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 law 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 value 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 file your paperwork for bankruptcy late, the creditors can arbitrarily change the payback provisions of their agreement with you.
• There are a 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.
• 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 to 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 afford to. Whatever you do, do not add purchases of any kind to your credit cards, and cut them up.