Bankruptcy is seldom understood

The new bankruptcy law, signed into law by President George W. Bush, created the largest changes in National bankruptcy law in 25 years. The Bankruptcy Abuse and Consumer Protection Act, passed into law with the full support of both houses of Congress, took effect in October 2005 Recently passed debt relief laws promised debtor "protection", but the legislation really does far more for the lending industry than it does for consumers with too much debt.

Below, in a nutshell, is a listing of five items each and every debtor should know about the newly bankruptcy legislation. 

• Chapter seven bankruptcy filings will just about disappear - The newly enacted law requires an income, or means test, which will compare the yearly income of the individual to the median salary of his or her state. If the consumer's income, or means is larger than that sum, he or she must file under the more stringent Chapter thirteen, which mandates partial repayment. The old debt relief legislation permits most people to file for debt relief under Chapter seven of the Federal code, which allows the courts to eliminate a lot of consumer debts. Court-mandated debt relief has functioned well in the past, allowing consumers to begin anew, but credit card companies typically had to write off the losses.

• The debt relief law changes hold lawyers liable for the data they file in court on behalf of their clients. The possibility of penalty fees for lawyers due to lies by their clients has frightened many lawyers away from debt relief law, and those who offered pro bono, or free, legal assistance may soon stop providing debt services altogether. If you fail to tell the truth in your application, your attorney is responsible for that and might be fined. Most lawyers who offer debt-related services will raise their hourly rates to account for the additional attorney liability offered by the recently passed laws, so be prepared to pay more money now that the newly enacted debt relief law has become law.
  
   

• Be ready to pay more bills - A Chapter seven or 13 filing won't eradicate some varieties of debt, such as taxes or student loans. The list of debts that must be repaid will grow longer under the new debt relief legislation and it includes debts incurred through theft of identity.
• Chapter thirteen filings are a good deal more complicated than Chapter 7 filings, so most consumers might need to hire a law firm. Many debt relief lawyers are already reporting large increases in business; some are turning away would-be customers as they just are not able to handle more cases. Be aware that financial attorneys are now much busier than they used to be and it might be more challenging to hire one.
• Credit guidance is now required - Uncle Sam is requiring credit assistance as a requirement to a personal debt relief application. Receiving credit guidance from a financial advisor that is not certified will not aid you one bit. The Trustees'office has created standards for which agencies may or may not qualify to be "approved" pre-bankruptcy credit counseling organizations. Beware of other agencies that are not authorized but are offering their services as though they have been approved.

Don't wait to call an attorney who works in debt relief law should you think you might need one. Should you believe you can't pay off your debts and looking for bankruptcy, or court-ordered debt relief is inevitable, do not hesitate. The changes in legislation are quite detailed and may have significant unforseen effects upon people.