New Bankruptcy Bill - Chapter 7 - Chapter 13
On March 10 the U.S. Senate, by a 74 to 25 vote, passed a bill that would significantly change bankruptcy rules. President Bush on Wednesday signed legislation rewriting the nation’s bankruptcy law. The new law, opposed by consumer rights groups, makes it harder for debt-ridden consumers to wipe that debt out by declaring bankruptcy. This bill will go into effect early April 2005.
Consumers looking to start over financially will face tougher guidelines in order to get debts erased which will toughen the
climb out of that big black hole.
Factors regarding the new Bankruptcy bill of 2005:
Chapter 7- You will have to meet specific income requirements in order to qualify for Chapter 7 bankruptcy status which actually clears most of your debts. If your income is more than your states annual median you will be sent into a Chapter 13 status which will restructure your debt but not remove it.
Living Standards- The IRS will determine monthly spending for food, clothing, personal care, and also transportation under the new law. Any remaining monies would be considered funds to use to pay down your debts.
Mandatory Credit Counseling - Credit Counseling must be completed at least 6 months before filing bankruptcy and no
bankruptcy will be discharged until you finish a financial management course.
Fraud - If you charge more than $500 which the court decides are luxuries on 1 charge card within the first 90 days of filing bankruptcy be prepared to foot the entire bill under the new law. The same goes for cash advances up to $750 within
70 days of filing.
New Bankruptcy Bill and Homestead Exemption:
Supporters of the legislative overhaul say bankruptcy is often abused by multimillionaires who buy mansions in states with liberal homestead exemptions in order to shelter assets from creditors.
Kansas, Texas, Florida, Iowa, and South Dakota have unlimited homestead exemptions. That allows wealthy people to file for bankruptcy and keep their mansions in those states sheltered from creditors.
The new bankruptcy bill restricts a state's homestead exemption to $125,000 if the person in bankruptcy bought his or her residence less than three years and four months before filing.