Bankruptcy and common myths

The new legislation makes filing for bankruptcy more difficult, but not impossible. A large number of people are bewildered by the newly enacted bankruptcy legislation approved in April, 2005 by The Federal government. Bankruptcy legislation has always been involved, and debtors filing for bankruptcy have frequently needed to employ an attorney to assist them in court.

Myth: After the debt relief law takes effect, consumers will no longer be able to file for bankruptcy.

Fact: Consumers will continue to be able to file. The debt relief legislation does require a "means test", which will contrast the individual's income to that of similar people in her state. If the salary is larger than the median, the consumer will still be able to file for debt relief, but only by means of Chapter thirteen, and not by means of Chapter 7. Chapter 7 effectively wipes out all financial obligations; Chapter 13 requires a partial repayment plan of 3-5 years in duration. Studies so far show that up to 85% of individuals who could currently file by means of Chapter 7 will still be able to do so once the new bankruptcy law takes effect. Mostly affected are the upper middle class and richer individuals.

Myth: In some states, your house will be safe from lenders.

Fact: Not true anymore. Long-time homeowners may be safe, but the days of hastily buying a house in Texas to save your cash are over. The old legislation motivated some rich individuals who were in financial trouble into moving to states with more friendly laws and buying massive homes in order to protect their money from lenders or creditors. Protecting your residence from creditors will no longer be possible, as the newly enacted law provides a maximum of $125,000 as a homestead exemption if the house has been owned for less than 40 months. Through the prior law, some states, for example Florida and Texas, had generous real estate exemptions. Citizens of some states could not have their homes apprehended to pay debt.

Myth: Consumers can easily seek debt relief without professional assistance.

Individuals will need a lawyer. The alterations in the law make up approximately 600 pages and are far more complicated than the old regulations. Please consider that most lawyers have raised their fees, as demand is high and they will now be held accountable for any incorrect information provided by their customers. Lawyers now carry some liability in handling bankruptcy cases, so they'll charge more to represent you. Attorneys who specialize in bankruptcy cases are already quite busy, so if you desire one, call now.