How Have Bankruptcy Laws Recently Changed?
- Lawmakers continue to make changes to bankruptcy laws that affect both Chapter 7 and Chapter 13 proceedings.
- Recent changes affect your eligibility and the outcomes of your bankruptcy case.
- It could possible be easier to discharge student loan debts in the bankruptcy process for some filers.
Bankruptcy laws are constantly evolving to address the changing economic landscape and the needs of everyday consumers and businesses facing financial hardships. In the last few years, congressional legislators have made several significant changes to bankruptcy laws, affecting both Chapter 7 and Chapter 13 bankruptcy proceedings.
Understanding these recent changes to the bankruptcy system is crucial if you are considering filing. This article explores the key changes to bankruptcy laws, differentiating between Chapter 7 and Chapter 13 bankruptcies. Speak to a local attorney before filing to ensure a sound financial strategy for your future.
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” allows debtors to eliminate most of their unsecured debts. Here are some notable changes to Chapter 7 bankruptcy laws:
- Means test adjustments: The means test determines whether you qualify for Chapter 7 bankruptcy based on your income and expenses. Recent acts by Congress have adjusted the income limits and expense allowances used in the means test calculation. The changes to the means test may affect your eligibility for Chapter 7 bankruptcy. If your income exceeds the new limits, you might be required to file for Chapter 13 instead.
- Time between bankruptcy filings: The time frame between successive Chapter 7 bankruptcies has been extended. If you have filed for Chapter 7 bankruptcy in the past, you may need to wait longer before being eligible for another Chapter 7 filing.
- Homestead exemption modifications: The homestead exemption, which protects the equity in your house during bankruptcy, has been subject to changes in various states. The adjustments to homestead exemptions may affect the equity you can protect in your home during Chapter 7 bankruptcy.
Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” allows individuals with a steady income to develop a repayment plan to settle their debts at a pace that works for them. Here are some significant changes to Chapter 13 bankruptcy laws:
- Debt limit adjustments: The total debt limit for filing under Chapter 13 has been increased. With the higher debt limit, more individuals are eligible to file for Chapter 13 bankruptcy and benefit from its debt reorganization features.
- Plan modification: Recent changes allow for modifying a Chapter 13 repayment plan under certain circumstances. If you encounter unexpected financial challenges during your Chapter 13 repayment period, the court may alter your plan to accommodate the changes in your income or expenses.
- Student loan discharge: The process for discharging student loan debt through Chapter 13 bankruptcy has been made more accessible. Individuals burdened with student loan debt may have a better chance of discharging some of their loans through Chapter 13 bankruptcy.
Navigating the complexities of bankruptcy laws can be daunting, and recent changes may significantly affect your eligibility and the outcomes of your bankruptcy case. Consulting with a bankruptcy attorney is essential for several reasons:
- Expert guidance: An experienced bankruptcy lawyer knows the latest changes to bankruptcy laws and can provide you with accurate and up-to-date information.
- Eligibility assessment: A bankruptcy attorney will evaluate your financial situation, income, and debt to determine whether Chapter 7 or Chapter 13 bankruptcy is the best option for you.
- Compliance with new regulations: Recent changes to bankruptcy laws may introduce additional requirements and paperwork. A bankruptcy attorney will ensure that you meet all the new obligations to avoid potential pitfalls in your case.
- Customized repayment plans: For Chapter 13 filers, an attorney can help design a repayment plan that reflects your current financial circumstances and complies with the latest laws.
- Student loan discharge evaluation: If you are burdened with student loan debt, a bankruptcy attorney can assess your chances of discharging a portion of your loans through Chapter 13 bankruptcy.
- Protection from creditors: Once you hire a bankruptcy attorney, creditors must communicate with them instead of contacting you directly, providing you with peace of mind during the bankruptcy process.
Congress’s recent changes to the U.S. Bankruptcy Code carry significant implications for both Chapter 7 and Chapter 13 bankruptcy filers. These adjustments to the means test, debt limits, and student loan discharge offer new opportunities and challenges.
Consulting with a bankruptcy attorney is crucial to navigate these changes effectively and make informed decisions about your financial future. An attorney will provide you with expert guidance, evaluate your eligibility, design customized repayment plans, and protect your rights throughout the bankruptcy process. Don’t wait to act.
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