How Does Bankruptcy Work Article

Some key changes in new bankruptcy law

Some major changes dictated by the new bankruptcy law that has come into effect state the methods of treatment of bankruptcy cases by the people and by the government. For this reason, it would be a good ides for any person who wants to file for bankruptcy to be properly informed of the important changes that influence the new bankruptcy law.

Mandatory credit counseling is one of the major changes. Counseling is now obligatory for anyone filing for bankruptcy and this must be carried out by government-accredited counselors. This measure exists to make people aware of the seriousness of bankruptcy. A lot of people do not properly weigh the pros and cons of such a decision without counseling. With mandatory counseling, people filing for bankruptcy will hopefully reduce and many more people will have a higher credit rating.

Another major change is about the 'means test', it aspires to prevent people from filing for bankruptcy in order to avoid paying debts. Thanks to this measure, the government hopes to filter individuals filing under Chapter 7 to find out if they really are deep in debt. This measure is destined to make sure that individuals start taking their liabilities a bit more seriously and do not think that filing for bankruptcy is an easy option to get out of paying their debts.

Chapter 13 is a move to help people consolidate their debts, repaying them in affordable amounts fixed at regular intervals. This will teach people to be much more serious about their debts as they will soon realize that debts cannot just be written off but must be repaid. They can, however, repay them in more reasonable amounts as far as they are concerned.

More protection exists now as a result of the changes. In the past, filing for bankruptcy meant protection from all creditors, in all cases. Now, there are some provisions to this 'automatic law'. Nowadays, filing for bankruptcy does not mean being thrown out of your house if you have not finished paying your debt or have your license suspended or that you can't have divorce proceedings started your spouse. The new law grants new power to creditors and is much more just.

The new law prioritizes child support and alimony. The first amounts are therefore paid out in these fields rather than to creditors. In the past, creditors were given prioritized during the take-over of assets. Nowadays, family members come first. This is one way of being absolutely sure that family members are the first to get what they need.

People filing for bankruptcy must attend financial-management lectures as well. Attending these is mandatory. The debtors must attend seminars and workshops to better understand how to money management. A brand new start doesn't mean that their lack of financial management skills can be ignored. They must learn these skills to avoid this happening again. The government hopes to reduce the amount of people unnecessarily file for bankruptcy.