New bankruptcy rules under the 2005 code

Bankruptcy has been around for many years, and it has helped many people and their families start over fresh financially. Bankruptcy can make a bad financial situation turn into a learning experience, and help people try and not make the same mistake twice and avoid getting into debt again. Now, with a few bankruptcy rule changes, hopefully it will help more families become financially responsible.

Chapter seven changes

Choose between chapter 7 and chapter 13 bankruptcy Prior to the new bankruptcy rules, many people have got to choose whether they want to file a chapter 7 (liquidation) bankruptcy or a chapter 13 (repayment) bankruptcy, and many people were choosing to file a chapter 7 bankruptcy. Since the new bankruptcy laws passed in 2005, it is making a person’s income determine if he can file a chapter 7 or 13 bankruptcy. New income rule The new bankruptcy rule is making bankruptcy filers determine if their current monthly income will allow them to be eligible to file a chapter 7 bankruptcy. This new rule will start comparing a person’s current monthly income, against the median income for a household comparable in size. If a person’s income is less or equal to the median income, then he is allowed to file for chapter 7 bankruptcy. If a person’s current monthly income is more than the median, then there are other requirements which must be met to determine if he can file a chapter 7 bankruptcy.

Counseling requirements

Consumer bankruptcy A pre-credit counseling session is required for all bankruptcy filers, and the pre-credit counseling session must be satisfactorily completed by an approved agency prior to a person being able to file for bankruptcy. The pre-credit counseling is to help a person determine if he really needs to file bankruptcy, or if a repayment plan will help get him financially back on track. A person does not have to accept the repayment plan as an option. He can file for bankruptcy if he would like to, but the repayment plan along with the pre-credit counseling completion certificate must be submitted to the bankruptcy court. Debtor education At the end of the bankruptcy proceedings, a person will have to attend another counseling session, and this counseling session is a debtor education session. This session teaches personal financial management, with hopes that a person does not have to file bankruptcy again. A person must submit a debtor’s education completion certificate in order for the bankruptcy discharge to be approved.