Recent Bankruptcy News
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Is There Recent Bankruptcy News of Which I Should Be Aware?
On October 17, 2005, wide ranging changes were made to U.S. bankruptcy law. Two major changes that affect everyone considering bankruptcy protection:
- The “means test.” While a component of the bankruptcy code throughout history, the means test was removed from the previous reform package that went into affect in the late 1970's. As most lenders realized, but the U.S. Congress apparently did not, this action opened many doors to bankruptcy abuse. Now back in favor, the means test dictates that people filing a petition must disclose all sources of income, which will help determine whether a Chapter 7 or Chapter 13 (wage earner plan) is the appropriate course of action. A person having significant income but few hard assets may be prohibited from filing a Chapter 7 bankruptcy, and will be permitted to file a Chapter 13 action only.
- Debt management counseling. All new bankruptcy filers must provide evidence that they have completed a debt/credit management counseling course within six months of filing their petition. While many scoff at the necessity of this requirement, everyone should know that knowledge is power. This new requirement should prove to help many people avoid a repeat performance of filing bankruptcy in the future.
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