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New Bankruptcy Laws and Their Effects

In late 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law. This law was supported and pushed by many of the larger credit card companies. With the new law many people were led to believe that filing bankruptcy was next to impossible. This is not so.

Purpose for Law Reform

The new law was mainly directed at those individuals looking at a Chapter 7 filing. A chapter 7 bankruptcy has traditionally allowed people with significant unsecured debt to simply remove themselves from any liability of paying the debt. Credit card companies felt that changing the requirements for a Chapter 7 filing would reduce their losses.

As a result there is much more paperwork involved with filing a Chapter 7 bankruptcy. The rules that determine who is eligible for this bankruptcy have been tightened and there is a new mathematical test to see who qualifies. Above all this, borrowers are required to successfully complete a credit counseling course approved by their local court six months before they can file bankruptcy.

Results of Reform

The results of the new laws have not met the expectations of credit card companies. Most of the credit card issuers felt like the new laws would prevent people from filing bankruptcy and force them to continue making payments. However the majority of people that have filed bankruptcy have chosen to use a Minnesota Chapter 13 plan. This means that the number of people filing bankruptcy did not decrease. They simply chose another plan.

In some areas, the new laws have resulted in more foreclosures. People that normally would have been able to relieve themselves of paying their unsecured debt through a chapter 7 filing have now been forced to make credit card payments and their mortgage payments. Many of these people could not afford both and have made the decision to look for cheaper housing

The Chapter 13 filing is also known commonly as a repayment plan. Within this plan borrowers, along with their attorney, examine all debts and assets and work out a mutually beneficial plan. This allows the borrower to repay their loans based on their current income. It also enables the creditors to recover most of the money that was loaned out.

In a chapter 13 filing unsecured creditors may receive up to 75% of the money that was originally loaned plus some interest. The court has determined agreeable interest rates for different types of loans such as cars versus unsecured debt. The percentage of the unsecured debt that is repaid will be determined by the borrower’s current income. A Minneapolis bankruptcy lawyer can explain how to calculate this percentage. In addition, the attorney will advise which non-debt items need to be considered when calculating the budget.

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A Short Guide On The Types Of Bankruptcy

If you’re considering filing for bankruptcy, one of the first things that you need to do is to explore your options and see what types of bankruptcy are out there. Bankruptcy can be hard to deal with, but you can mitigate its effects by knowing which type would suit you best. Although it can require a lot of effort on your part, make sure to take the time to really research on each and every bankruptcy type so that you’ll know how you can handle each one. Here is a short guide that might help you out.

Filing for personal bankruptcy? Then there are two types of bankruptcy that you’ll need to deal with. First we have chapter 7. You can consider filing for bankruptcy under chapter 7 if you’re stuck with a bunch of unsecured loans that you cannot possibly pay for any more once the secured loans have been paid off. Filing for bankruptcy under chapter 7 requires that your liquid assets will be submitted to the courts so that they can decide on whether you’re eligible for this type.

Another bankruptcy type that you can consider is chapter 13. This is perfect for those who still have the capacity to pay off a majority of their current loans, but with serious implications on their living conditions. This is a much favorable type compared to the other one as it provides you with a chance to rebuild your credit again, one step at a time. Since there is a provision that states you pay off your debts in a specific time period, it can give you enough time to put your finances back on track again.

So there you have it. Now that you know the 2 types of bankruptcy, use this information to your advantage. Choose one that will specifically meet your needs.  And please, if you can, learn how to avoid bankruptcy by taking better control of your finances.

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Methods To Erase Credit Card Debt

There are several ways to erase credit card debt. The most basic method is to pay more on the balance each month. Unless you hire a bankruptcy attorney you will not be able to erase credit card debt without actually paying on your credit cards. You will never be able to erase debt for free. You will either pay an attorney to file bankruptcy or you will have to pay more each month on the credit card to reduce the debt.

With the new credit card reform you will now be able to track how long you will have to pay on existing balances to erase all the debt acquired on credit.  If you come to the realization that it will take you several years to pay off the debt provided on your credit card statements then you should look into hiring Michigan bankruptcy attorneys to figure out if bankruptcy is the best option to remove all of your debt.

Consumers often balk at the idea of filing bankruptcy. However, if you look at the numbers realistically you can conclude that it would be much cheaper and better for your credit to file bankruptcy and slowly rebuild your credit over seven years rather than pay on high interest cards  where the principal is paid down only by a mere dollar at a time. As an example, if you are paying on a credit card balance of 5K and your minimum payment was $100.00 most of your monthly payment does not pay down the 5k . Most of the monthly payment is going towards paying the interest on the balance of the 5k. Therefore, if you intend to erase the debt you need to pull out the calculator and read your credit card statements to evaluate how much you can put down on a monthly payment to actually get the balance down to zero.

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