Debt Consolidation

Custom Search
 

Debt Consolidation
Debt Relief
Mortgage
Credit
Bankruptcy
The New Bankruptcy
What to Consider
Bankruptcy: What's the
Available Bankruptcy Options
Using an Individual
Bankruptcy Law and
IVA - An
Five Steps on
New Bankruptcy Law
New Bankruptcy Law
New Bankruptcy Law
New Bankruptcy Law
Buying a Home
Bankruptcy - The
When Filing for
New Bankruptcy Laws
New Bankruptcy Law
Bankruptcy Or Debt
Chapter 13 Bankruptcy:
Filing Bankruptcy
Filing Bankruptcy Online
Filing Chapter 11
Filing Chapter 13
Filing Chapter 7
Filing Corporate Bankruptcy
Filing Personal Bankruptcy
Low Cost Bankruptcy
Bankruptcy
Bankruptcy Attorneys
Bankruptcy FAQs
Bankruptcy Laws
Filing Bankruptcy in
Life After Bankruptcy
Personal Bankruptcy
Types of Bankruptcy
Sitemap
Debt Consolidation
Debt Relief
Mortgage
Credit
Bankruptcy
 
What You Need to Know When Considering Bankruptcy
by Brooke Sikula
For most people of course, bankruptcy is very much a last resort, to be considered only after all other debt consolidation and debt reduction options have failed. Even so, the new bankruptcy laws passed in 2005 mean that filing for bankruptcy is

For most people of course, bankruptcy is very much a last resort, to be considered only after all other debt consolidation and debt reduction options have failed. Even so, the new bankruptcy laws passed in 2005 mean that filing for bankruptcy is now much more complicated, and for many people much more expensive that it had been before the new laws went into effect.

Just what has changed?

Perhaps the biggest change that was instituted in the world of bankruptcy laws is the introduction of a two part means test. The results of this means test are used to determine which of the two forms of bankruptcy the individual must use.

The first part of the means test uses a formula to find out if the individual can afford to pay at least 25% of the non-prioritized unsecured debt that is owed. This non-prioritized unsecured debt includes debt such as credit cards. The formula takes into account and exempts necessities like food and rent, but it can be fairly restrictive.

The other part of the new means test is to compare the income of the bankruptcy filer to the median income for his or her state. Those who are found able to pay back at least 25% of the unsecured debt they owe, and whose income exceeds the state median, will be required to file for bankruptcy under the more restrictive Chapter 13 law, and they will be ineligible for the more generous rules of a Chapter 7 filing.

What’s the difference?

There are considerable differences between the two forms of bankruptcy filing, and the difference can add up to thousands of dollars. With a Chapter 7 bankruptcy filing, the debtor has all of his or her assets, except for those which are exempted by the state, liquidated, and the proceeds are used to pay off the creditors. If the amount of debt exceeds the proceeds of the assets, the remaining debts are cancelled, leaving the creditors holding the bag.

With a Chapter 13 bankruptcy filing, on the other hand, the debtor is required to complete a court mandated payment plan, lasting up to five years. Any debts that have not been repaid by the end of that predetermined period are cancelled.

As you can see, the Chapter 13 bankruptcy filing is quite a bit more restrictive, and it typically means that a greater percentage of the total debt must be repaid. It is important for any debtor considering a bankruptcy filing to look at his or her own situation, and apply the means test to determine which filing status he or she is likely to fall into. Being an informed consumer has never been more important.

Brooke Sikula is a freelance writer based in Ventura, CA and writes on a wide range of topics from home improvement to credit repair and everything in between. She is a regular contributor to http://www.loan-mortgage-auto.com and http://www.home-improvement4u.com For more information and advice on credit issues, check out http://www.credit-card-faq.com

 
The site is not responsible for any content in it. E-mail: alldir[at]gmx[dot]com
debt consolidation, home loan, mortgage, debt free, debt help, refinance, equity loan, unsecured, secured debt, bankruptcy, credit card , bad credit, payday, cash advance, cash settlement, line of credit, student loan, interest rate, borrow money, car loan, adverse credit, compensation, quote, credit score, consolidate debt Copeland Mishicot village Balance of Pottawatomie township Belknap village Morland Sierra Vista Geraldine town St. Matthews town Geneva Catharine township Wilson County Newtown township Pine Grove borough Losantville town Madison Morrow County McCool town Hunker borough Cowan Deuel County Edwardsville Grantham town Greensboro town Jersey Village Tallassee Potter County Bettles Mackay McCaskill town Garvin town USA UK Australia Canada Martinique Philippines Tonga Belarus Honduras Indonesia San Marino Ascension Egypt Oxfordshire Tyrone Perthshire Brecknockshire Montgomeryshire Oxfordshire Aberdeenshire Rutland Fermanagh Hampshire Texas (TX) Massachusetts (MA) South Dakota (SD) Alaska (AK) Tennessee (TN) Oregon (OR) Illinois (IL) Washington (WA) California (CA) Vermont (VT) New Mexico (NM) Federated States of Micronesia (FM) Federated States of Micronesia (FM) Ohio (OH) Colorado (CO) Florida (FL) Georgia (GA) Indiana (IN) Oklahoma (OK) West Virginia (WV)