Federal Bankruptcy Laws

Recently, federal bankruptcy laws have changed and become more stringent on who can file and when. These new bankruptcy laws make it more necessary that a petitioner hire someone who can guide him through the legal system. Otherwise, the petitioner may make mistakes that make it more difficult to discharge debt and give more time to creditors to come against him. There are two types of laws that can give protection to the debtor: Chapter 7 and Chapter 13. Each type has different requirements. In Chapter 7, the person filing has to meet certain income requirements, namely that the person has an income either equal to or less than the median income in his state. If the debtor makes more than the median income, he may qualify under certain calculations and applicable expenses. A person should choose Chapter 7 if he has little property other than furniture and clothing, has little or no money after paying expenses, and has mostly unsecured debts. These include debts such as credit card bills or medical bills. This person must make an appointment with credit counselor for a pre-filing session in which the financial situation is examined to determine if this is the best option for the filer.

Federal bankruptcy laws also require creditors must stop harassing the person who owes them money as soon as the court files an automatic stay. This means that the court will decide which debts have to be paid back and which will be discharged, which means they will be completely eliminated. The new bankruptcy laws allow that most non-exempt assets can be sold or liquidated by the trustee for the benefit of the creditors. That's why it's so important for the debtor to determine which of the bankruptcies would best fit his situation. A person could lose assets if this person files under Chapter 7, so the petitioner must determine if he owns too much property and would therefore be better off filing under Chapter 13. In other words, if a person owns property, has equity in property, and wants to keep it, that person should file under Chapter 13 because these assets will not be liquidated. The debtor will be given additional time to repay the back payments while keeping up with the current payments on the property. Also, if a person has a regular income but just can't keep up with the payments he owes, he should file under Chapter 13. The court will set up a trustee, who will manage the plan set up to repay the debts. This trustee will have contact with the creditors, relieving the individual of dealing with them. It's also easier to file for Chapter 13 because the filer does not have to take a means test, but as soon as he files he can just get an automatic stay to stop foreclosures or repossessions.

The U.S. Bankruptcy Code requires that the petitioner filing for Chapter 13 complete a U.S. Trustee approved Credit Counseling Briefing. Usually, an attorney will file this document with the petition, and it's essential that this document is filled out correctly or the petition may be dismissed. This will allow creditors to once again come against the debtor until the right paperwork can be filed. These federal bankruptcy laws were put into effect in 2005, and this makes it more important for the petitioner to consult an appropriate attorney or other expert. Then the court enters the automatic stay which precludes creditors from taking any more action against the debtor. The court then sends a notice to all creditors listed and assigns a trustee to the case. The typical case lasts from 36 to 60 months, in which the petitioner has time to turn around his financial situation and begin repaying what is owed on his property. The new bankruptcy laws, however, make it more difficult for the debtor to discharge what is owed under Chapter 13. Tax debts cannot be discharged, but this type of action can help the person who owes the IRS catch up on past amounts. The debtor also cannot discharge student loans, so this person would probably want to file for Chapter 13. Chapter 7 would not allow him to liquidate his student loans, but Chapter 13 would enable him to set up a reasonable schedule to repay the loans. One important step to take is to make a decision before the financial situation gets too bad. But many people wait until they are in the middle of a foreclosure or a repossession before turning to federal bankruptcy laws for protection. Sometimes, emergency measures can be worked out with the court, but many times, the process may be started too late to alleviate the situation.

Because the new bankruptcy laws were enacted so recently, a person desiring to petition for protection may need the expert opinion of someone who knows the ins and outs of the court system. Many law firms specialize in this type of action and have all the information needed to determine the best option for each person. Bankruptcies are some of the most complex parts of our legal system, involving contract laws, real estate laws, and tax laws. The court will determine which creditor is to get paid and in which order. There are two other types of bankruptcies that apply to specific people--Chapter 11 applies to businesses and Chapter 12 applies to farmers. Once again, these legal processes have specific forms and documents that need to be completed. But the greatest debt we owe is to God, who is our protector. The Bible says, "Offer unto God thanksgiving; and pay thy vows unto the most High" (Psalm 50:14). As we repay what we owe to men, we must also acknowledge out debt to God.

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