Planning For Filling Bankruptcy Law

In terms of the bankruptcy law, some dramatic changes have been recently made in the USA. Just in case you find yourself in a ‘bankruptcy’ situation, it would help to know what these changes in the law are and where should you be filing for bankruptcy.

Before the actual look at the major changes that have occurred, it would pay to learn a little about what the different kinds of bankruptcy are, that one can now file for.

Chapter 7 Law - This is the most commonly used law of in terms of bankruptcy one can file for. After filling 7 is filed, a trustee is appointed to oversee the property and assets of the person who has filed for bankruptcy. If possible, some of the concerned person’s assets are obtained, with a view to sell them off and raise money to pay back the person’s creditors. Though it is not possible to wipe out all types of debts of a person, even after filing a Chapter 7, most of the debts are cancelled in their entirety.

Chapter 11 Law – Though businesses more commonly use this type of bankruptcy filing, individuals can use a Chapter 11. However, many people do not like to use this form of bankruptcy often because it can prove to be expensive and complex. Mostly, people, who have debts above the limits set in a Chapter 13 bankruptcy filing, are most likely to file a Chapter 11. The advantage of this particular bankruptcy is that a business can continue operating, and actually gets sheltered from some of its debts.

Chapter 13 Law - A person can up with a proposed repayment plan to pay back all their creditors through a Chapter 13. Just as in the case of a Chapter 7, the court appoints a trustee who is supposed to collect the payments from the person who has filed a Chapter 13, and then pay the money to the creditors. The appointment of a trustee in a filling 13 bankruptcy filing is to ensure that, at all times, the person filing complies with the repayment plan that has been decided upon. A point to be noted is that in a filling 13, your debts are not wiped out.

With this basic information about the kinds of bankruptcy that one can file for, comes the time to take a look at the changes that the bankruptcy law has undergone. The changes in the eligibility criterion for bankruptcy using Chapter 7, is the most important change to have taken place. The changes imply that the law now prohibits people who have a considerably high income from actually filing a Chapter 7.

Therefore, it is the ‘means’ test that determines whether or a person is actually eligible to file. In case, your income is higher than what is considered as the median income for a Chapter 7, you will need to file a Chapter 13 instead.

Moreover, with the change in the bankruptcy law, before actually filing a bankruptcy case, people who owe money would need to get credit counseling. Additional counseling would also need to be undergone, with regards to budgeting, to guide people to best manage their debts before they can actually be wiped out or their assets liquidated.