President Bush signed a bill Wednesday, April 20, 2005 making it harder for debt-ridden people to file for Chapter 7 Bankruptcy. The new law will take effect in 6 months imposing tougher guidelines.
With the new law, people with insufficient assets or income could still file Chapter 7, which if approved by a judge, erases debt entirely after certain assets are forfeited.
The legislation set financial limits on who could qualify for Chapter 7. Those with incomes above the state median income, who can pay at least $6000 over 5 years would be forced into Chapter 13, where a judge would then order a debt reorganization and repayment plan. Paying all or some of their credit card charges, medical bills and other obligations under a court ordered bankruptcy plan.
The new law would have a more standard formula that judges would use to decide who is eligible for Chapter 7. The current law allows bankruptcy judges to use a broad discretion to determine who is unfairly filing under Chapter 7.
The bankruptcy laws were written for the most part for people who need a fresh start. When the new law takes effect, many consumers will be disqualified from taking advantage of the more generous provisions under the current bankruptcy code.
.Read More About: Changing Chapter 7 Laws
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