Friday, May 18, 2007

New Bankruptcy Legislation Requirements

The law, which took effect on October 17, 2005, has taken up the onus of making the process of filing for bankruptcy a more laborious task, for attorneys and debtors. Of course, that's one side of the coin and the shift is undoubtedly geared towards benefiting the end customer; the debtor.

The documentation that is required when filing for bankruptcy has increased. For example, the debtor must provide additional information that details all income and expenses. In cases where the expenses exceed the IRS allowance, a special circumstances document must be submitted which reasons the necessity of the extra expense incurred. A statement of accuracy must also be submitted, along with these special circumstance documents.

The attorney’s job is further diversified, and a lot of responsibility for ensuring checks is put on the attorney. A signature of the attorney certifies that the petition has been reasonably inspected, and the proceeding is not an abuse of the bankruptcy process. The attorney also certifies that the proceeding is acceptable under current law or that it is a good faith argument for the extension/modification of current law. In case of a violation, the fees of the attorney and the debtor cost can be assessed and made payable to the trustee. This will possibly work as an incentive for trustees to file more motions, perhaps resulting in the need for additional insurance or an unknown increase in current rates.

In a bid to decrease the number of people filing bankruptcy, the new law requires that debtors receive counseling from an approved credit counseling agency within six months prior to filing the bankruptcy petition. This counseling would orient clients of other options that are available to them. Such a counseling session will ensure that people don’t take an uninformed decision to file for bankruptcy.

Here again, it will be the responsibility of the attorney to ensure that the client has attended a certified counseling program. But this is just as simple as a “have you” or “have you not” verification. In Senate hearings the credit counseling industry has been described as "a network of not-for-profit companies linked to for-profit conglomerates. … plagued with consumer complaints about excessive fees, pressure tactics, nonexistent counseling and education, promised results that never come about, ruined credit ratings, poor service, in many cases being left in worse debt than before they initiated their debt management plan.” The debtors’ job is not getting any easier, with counseling required even in such cases where repayment is impossible, or where a debtor faces an unfair debt.

Further more, while in the old law in consultation with attorneys debtors chose the type of bankruptcy that they felt suited them the most, in the new law that is not to be the case. The new law will also reduce the number of people who file for Chapter 7 bankruptcy by allowing only people who fall under the median state income, adjusted for family size and inflation, and people who meet the rigorous standards under the means test to file for it. A series of complex mathematical formulas have been put in place to evaluate the rest of people who don’t make this mark. These formulas won’t be fixed, and will be revised on an annual basis when the new median incomes are released. The new law utilizes income and expense standards devised by the IRS that vary by county. There are numerous exceptions and special circumstances to the standards that must be considered for each client.

Clients who do not qualify for the aforesaid means test will be required to file for Chapter 13 bankruptcy. Also, the new law has extended the term for Chapter 13 bankruptcy from the range of three to five years, to a mandatory five-year term. Chapter 13 Bankruptcy clients will now require supervision and representation for at least five years before they receive their discharge.

The effects of the new law are such that it would require attorneys to specialize in bankruptcy. These are complex rules, and a new level of commitment towards the protection of bankruptcy clients is mandated by it.

Yes, it would seem from hereon lawyers would be harder to find, because of the kind of complications that have been introduced under the new law. The commitment of Bankruptcyhome.com is undeterred! After all, the basic tenet of bankruptcy filing remains unchanged. A change in the law does not imply a change in the basic principles that we work on. We specialize in bankruptcy litigation will continue to assist clients, even in the face of new bankruptcy legislation.

http://www.bankruptcyhome.com/bankruptcy-certification.htm

Filing Bankruptcy Process

Those who are faced with the overwhelming fact that their debts have grown to such a large amount that they might have to file for bankruptcy might not have a clue about how to go about this course. The first and foremost step to take is to put your bankrupt status on paper by filing for bankruptcy through the bankruptcy court. But how exactly does one go about it?

First of all, you should keep in mind that filing for bankruptcy is a legal process. For this reason, and for your own financial wellbeing, each decision that you make about bankruptcy should be well informed choices. That is to say, is this process something you want to take up on your own, or do you want a professional to help you? It is possible to file for bankruptcy on your own; however, it is a process that would take a lot of patience and diligence.

If you decide that you want to file for bankruptcy on your own, the first decision you have to make is which kind of bankruptcy you should file for: Chapter 7 or Chapter 13? Once again, these decisions cannot be made fast. So it would be a good idea to visit your local library and talk to a few people who might know more technical information about filing for bankruptcy.

On the other hand, it might be a safer option to get in touch with a bankruptcy lawyer who can guide you through the complicated procedure of filing for bankruptcy. You will have to provide you bankruptcy lawyer with all your personal information in order to put together and file your voluntary petition. Once the documents are filed at the bankruptcy court, you will be assigned a trustee who will see to it that all the information that is needed is collected from you and that all the information provided is accurate. The next step would be to notify your creditors that you will be filing for bankruptcy so that they will have to stop all actions they might be taking up against you to get your payments.

The later procedures include meeting the various parties who are involved in your bankruptcy case, together with your creditors and if possible your creditors’ lawyers.

While all this is going on, also keep in mind that filing for bankruptcy is a long process which will require a lot of patience. For this reason, having an experienced lawyer might make sure that everything runs smoothly.

http://www.bankruptcyhome.com/filing-bankruptcy.htm

How Did This Happen?

