In recent years several new laws have been put in effect to make sure those individuals or businesses who file for bankruptcy have valid reasons for bankruptcy.
The new Bankruptcy Abuse Prevention and Consumer Protection Act applies stricter rules and repayment budgets for the value of assets in bankruptcy on all Chapter 13 debtors and makes it more difficult for a debtor to qualify for a Chapter 7 bankruptcy.
To qualify for bankruptcy a debtor must have filed federal tax returns for the last four consecutive years. Their dischargeable debts are now more difficult to obtain as the new law requires debtors to show they have good reason for their dischargeable debt and often force debtors to be responsible with their payments of debts which are non-disposable.
If a debtor has a steady income and heavy debt, then Chapter 13 bankruptcy allows a debtor to keep limited assets while setting up a budget to fully repay debt for cars and mortgages, usually within 3 to 5 years based on their value of assets in bankruptcy. Chapter 13 is a fit for most people who have means to repay some of their indebtedness, but unable to repay all.
When you have no income and repayment isn't an option, the newer laws require a Chapter 7 bankruptcy filing. A Chapter 7 is called a full or complete bankruptcy as it requires a debtor to liquidate all but their exempt assets. Usually exempt assets are those assets needed to be able to work and provide an income.
Any type of bankruptcy does not allow a debtor to be absolved of certain debts. These debts could include such things as student loans, taxes, child support, alimony and other court ordered payments. A Chapter 7 bankruptcy as well as a Chapter 13 bankruptcy will still have court ordered payment plans to pay off some debt and will determine the value of assets in bankruptcy.
Any bankruptcy has its drawbacks. Some things to consider would be the 10 years that this negative information will stay on the debtors’ credit report, making it harder to get credit. If or when credit is given then higher rates may be charged because of a poor credit rating. If there are any cosigners on any of the debts then those cosigners can be held liable to pay off the debts.
The safest and correct way to make sure to have the proper answers to all bankruptcy questions is to contact a good bankruptcy lawyer or attorney in the state and county where the bankruptcy is to be filed.
