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Understanding Bankruptcy Laws Before Filing

Jun 10, 2008
The decision to file for bankruptcy is a hard one and so is the process. The original bankruptcy laws of 1978 have been revamped tightening requirements for those seeking bankruptcy relief. Before filing, educate yourself on the latest bankruptcy requirements and seek out the help of an experienced bankruptcy attorney to steer you through the process.

Major Changes In The New Bankruptcy Law

The landscape of filing for bankruptcy has been changed dramatically with the implementation of the new bankruptcy laws.

First of all there is now a Means Test that is used so that you can show that you are not abusing the use of bankruptcy. Herein your monthly income is considered, minus certain expenses that are allowed. If you come out above the median income you will have to file for Chapter 13 bankruptcy.

With the second change made, the Internal Revenue Service (IRS) set up strict guidelines for what they call allowable expenses. These allowable expenses require some tight budgeting, which include $200 a month for food and $800 a month for housing.

Thirdly, before filing it is important to educate yourself on the bankruptcy laws of your particular state. Some states requirements are stricter than others. You must be a resident of a state for at least two years before you can file within that state.

Fourth, you will have to attend a mandatory credit-counseling course that has to be approved by the IRS within 180 days of your filing for bankruptcy. This is not a free course. Instead it will cost you approximately $75.

The fifth change made is more paperwork is required to prove that bankruptcy is necessary for you. Some of the requirements by the IRS include: a list of unsecured and secured creditors, proof that you have taken the credit counseling course, detailed list of your expenses and monthly income, liabilities and assets, most recent tax return, photo ID and pay stubs.

Sixth, there are now hefty legal fees that you will have to pay thanks to this new bankruptcy law. This is because you will have to have a bankruptcy attorney certify that your figures are accurate. Otherwise, both you and your lawyer may face sanctions. As such, bankruptcy lawyers now have to do more investigating and fact checking than ever before in order to ensure that your information is correct.

How To Interpret The Bankruptcy Law

Under the new bankruptcy laws you are not required to retain an attorney other than to certify and fact check your filing. However, it is a good idea to seek the help of a bankruptcy attorney from the start to ease you through the process. They can advise you on the steps to take and paperwork that needs to be filed. If you go it alone, and forget to file certain documents, your case could be dismissed and you would have to start the process all over again. It might cost you some cash to retain an attorney, but in the long run it could save you many headaches.
About the Author
Debt consolidation is an effective way to pay off debt faster but it's not the best choice for everyone. Find out more about whether you should consider consolidating your debt on the Inside Debt Consolidation website at http://www.insidedebtconsolidation.com
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