Thinking About Filing Chapter 7 Bankruptcy?

If you've been thinking about filing bankruptcy so you can get a fresh start with your credit, don't delay. On April 25, 2005, President Bush signed into laws a new version of the bankruptcy laws. These new laws have stricter rules about filing Chapter 7 bankruptcy. Filling chapter 7 will forgive most debts but back taxes, student loans child support and alimony. Most of the new bankruptcy laws took effect on October 25, 2005.

The new laws have stringent income tests for Chapter 7 bankruptcy. Each state will have a median income valued assigned by the IRS. People whose income is above the median will no longer be eligible to file Chapter 7 bankruptcy. They will have to file Chapter 13 if they can afford to pay $100 per month for five years after expenses are subtracted. People with incomes below the median may or may not be allowed to file for Chapter 7. A new list of allowable expenses has been created, and those numbers are not flexible.

Additionally, people who wish to file for bankruptcy under the new Chapter 7 laws will be required to take classes in financial management and meet with a credit counselor from a credit counseling agency in the non-profit sector. These requirements must be completed in the six months before the bankruptcy papers are filed. The agency representative will perform an analysis of your budget. If you cannot afford to pay the bill for this service, it will be free. And, you must pay for both these services if you can afford it.
Here are some other highlights of the new law:

• Medical expenses must be paid if you fail the income test for Chapter 7 bankruptcy.
• If you want to keep your car and it is not paid for, you will have to pay it off completely or the financing company will repossess it. This will happen even if the value of your car is less than what you owe on it.
• If you rent your home and cannot pay your rent, the new laws makes it easier for property owners to evict you, even if you think you could catch up with your rent payments in a couple of months.
• Buying any expensive jewelry on your credit cards, or any items that costs more than $500 within 60 days of filing your bankruptcy paperwork for the first time, you will be required to pay it back. Cash advances are also not exempt if you took them within 70 days before filing.
• If you file your paperwork for bankruptcy late, the creditors can arbitrarily change the payback provisions of their agreement with you.
• There area few provisions in the new bankruptcy laws that help consumers. One of these is that a credit card company cannot cancel your credit card after you repay your debt to them.
• Another stipulation allows you exempt your retirement IRA up to $1 million. The new law also requires that credit card companies be examined more thoroughly to make sure that people unable to pay the debt are not issued new credit cards, thereby hopefully keeping more people out of the easy money via credit card trap.
• Pay off as many debts as you possibly can and sell whatever assets you can to do so. Whatever you do, do not add purchases of any kind to your credit cards and cut them up.