A new bankruptcy law that came into effect in October 17, 2005 bought with it major changes in the bankruptcy structure with some taking place immediately and others 180 days after the law was passed by congress and signed into law. With this new law, it has become much more difficult for anyone seeking to file a bankruptcy claim to provide the evidence of their bankruptcy and seek the allowance to pay debts in a legal state of bankruptcy.

These new laws have also brought about between 75 percent to 100 percent increase in legal fees that bankruptcy lawyers charge making filling a bankruptcy claim even more expensive because of the enhanced responsibility and accountability that the new law constrains bankruptcy lawyers. Bankruptcy lawyers can now be found culpable if they do not take enough time in validating the claims of their client’s bankruptcy before making a filing. This has made the bankruptcy process much longer because of the eligibility process that one has to go through and as such bankruptcy lawyers have much more to do for their clients.

Because you now have to prove that you are eligible to have your debt eliminated in part or in whole, you will have to go through an income subjection of to two major tests to determine if you actually qualify for the debt elimination process. Firstly, your income will be subject to a principle that exonerates some specific expenses such as rent, food and such to make a decision on weather you are in a position to manage payments of your “non-priority unsecured debts” for example debts related to your credit cards. Secondly, a there will be an examination in contrast to your state’s maiden income.

You will not be denied the opportunity to make an application under chapter 7 if your income is higher than your State’s maiden and you are in a position to settle 25 percent of your unsecured debt although you may be allowed to make an application for chapter 13. Should your income happen to fall lower than the State’s maiden, you can make a settlement of 25 percent of your unsecured debts and you may be able to make an application but the court might still require that you file chapter 13 rather than 7 if they are of the firm view that you will be taking advantage of the system if you file under chapter 7.

The old law gave the court leeway in determining if debtors can make applications under chapter 7 because of personal mitigating conditions. Under the new law however, debtors are to present their applications under very exceptional conditions whereby unavoidable critical situations outside limits that can be controlled brought them to a place where they have to apply for bankruptcy. Should the court consent, then they are likely to be granted permission to apply for chapter 7 despite the fact that they might not technically qualify by way of an outcome of the means test.

The old law was a compromise between you and the court on what was reasonable and necessary to pay while with the new law the court looks at living standards arrived at by the IRS to decide what you will pay for your expenses and decide what you have at your disposal to pay for your debts. But the new law also might subject bankruptcy attorneys to certain fees and fines should information concerning a client be found to be incorrect. This makes locating a bankruptcy lawyer willing to make an application more difficult for consumers due to the conditions of accountability and the extra work required to make a validation of the client’s information.

Because the procedures of applying for bankruptcy now includes qualification, bankruptcy lawyers re doing a lot more than just providing legal advice, holding creditors at bay, and making bargains on your behalf. They also provide assistance to the client throughout the process, handle all the paperwork, and get involved in creating a payment plan at the lowest interest they can get for you. An application for bankruptcy should always be made if this is the only option that remains available because you’re your credit can be blighted for years to come. While bankruptcy attorneys will be charging more, there is no doubt that they are doing much more for you than before.

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Category: Legal
Keywords: bankruptcy laws