The purpose of this bill was to curtail the unfair way in which some high income earners were using bankruptcy laws as a way of avoiding their tax payments.
What was the Bankruptcy Reform?
On May 14th 2004 the new Bankruptcy Legislation Amendment (anti-avoidance and other measures) Bill was introduced. The purpose of this bill was to curtail the unfair way in which some high income earners were using bankruptcy laws as a way of avoiding their tax payments. Even though the number of affluent people who try to use bankruptcy as an excuse is small, their share still amounts up to a significant sum. These people have the ability to pay their taxes but by filing for bankruptcy they are able to avoid their tax obligations.
Despite the good intensions with which this bill has been introduced, some people are worried that though this bill was initiated to curb tax avoidance by those who can afford it but it might also adversely influence other people who actually need the advantages of filing for bankruptcy to solve their serious financial problems.
The bill came into effect quickly after it was introduced in May 2004. On May 21st 2004 the Chairman of the House of Representatives Standing Committee on Legal and Constitutional Affairs, Bronwyn Bishop made it known to the media that the committee is examining changes to bankruptcy laws. On the 18th of June, 2004 the ICAA expressed its support for the legislation, however they also voiced their concern about the effect that this new law would have on the individuals who genuinely were in financial trouble and were not using bankruptcy as a technique of tax evasion. By the 7th of December 2005 the Bankruptcy Legislation Amendment (Anti-Avoidance) Bill 2005 was introduced into parliament.
The bill has been effective from October 17, 2005 and with this bill it would be more difficult for people to make a fresh start with their finances by filing for bankruptcy. Since the law has come into effect, filing for Chapter 7 bankruptcy will be considerably changed. Unlike earlier, a means test will be conducted in order to evaluate if you quality for Chapter 7 or not. In addition to that you will also have to attend, and pay for, debt counseling which is mandatory and will be considered as part of the criterion for determining your qualification. At the same time, if it so happens that you do not qualify for Chapter 7 bankruptcy, then you can still file for bankruptcy under Chapter 13, even though it is a much more complicated process.
More Help on Bankruptcy Reform
- Bankruptcy - Bankruptcy is a legal procedure documented in Title 11 of the United States Code (11 U.S.C. §§ 101-1330) which outlines statutes which must be followed if a person or business can not meet their financial obligations to their creditors. - read more
- Bankruptcy Information - If you have high credit card debt, overwhelming medical bills, forced home foreclosure and creditors calling and harassing you, you need help. Federal bankruptcy laws have been instituted to give you a fresh financial start. - read more
- What Federal Income Taxes can be Discharged in Bankruptcy? - Trying to include taxes owed to the Internal Revenue Service (IRS) in a bankruptcy petition can take place under strict conditions set by the U.S. Bankruptcy Court. - read more
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