Filing Bankruptcy
Bankruptcy Laws
In 2005 the U.S. implemented new bankruptcy laws that passed congress. Before that time, filing for chapter 7 bankruptcies was an easy way out of financial obligations.
Many people spent years being careless with their credit and debts because it could be fixed with a quick filing for bankruptcy.
Now that the law has changed, there are more restrictions for filing a chapter 7. Before the 2005 revision, filers could choose which code they wanted to file under. Income did not matter.
One of the biggest changes is that now those with a higher income will have to file under chapter 13 and therefore pay off some of their incurred debt. The law also imposed new restrictions on bankruptcy lawyers. It may be tougher now to find a lawyer who will represent you in a bankruptcy case.
In addition to the new income restrictions, there is also mandatory counseling that debtors must complete before and after filing for chapter 7 bankruptcy.
Pre-filing, individuals must complete credit counseling and post-filing, they must complete financial budgeting. These should have been implemented years before. They are designed to keep people aware of their spending and keep them on track.
There is also a change for chapter 13 filers. There is also a new income demand. All disposable income left after paying actual living expenses must now go into their repayment plan.
The IRS now determines the allowed actual living expenses, not the actual living expenses, if their income is higher than the median income in their state.
Bankruptcy Court
If you are planning to file for bankruptcy then you will indeed be making a trip to court. The U.S. Bankruptcy court is a federal court and deals with all aspects of bankruptcy law. Each of the 94 judicial districts handles bankruptcy matters.
Each bankruptcy court houses a bankruptcy judge who is appointed to 14 years by the U.S. court of appeals. Though rare on occasion, regular district courts can hear and try bankruptcy cases on the courts discretion.
Your first visit to court will most likely be brief. You will not be seeing a judge on your first visit, but instead a trustee of the court who will ask you questions regarding you financial status and history.
Questions will fall along the lines of where you live, what property you own, list of assets and liabilities and if you have any pending lawsuits against another person.
You will also be asked if you expect to inherit cash from a relative or other source. No creditors will be in attendance during your chapter 7 hearing and your lawyer will be with you the whole time.
For Chapter 13 hearings it will be the same basically. You will endure the same questioning in addition to questions regarding your repayment plans.
After sixty to ninety days you will be returning to court to finish the discharge order. It is very important though that you show up and are on time.
The court may see you in contempt and discharge your bankruptcy case unless your attorney successfully files a continuance. Then you will most likely have to pay your attorney an extra filing fee on top of everything else.
