New bankruptcy laws
As the number of people filing for bankruptcy was increasing year after year there was an urgent need for the laws to change and make the whole process of bankruptcy strict. The law that was enforced in October 2005 has made it difficult for both lawyers as well as debtors to file for bankruptcy. However the law has been made in such a way that the customers can also benefit from them.
With the amendment of the new bankruptcy laws the documentation required for filing bankruptcy has increased. For instance the debtor is required to provide details of all the income and the expenses. In cases where the expenditure is more than the IRS allowance a document of special circumstances needs to be submitted which would reason the necessity of the extra expenses to be incurred. Besides this a statement of accuracy also needs to be submitted with the special circumstances documents.
The lawyer?s job has also increased and now the lawyer has to be more responsible. The signature of the attorney would certify that the petition has been inspected reasonably and the proceeding is not against the process of bankruptcy. The attorney would also certify that the process is in acceptance of the present bankruptcy law or it is a good faith argument for the extension of the current law. In case of any violation the fees of the attorney and the debtor can be assessed and is to be made payable to the trustee. This would work as incentive for the trustee to file more motions and would result in additional insurance or an un-foretold increase in the present rate.
In an attempt to decrease the number of people from filing for bankruptcy the new law would require that the debtors should get counseling from an approved credit-counseling agency six months before filing the bankruptcy petition. This credit counseling session would make sure that people do not take any uninformed decision about the bankruptcy and look out for the other options available for them.
Once again it is the responsibility of the attorney to ensure that the client has got the credit counseling session and has taken the counseling from a certified counseling program. With the old bankruptcy laws the debtor chose the type of bankruptcy that they felt would suit their financial conditions. But this is not the case in the new law. With the implementation of the new law the number of people filing for bankruptcy has reduced and now only people who fall into the median state income, adjusted for the family size and inflation and people who pass the vigorous means test would be able to file for bankruptcy.
People who do not comply by the means test would be required to file bankruptcy under Chapter 13. With the new laws the term for Chapter 13 has extended from a time range of 3-5 years to a compulsory 5 years. People who file under Chapter 13 are required to have supervision and representation for at least five years before they are given any discharge. The effects of the new laws have been made in such a way that it requires the lawyers to specialize in the bankruptcy Chapters. The lawyers are finding it difficult because of the complications that have been introduced in the new bankruptcy laws.
People who were thinking of filing bankruptcy will have to undergo a compulsory credit counseling. Besides they would also have to take by debt management and budgeting counseling before their debts are removed. Some of the bankruptcy filers who have higher income would not be allowed to file bankruptcy under Chapter 7 but would have to repay some of the debts under Chapter 13. As the new law has complications it would become tougher for people to search for lawyers who can represent them in the bankruptcy court.
The major important changes in the bankruptcy laws include:
?h Counseling requirements: You are required to have credit counseling by an agency that is approved by the United States Trustee's office. (To find an approved agency in your area, go to the Trustee's website, www.usdoj.gov/ust, and click "Credit Counseling and Debtor Education. The counseling aims at making you realize whether bankruptcy is a good option for you or not. Even if it is obvious that you won?t be able to pay off the debts or you don?t wish to pay towards the unfair debts that you are facing you are required to take the credit counseling. Once the bankruptcy case is over you are again required to attend counseling to learn financial management.
?h The restricted eligibility for Chapter 7: Earlier there were more and more people filing for bankruptcy under Chapter 7 to get rid of their debts easily. But with the new laws the eligibility for filing under Chapter 7 has changed and people with higher income cannot file under this Chapter. Besides the new law imposes means test to determine whether a person can file under Chapter 7 or not.
?h The lawyers: With the implementation of the new laws the lawyers are required to be thorough with the bankruptcy procedures and the requirements. The lawyers are required to specialize in the bankruptcy chapters and make sure that their clients have gone through the credit counseling.
With new bankruptcy laws filing bankruptcy has become difficult and the number of people opting for bankruptcy has reduced. It is becoming tougher for people to find bankruptcy lawyers to represent them in the court cases and hence more people are opting for other ways of coming out of debt.
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