Understanding the new bankruptcy law

Really, the so-called new bankruptcy law is old news because it has been in place since 2005. The reason they are still referred to as the new bankruptcy laws is to make sure people realize that the laws being discussed are not the ones that were in place before 2005.

If you filed for bankruptcy prior to 2005, you did so under the so-called old laws. Even if you filed a Chapter 13 bankruptcy, which can go on for several years, you are under the old laws if your original filing date is before 2005.

There are some big differences in the new bankruptcy law that people need to understand. The means test that is part of the new bankruptcy laws is thought by some to be more partial to creditors like credit card companies than to the person filing for bankruptcy. What the "means test" does is figure out how much, if anything, you can repay to the creditors to whom you owe money.

Old bankruptcy laws versus new bankruptcy law

The old bankruptcy laws were written so that you did not owe your creditors a penny if you did not have assets that could be liquidated to repay them. The new bankruptcy law 2005 goes by your income, not your assets, so you could actually have to file Chapter 13 bankruptcy with a repayment plan in some cases with these new laws.

With the Chapter 13 bankruptcy, the courts determine how much you will repay your creditors and a court employee is put in place to make sure you follow the repayment plan. The means test looks at how much money you make, as well as how much you need for living expenses. If you make too much money under the new bankruptcy laws, you will be required to file a Chapter 13 bankruptcy.

There are more changes in the new bankruptcy laws than just the means test. Other big changes are the requirements that you go to a credit counselor to work on your debt and that you can be made to repay creditors over five years instead of three years under Chapter 13 bankruptcy.

The biggest change is the change in the way the homestead exemption is handled. There was previously no limit with regard to the Homestead Act. The new bankruptcy sets the limit at $125,000 and you have to have been a resident of your state for at least 3 years. The changes to the Homestead Act in the new bankrupt laws make a big difference in if your home stays with you or is taken away.

Bankruptcy attorneys

Bankruptcy attorneys have had to change their practices because of the new bankruptcy law. With the new bankrupt law, lawyers have to be sure any information they get from their client and give to the court is accurate or they are going to be in trouble.

The attorneys can be fined if they pass on false information knowingly or unknowingly to the courts. That means that the rates of bankruptcy attorneys have gone up since the new bankruptcy laws have been in place so they can protect themselves from these fines.

There are smaller, less important changes in the new bankruptcy law like the one that talks about tithing and lets you give up to 15% of your money to charity. The way car loans are handled in the new bankruptcy law 2005 is different and can end up costing people who go through bankruptcy more money if they want to be able to keep their car.

With the new bankruptcy law, more people have to file for Chapter 13 bankruptcy and fewer are filing for Chapter 7. Both forms of bankruptcy can help you get through a tough financial time.

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