On October 17, 2005, the new bankruptcy law became effective and introduced some major changes in the bankruptcy process. Under the new law, anyone who wants to file for bankruptcy must first undergo credit counseling with a government accredited agency. ]]>

On October 17, 2005, the new bankruptcy law became effective and introduced some major changes in the bankruptcy process. Under the new law, anyone who wants to file for bankruptcy must first undergo credit counseling with a government accredited agency.

The counseling must be completed at least six months prior to submitting the bankruptcy application. This new change was made to ensure that consumers are not simple declaring bankruptcy to escape their payment obligations to their creditors. The credit counseling agency will give advice or the best solution for the debt problem. The agency would also be the one to recommend bankruptcy after all other options has been considered.

If filing for bankruptcy is applicable, hiring a bankruptcy lawyer is recommended. This is because preparing the documents can be complicated. With the amendment of the new law, bankruptcy attorneys are made accountable for any false information found in their client’s application.

This puts a greater responsibility on the part of bankruptcy attorneys. Consequently, many lawyers have increased their fees- even to as much as 100% increase- on account of the additional duties and responsibilities put upon them.

Today, consumers who declare bankruptcy cannot choose which Chapter of bankruptcy to file. Instead, applicants must first go through the Income Means Test to determine whether he/she is qualified for a Chapter 7 or Chapter 13 bankruptcy.

Remember that only Chapter 7 completely discharges the debtor from his debts. Meanwhile, a Chapter 13 bankruptcy mandates a repayment plan for a period or 3 to 5 years, depending on the debt amount. Under this plan, a certain percentage would be automatically deducted from the borrower’s monthly salary to pay off his creditors.

This new process obviously calls for a serious consideration. A consumer in debt cannot simply decide to file for bankruptcy to be free from bad debt. The best way to deal with a debt problem is to study the situation carefully and consider all possible solutions, other than bankruptcy. Seeking help from a trusted credit counseling agency can be a big step towards resolving bad debt.

RESOURCES for YOU:

• Free Credit Reports
• Credit Builders
• Free Credit Repair Guide

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