New Bankruptcy Law
Key Changes in the New Bankruptcy Law
The new bankruptcy law contains some major reforms in the way bankruptcy is treated by the government and by the people. In order for the individual to make decisions regarding bankruptcy better, he or she should understand the key changes present in the new bankruptcy law:
1) Mandatory Credit counseling – people who want to file under the new bankruptcy law now have to undergo mandatory credit counseling. The credit counselors have to be accredited by the government. Hopefully, this reform in the new bankruptcy law will help people realize the seriousness of the decision to declare bankruptcy. Many people often enter into the decision without properly considering the consequences or even looking for alternatives. By the new bankruptcy law’s mandatory credit counseling, the number of people filing for bankruptcy will be reduced and credit ratings of individuals will hopefully rise.
2) “Means test” – this reform of the new bankruptcy law hopes to reduce the number of people who make bankruptcy into an excuse to avoid their debts. By implementing this test, the government will better be able to screen the people who file bankruptcy under chapter 7 which does not require them to pay back any of their acquired debts. This means that people will have to find a way to take responsibility for their liabilities. Overall, this is a great reform for the economy.
3) More filing under chapter 13 – since there are stricter rules regarding filing for bankruptcy under chapter 7, a major reform of the new bankruptcy law also calls for more filings under chapter 13. Under chapter 13 of new bankruptcy law, people will be able to consolidate their debts and pay it off in amounts that they can afford regularly. This way, people learn how to take their debts more seriously. By filing under chapter 13, people will be able to pay back the amount that they truly owe in a way that’s easier on them.
4) Fewer protections – in the past, once a person files for bankruptcy all creditors are immediately rendered powerless. However, the new bankruptcy law makes provisions which take care of this “automatic stay” law. This means that when people file for bankruptcy, it will not stop people from evicting them, suspending their driver’s licenses, or even filing for a divorce. Under the new bankruptcy law, people are prevented from using the protection provided by the courts for their own means. Thus, both the creditors and the debtors are given justice.
5) Priority for child support and alimony – In the new bankruptcy law, people who are owed child support or alimony are given priority over creditors. In the past, creditors were given priority especially if they hold secured debts. However, the new bankruptcy law allows the family members to collect from the assets first. This system ensures that those who truly need the money from the debtor get it first.
6) Mandatory financial-management lectures – after the bankruptcy proceedings, the debtors are required by the new bankruptcy law to attend some seminars and workshops regarding proper financial management. Although people see the end of bankruptcy as a fresh start, few are actually equipped to make it so. The new bankruptcy law makes sure that people do not commit the same mistakes that forced them to declare bankruptcy in the first place. By equipping them with proper financial management education, the new bankruptcy law makes sure that their new beginning will be better than the last.
Source: http://www.positivearticles.com/blog