Chapter 7 Bankruptcy Laws
Chapter 7 bankruptcy laws went through a major overhaul in the recent past which has put a serious crimp in many people's plans to start over. The new laws that were put into effect regarding what is chapter 7 bankruptcy options will substantially increase the number of chapter 13 filings since it is now much harder to qualify for chapter 7. The tough guidelines enacted by lawmakers will quash manipulation of the system by those who wish to wipe out debts that were incurred with no restraint. While many people suffer serious financial hardships at no fault of their own, those who have stacked unreasonably large debt upon debt will now be forced to face the music by submitting to the guidelines of a chapter 13 filing instead.
For those who are considering filing for bankruptcy, it is important to understand what is chapter 7 bankruptcy when it comes to the law. According to the new laws, several things can qualify an individual for this filing and an assessment is made by the courts as to a person's financial circumstances. The IRS has certain allowable limits for necessary living expenses that are assessed such as food and housing. Generally, the food allowance is around $210 and the housing allowance may be upwards of $900. Anyone who spends more than that cannot qualify for chapter 7 bankruptcies. Also, an assessment called a 'means test' is transacted and an individual's earnings are calculated minus a housing and food allowance.
If the subtracted amount of income if less than the mean income in that state, an individual may qualify to file, if not, filing for a chapter 13 will be mandated. These two particular laws put a stop to many people who would otherwise have filed for bankruptcies. When a person files, the current chapter 7 bankruptcy laws determine whether or not he or she must be denied and passed on to a chapter 13 filing. Up until now, many individuals would rather have avoided a chapter 13 because of the strict financial accountability and reorganization of personal finances that become court mandated. For those whose ask, "What is chapter 7 bankruptcy?" the answers have changed as a result of even more legal restraints.
Other changes to chapter 7 bankruptcy laws include restrictions on filing in any state unless a person has been a residence for at least two years. Other changes include mandatory financial counseling and expensive items purchased or cash loans received within 60 days of a petition will have to be repaid in full. In the past, many people attempted to take advantage of some states protective laws regarding assets such as homes and property. In some states, liquidation of personal homes as a result of filings are prohibited. Before filing a petition, some people have moved across state lines to file in another state in hopes of receiving the benefits of that state's laws. Under the new laws, that is no longer possible.
Those who discover more about what is chapter 7 bankruptcy laws will find that financial counseling will be imposed on anyone who advances through the process of filing. Within six months, mandatory counseling must take place as directed by the court. This new requirement of current laws has created an accountability factor that will undoubtedly prove to be useful in resolving debt and educating consumers. An important part of legislation that was enacted that helps creditors is the fact no one is allowed any longer to run up large bills on luxury items or receive cash advances within the last two months before filing for chapter 7. In the past, it has been noted that many people have premeditated their expenditures on luxury products just before filing. They have had their debts written off, but their creditors are left holding the bag. It has proven to be a scam of sorts and current chapter 7 bankruptcy laws have put a stop to that practice. "Submit yourselves to every ordinance of man for the Lords sakes..." (1 Peter 2:13a)
The purpose of allowing petitions to be filed through the courts was originally to provide a way for people to have a new lease on life after suffering serious financial setbacks. Over the past years, the original purposes for bankruptcies have been distorted. In order to halt unfair use of the laws, the recent legal requirements have been passed. Now, many people will be required to file a chapter 13 petition instead which will require greater accountability, repayment of most debts and mandatory fiscal responsibility. In order to understand what is chapter 7 bankruptcy requirements for individuals who wish to file, there are many online sources that can further expand the topic for anyone who needs assistance.
Chapter 7 Personal BankruptcyFiling chapter 7 personal bankruptcy actions may be the only way that some people see to finally being rid of choking debt. The creditor letters come almost daily in the mail, the collectors call and harass at all hours of the day and for the debtor, there seems no other way out. For the borrower who has gotten so far into debt that the prospect of living another day under the strain is not worth contemplating, perhaps the time has come to pick up the phone and call an attorney to begin a chapter 7 personal bankruptcy action. For some people, wiping out debt without much conscience is intolerable and a chapter 13 filing may be more palatable. This action allows someone to set up a payment plan to repay all debts over time, but it does give relief to phone calls from collectors and garnishment of wages.
When considering any kind of bankruptcy proceedings, a debtor must first have had counseling from an approved court list of professionals. These sessions will cover areas of financial management as well as whether or this is really the best course of action for the debtor. Explorations may be made into the psychological effects of such action and ways to cope with such effects. This counseling must have occurred during the six months prior to filing the action. This counseling helps to mitigate sudden and perhaps hasty decisions being made regarding a chapter 7 personal bankruptcy action.
Before ever deciding to make such a drastic decision, there are actions that a person should consider as an alternative to a chapter 7 personal bankruptcy proceeding. The first option would be to seek out a credit counseling service. These services are both for profit and non-profit, and some are even faith based which may be able to help with even deeper issues that have actually brought about the credit crisis in the first place. Services are neither better nor worse if they are for profit or non-profit. These services can actually help reduce credit card and other debt by as much as fifty percent each month. These services try and work with creditors to craft a three to five year plan to pay off all high interest debt, but it takes a great deal of discipline on behalf of the debtor to not spend the extra money saved each month on unwise purchases. Another alternative to seeking a chapter 7 personal bankruptcy is to obtain a second job and use all the money made from that employment on debt reduction.
A debt consolidation loan may be available to try and put all outstanding accounts under one loan at a lower payment. This may especially be of interest to the homeowner who has substantial equity in his house. A home equity loan at much lower interest rates than credit cards can be a good way to getting a handle on a number of different payments. A home equity loan is given in return for a percentage of the homeowner's equity. This can be fifty to seventy percent of the home's equity. If this is not an option, a final action before bankruptcy should be the liquidating of assets. Often someone in a high debt situation has made a number of purchases that could be sold through auction, garage sale or other method that can then be used to help mitigate the debt.
The chapter 7 personal bankruptcy proceedings take about four months to complete and is costs about three hundred dollars for the actual filing fee. An attorney may cost in excess of several thousand dollars, but if the client can attend any legal proceedings without the barrister, that may be able to reduce some of the cost. The day that a filing takes place, creditors must stop contacting the debtor and any garnishment of wages will end. This kind of legal action does not wipe out the debtor's assets except for those on an approved list. If the reader is facing financial difficulty, know that God cares about the situation. "Behold the fowls of the air for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they?" (Matthew 6:26)
Finding discharge of overwhelming debt from taxes can be accomplished under certain situations in a chapter 7 personal bankruptcy proceeding. The due date for filing a tax return must be at least three years old, the tax return was filed at least two years ago, the tax assessment is at least two hundred and forty days old and the tax payer is not guilty of tax evasion. Recent tax returns and at least four other tax returns must be on file before discharge of tax liability may be granted. In addition, federal student loans are usually not allowed to be discharged in bankruptcy court. And any credit that is run up in contemplation of bankruptcy filing will not be available for discharge.
Making the decision to declare either chapter 7 personal bankruptcy or chapter 13 is a very serious matter. The stigma of such a proceeding does not leave a person's credit report for ten years. The ability to live above one's means is basically shut down meaning that luxuries are a thing of the past. Most Americans use credit to enjoy the amenities that really aren't within the normal budget, and credit is not on the chapter 13 menu for a decade. What may be most difficult for many is the realization that their credit promises were not kept and financial privileges offered in good faith were abased when chapter seven bankruptcy was declared.