Changes in Bankruptcy Laws
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Sometimes people's spending gets out of control and they are left with no option but to file for bankruptcy. Others face a terrible run of bad luck that leaves them unable to pay their bills. Whatever the reason, many people have looked towards bankruptcy as a way out from under the debt that is crushing them. The laws regulating bankruptcy have gone through dramatic changes recently. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 came into effect on October 17, 2005. It has changed the rules and made bankruptcy more difficult to claim for consumers. Here are some of the changes:
It will be harder to file - Credit counseling classes are now required before you file and the legal fees will be much higher. The classes will cost $50 and legal fees have doubled to as much as $3,000. It seems strange, but some people won't be able to afford to file for bankruptcy. One can only guess what will happen to these people, though you can be sure that it won't be good.
Chapter 13, not Chapter 7 - Up until now, consumers could file for Chapter 7 bankruptcy protection. Most consumers will now be pushed into a Chapter 13 debt repayment plan instead of Chapter 7, which meant that debts were wiped out. Under Chapter 13 they will have to agree to a plan to repay all of their debts and stick to it. These changes mean that consumers will have less disposable income as they are trying to rebound from bankruptcy. Decreased disposable income also has an obvious negative impact on retailers.
Collection agencies win - If you default on your Chapter 13 repayment plan your account will end up with a collection agency again. This means that people who are unable to meet the needs of their repayment plan could face more collection and, potentially, even more damage to their credit rating than a bankruptcy would have caused.
Kicked out of your rental - Under the prior law a bankruptcy proceeding voided any eviction proceedings that had been started against a person. Under the new law, this is no longer the case. That means that someone who files for bankruptcy and is short on money will likely lose their rented home or place of business as well. It's another blow for someone who already faced a lot of problems, even if they are of their own causing.
Posted by jonathan on December 15, 2005 at 04:36 PM