Dear Readers, Picture This:

Your spouse is out of job, the monthly income is halved and your family is left without health insurance. Just as you are managing somehow by slashing all unnecessary expenses your child is hospitalized for a tonsillectomy. Past-due bills are piling up, the number of calls from nasty creditors, and the letters threatening to foreclose on your mortgage, are on the rise too. You contact non-profit debt counseling services who manage to keep their promise of permanently lowering interest rates on some of your outstanding bills. But six months on, and having paid the sign-up charge and monthly fee of the agency, your debt only increases. The counseling services seems to have profited more.

Claim for help is hollow, and the promise to rescue, a scam. The combination of high household debt levels and major corporate layoffs in the past few years has led to a sudden increase in many organizations that depend on people falling for these claims.
But What About The Law?

Yes, the laws are all in place to safeguard fair practices and what not, but the rise of abusive practices is phenomenal even in the face of such laws. Such credit counseling agencies are typically small and offer services such as providing help with budgeting and management of debt. Individual cases determine future course of action, with some extreme cases even steered into bankruptcy, but a majority guided towards debt management programs.

"More recently," says Winston, "a new kind of agency has arisen." Instead of being locally-based, these agencies are national. And, he adds, "they pitch their services aggressively," advertising on television, in magazines and over the Internet.

According to Winston, self-promotion was traditionally not a practice of credit counselors, but the problem with such advertising is that oftentimes it is not truthful. It has been seen that the word “non-profit” misleads people into blindly believing such organizations, and their intent.

As a note of warning, he advises people in a financial crisis to be particularly wary of organizations, and have a clear understanding of the fee structure that they follow.

You need to ask the right questions about commissions, and be wary of any possible no tie up between the credit card company you owe money to, and the agency – this will obviously influence the advice you are given. You should know that, commission kicked back to the credit agency could range anywhere from 5 to 15 percent of the amount that is paid. Reduction of you debt in such a scenario need not be the primary goal of the credit counselor. There have even been cases where people were wrongly advised to stay away from bankruptcy, when it was the best option.

For your information, a legitimate credit counseling agency would be aware and sympathetic towards your financial crisis and charge you just enough to cover their expenses. That would be essential differentiator between a "non-profit" organization, and a non-profit organization. The good news for debtors is that there are organizations where based on individual cases all charges are waived off.

Is There A Way To Know?

Profit making non-profit organizations can be identified based on a few tip offs. Here are some.

* They charge a high fee.
* They guarantee to eliminate unsecured debt or promise that it can be paid off for pennies on the dollar.
* They advise to stop making payments to your creditors.
* They provide no guidance on how to avoid financial trouble in the future.
* They automatically pitch their (fee-based) re-payment plan without considering your case at length.
* They promise to clean up your credit report. (It takes 10 years to eliminate bankruptcy filing, and late payment and defaults stay on your record for 7 years.)

If you find out that you are a victim, have your contract scrutinized by a trusted advisor. Once confirmed, you should file a report with the local Better Business Bureau or your State’s Attorney General’s office. You can contact the Federal Trade Commission, which may not be able to fight your case since it’s a law enforcement agency, but broader action can be initiated based on complaints. There can, for example, be a move to shut down a company if many such complaints trickle in.

Attempts are being made to crack down on these unscrupulous credit counseling firms, but in the meanwhile be alert to such possibilities. Go to a company if you know someone who’s been there and got their problem resolved, or of course if you are certain that the history they boast of is for real. But the bottom line is, be aware and prepared to tackle any negative consequences.

http://www.bankruptcyhome.com/howdidthishappen.htm

Credit Woes

Imagine this: Over the years your debts have somehow piled up to an unmanageable level. And now amongst unpaid bills and dealing with angry creditors, you feel the only solution for you is to get some help to clean up the mess. That is all well and good, but where exactly do you go to find this help?

Now imagine this: tired of the growing debts and with no way out you decide to consult a ‘professional’. You go to a credit counsellor and let that person try to help you out of your debts only to find that they have put you in more trouble than you already were in when you started.

Needless to say, over the years because of changes in lifestyles and spending habits, many individuals have found themselves in a situation where they are too deep in debt. Unfortunately, at the same time there has also been an increase in the number of abusive practitioners who pose as credit counsellors only to make the situation much worse than it was in the beginning.

The traditional credit counselling agencies were small and local services whose main function was to lend a hand to consumers with guidance and education about budgeting and how to manage their debts. Each case is studied individually and depending on the individual consumer’s situation they will be directed towards debt management, or at the worst case, filing for bankruptcy.

However there has been a shift in the nature of these small agencies. For a start, a lot of them are not small anymore. Nor are they local. The trend in credit counselling agencies finds organizations that operate at a national level and adopt aggressive marketing strategies to break through to the public. It is not unusual to see these credit counselling agencies selling their pitch by advertising through television, magazines, radio and the internet.

When going to a credit counselling agency keep in mind that most genuine agencies of this kind offer their services at a minimal fee. This fee that is charges is usually just enough to cover their expenses, thus they make the grade at a ‘non profit’ business. It might only be natural for consumers to drop their guards when they are met with the word ‘non-profit’. But one has to be aware of the fact that not all these organization have your best interest in mind.

Experts suggest that people who are looking for assistance from credit counsellors should be cautious with the choices they make. It is important to understand the fee structure and look into the structure more deeply if they operate on the basis of percentages and commissions. You should understand points such as who pays the commissions, you or the credit card company. Also be sure to check out if the agency gets a kickback from the credit card company from the outstanding amount when it repaid, since that is something that is likely to have an effect on the way the agency works with you.

http://www.bankruptcyhome.com/creditwoes.htm