| In just a few short weeks, President Bush?s | | | | counselor as this field is filled with people looking |
| Bankruptcy Abuse Prevention and Consumer | | | | to line their pockets while emptying yours. |
| Protection Act will take effect. In a nutshell, the | | | | To find a trustworthy counselor, check to see if |
| new law, which goes into effect on October 17, | | | | there are any complaints against them or their |
| 2005, makes it more difficult to cancel your debts | | | | organization filed with your local Better Business |
| under Chapter 7 Bankruptcy protection. Instead, | | | | Bureau. Secondly, find out if they are certified by |
| consumers will find themselves having to file for | | | | the National Foundation of Credit Counselors or |
| Chapter 13 Bankruptcy protection and paying | | | | the Association of Independent Consumer Credit |
| back their creditors over a five year period. | | | | Counseling Agencies. Finally, find out if they have |
| Here?s a look into some of the major changes | | | | not-for-profit status. Personally I recommend |
| that will affect consumers choosing to file for | | | | Consumer Credit Counseling Services as they |
| bankruptcy after the new law goes into effect - | | | | meet all three of the above criteria. They can be |
| Qualifying - Chapter 7 or Chapter 13? | | | | reached at 1-800-888-2227 and can connect you |
| To be able to qualify for protection under Chapter | | | | with a local office. |
| 7 bankruptcy, consumers will have to face a | | | | The Cost Factor |
| means test. The means test determines if your | | | | Filing for Chapter 7 protection under the old laws |
| household falls above or below the median income | | | | normally cost under $1,000. You should expect to |
| in the state where you reside. Those whose total | | | | pay more under the new laws as filing fees have |
| is greater than the state median income will not | | | | been increased by $60. Additionally, your attorney |
| qualify to cancel debts under Chapter 7 protection | | | | will be required to double check all your financial |
| and will alternately have to file under Chapter 13 | | | | information which will take more of his or her |
| and pay back your creditors. | | | | time. Also there is greater liability imposed on the |
| The major intent of bankruptcy reform is to | | | | lawyer which may cause their liability insurance to |
| require people, who can afford to make some | | | | increase, which gets passed on to their clients in |
| payments towards their debt, to make these | | | | the form of higher fees. Under the new law, |
| payments, while still affording them the right to | | | | many are expecting fees to increase between |
| have the rest of their debt erased. | | | | 25-50%. |
| The amount you have to pay back under | | | | Why Were the Laws Changed? |
| Chapter 13 protection will be greater because | | | | The bottom line is that major commercial |
| instead of a 3-year pay back period, that time | | | | creditors lobbied hard for reform. Companies like |
| frame is now extended to five years - to ensure | | | | CitiBank, MBNA, and other credit card issuers |
| your creditors get paid. | | | | actively contributed proposed amendments along |
| Credit Counseling | | | | with generous financial support to reforming the |
| Anyone filing for bankruptcy under the new law | | | | bankruptcy laws - and in their favor, according to |
| will be required to go through mandatory credit | | | | many consumer protection groups. |
| counseling. Be careful before choosing a credit | | | | |