make a fresh start. Providing the need for financial and debt management as part of the bankruptcy process will provide the needed help while sifting out those individuals who use the bankruptcy laws to simply create debt and have it wiped out by the court periodically.
In most instances the laws still allow for discharging all legally dischargeable debt for those whose only way out is through bankruptcy. However, it also makes it tougher to meet the demands of the new laws. This may prevent some people from filing for bankruptcy, either Chapter 7 or Chapter 13 from seeking the help offered through bankruptcy, only making their financial life more miserable.
In 2005, the U.S. government seemed to agree with lobbyists for credit companies and determined that too many debtors were allowed to get out from under their self-created debt by filing for bankruptcy. Many were pointing to a few cases in which people with the means to make good on their obligations were simply filing for Chapter 7 bankruptcy and leaving the creditor holding the balance.
The new law, which was supposed to provide additional help to consumers in handling their credit load, also added many requirements, including the need to go through credit counseling services before filing bankruptcy. The counseling is also to provide alternatives to bankruptcy, attempting to move more people from Chapter 7 bankruptcy into a plan that will provide the creditors receiving payments through Chapter 13 filings.
The new bankruptcy laws added extra burdens for the debtor as well as the attorneys, which not only increased the amount of information collected for bankruptcy filings, but also included many new financial requirements that are beginning to resemble the current income tax code. In order to understand the new rules and regulations as well as the reporting requirements, many attorneys will need to specialize in bankruptcy.
There are also penalties in the new law for both attorneys and clients who willfully attempt to use inaccurate information in a bankruptcy petition. If a violation is found by the court, the attorney fees and client costs can be claimed by the court trustee, giving the trustees more incentive to more carefully review all filings in the court.
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Legal Helpers is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code. We’re one of the largest consumer bankruptcy firms.
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Is anyone clear on the new bankruptcy laws?
I was recently married and on our honeymoon we got sucked into listening to a 90 minute (turned out to be 6 hours) presentation for a time share. We stupidly agreed to this and now are stuck with a mortgage payment every month. Here is the thing, I am the primary person on this. The company claims they don’t report credit, check credit or anything else. The closing officer explained that if we didn’t want the property they just ask for it back. Sounded simple; not exactly. I called the other night and tried to do that and they won’t let me. My husband just found out that they are cutting their hours and laying people off frequently. I explained to them that this was not feasable for us and they don’t care. My credit can’t get any worse than it is. He is also on the contract, however he is not the primary. Can I see a lawyer and try and file bankrupt? The real estate is over 14,000. Does the loan have to be in default before I can file? Please help.
The loan does not have to be in default. But the new laws require you to be in more dire straits than before. If the court thinks you and your husband can afford this and just don’t want to pay for it they will not grant you the bankruptcy. I don’t know what your household income is, but they will base their decision on that as well as your other debts.
You can file 2 different types of bankruptcy:
Chapter 7 , in which the debt is completely wiped out and you start over. Destroys your credit rating but it can be built back up in abut 2 years (they say 7 years which is how long it stays on your credit report, but I filed one and was able to buy a car and rent an apartment the same year. I had new credit cards etc. after about 2 years). Chapter 7 can not be filed again for at least 7 years, so make sure you get back on track after filing.
Chapter 13, in which the court determines a percentage of the debt you must re-pay and you make monthly payments for 2 to 5 years. This also destroys your credit, and you are COURT-ORDERED not to purchase anything on credit for the time you are paying off the debts. Under Chapter 13, you MUST include ALL your debts. You can not pick and choose which ones you want to list. Even your car must go into it. Then you make one monthly payment on all your bills. You can file this type as often as you need.
Either way you look at it, your credit is probably screwed. I’ve been there. Good luck.
New bankruptcy laws to focus on balance