A record number of people filed for bankruptcy seeking protection from creditors, but with the coming changes in bankruptcy laws, future filings may decrease, or at least that is the hope of congress and the US bankruptcy courts. Record numbers of Americans are drowning in excessive debt. The answer to the stress and burden of obligations for many households has been to protect themselves legally with filing a Chapter 7 or Chapter 13. Yearly, the number of those filing against creditors has risen, and the government has taken notice. Bankruptcies costs the court and losing creditors millions of dollars. The new bankruptcy law in 2005 will attempt to curb some of the abuse.
With a Chapter 13 filing, consumers and families could reconstruct their debt and be bound to court procedures for a limited time. This chapter allows for some debt elimination and an organized method to getting other debt completely paid off. The court and a trustee oversee the entire process and prioritize repayment. Repayment schedules can extend for up to five years. Although Chapter 13 is a true legal filing, it is viewed as more positive than a Chapter 7, because it allows for creditors to regain some of their funds.
Historically, a Chapter 7 filing has proven to be the most popular with consumers. With this avenue, there is the liquidation of assets to pay off debt. If there are no assets available, then debt is completely discharged and the family is given the opportunity to start completely over financially. The law varies from state to state, but most states protect certain assets from liquidation. These assets can include home equity, cars, and household items. Chapter 7 was constructed to aid persons in tragic or crisis situations, such as with the victims of the recent hurricanes. But, there has been extreme abuse of bankruptcy by consumers and now the biggest changes in bankruptcy laws effect those filing for Chapter 7 protection.
Most individuals that seek bankruptcy will now have to consider a Chapter 13, unless their income is below a certain level. These changes in bankruptcy laws will force consumers to repay debt to creditors. Other changes in bankruptcy laws have been executed as well. Those filing must now offer extensive paperwork and income proof within limited time restrictions. The amount of documentation and hassles are in place to not only properly prove the need, but to discourage consumers from abusing an easy process. The new bankruptcy law in 2005 also mandates that families receive credit counseling before filing and again after filing, to prohibit multiple filings. Personal credit counseling is intended to help consumers manage future finances more effectively.
There are also special provisions for natural disaster victims. Not all changes in bankruptcy law will apply to those who have financial difficulties due to hurricanes Katrina and Rita. The families that survived the hurricanes, but have been financially devastated, may not have to meet all of the new requirements. Some of the differences may include not seeking credit counseling and added consideration for these families' increased expenses.
Experts cite that with the new bankruptcy law in 2005, the way consumers view debt should radically change. Now, bankruptcy should not be an easy option for negating a heavy debt situation. The hope from the government is that not only will costs and filings lower, but that consumers will seriously consider how much debt they carry in their financial portfolios. The changes in bankruptcy laws hold promise to do just that.
There has already been a drop in Chapter 7 filings with the new bankruptcy law in 2005, which went into effect in October of 2005. Perhaps the record number of filings documented in 2005 were in part due to consumers rushing to obtain protection before the new and stricter procedures went into play. The mounting debt problem in America is currently being addressed by several entities, credit extenders included. Credit cards are attempting to help bankruptcies decline by restructuring payments and minimum payments due. But, the attack against excessive debt must ultimately come from the consumer.
The question of bankruptcy for Christians is a difficult and complex matter. There are devastating circumstances that can lead families to seek legal protection. But, the Bible is clear that Christians are to be examples of Christ and demonstrate His character in all of their dealings. "And whatsoever ye do in word or deed, do all in the name of the Lord Jesus, giving thanks to God and the Father by him." (Colossians 3:17) Perhaps with the changes in laws, Christians can seriously reflect on how excessive debt and unpaid bills mirror Christ's image to the unbelieving world. Christians are to be in the world but not of it. Following the path of materialism, comfort, and convenience is following the path laid forth by the world.
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