New Bankruptcy Law Explained

On October 17, 2005, new bankruptcy law went into effect, changing the process of filing for bankruptcy throughout the United States. This new shift in law requires additional steps to be taken by the attorney and the debtor but has been geared toward benefiting the debtor with the end result. The following details explain the changes in the law and how they will affect anyone considering bankruptcy.
 

Documentation

The documentation required for filing for bankruptcy has been increased, asking the debtor to provide additional information thoroughly detailing all of their income and expenses. If expenses exceed the IRS allowance, a ‘special circumstances’ document must be submitted explaining the reasons for the extra expenses. A statement of accuracy must also be submitted with the special circumstances document. The additional documentation makes the task of filing more laborious but provides more accuracy to a debtor’s financial dilemma. This could result in more debt relief or less money owed to creditors.

Counseling

In an attempt to decrease the number of people filing for bankruptcy, the new law requires that debtors receive counseling from an approved credit counseling agency within six months prior to filing for bankruptcy. The purpose of the counseling is to ensure that people are not making an uninformed decision to file for bankruptcy. It is also the hope of the court that counseling will provide alternative options for those who truly don’t need to file.

The Means Test

Before the new law, consultations with an attorney would allow the client to choose what type of bankruptcy they felt suited them best. However, the new law is framed to reduce the number of Chapter 7 filings by only allowing people who fall under their median state income, adjusted for family size and inflation, and people who meet rigorous standards under the means test to file for it. The rest of the people who don’t meet these standards must be evaluated by a series of complex, mathematical formulas that change annually to match new median incomes and expense standards. Clients who do not qualify through the means test will be required to file for Chapter 13 bankruptcy. The new law also extended the Chapter 13 term from a three- to five-year term, to a mandatory five-year term for some people. Throughout the mandatory five-year term, debtors must pay a regular monthly payment before they can receive their discharge.

The effects of the new law make the process of filing for bankruptcy more complex, requiring attorneys to specialize in bankruptcy law. To completely understand how the new bankruptcy laws in your state can impact your debt and affect your life, speak with a local bankruptcy lawyer.
If you are seriously considering bankruptcy and you live in North Carolina , you need to consult with a North Carolina bankruptcy attorney. While the process appears complicated, a North Carolina bankruptcy lawyer will be able to help you understand your options and avoid making bad decisions that you could later regret. Law Offices of John T. Orcutt specializes in bankruptcies. Every day, we help people get out from under debts from $10,000 to $1,000,000 and higher. So far, we’ve wiped out over 100 million dollars in debt. We even created the debt counseling course that is now used by other leading bankruptcy law firms throughout the country! You need Law Offices of John T. Orcutt. No other law firm is better qualified to bring you the fastest debt relief and do it right the first time.

Author: Carl Gustafson