In 2005 the U.S. was introduced to new bankruptcy laws, which implemented with new bankruptcy laws that passed congress.
Before then, Chapter 7 was the most common form of bankruptcy in the United States, because in a Chapter 7 bankruptcy individuals are allowed to keep certain exempt property.
Before the changes in the law were enforced, many people were lacking in good judgment on how they used their credit, which created so much debt they would just file for bankruptcy as a quick solution.
Now that the law has changed, there are more restrictions for filing chapter 7.
Before the 2005 revision, filers could choose which code they wanted to file under.
It did not matter the amount of income you made either.
The most obvious change was made in how a person files, based on their income; for example, people that filed for bankruptcy under Chapter 13 of the Bankruptcy Code, have the opportunity to repay some or all the debts in their name, in better terms, i.e. lower or no interest and that is unlike Chapter 7 which involves liquidation of assets.
The law also imposed new restrictions on bankruptcy lawyers.
It may be tougher now to find a lawyer who will represent you in a bankruptcy case.
Another change, is that now people planning to file for personal bankruptcy under chapter 7, must complete the mandatory credit counseling first.
Individuals that decide to pre-file, still have to complete the credit counseling requirement and people that post-file must complete a financial budget that they will use.
In light of our current economic situation, many feel these new standards should have been executed several years earlier.
These financial tools are designed to help people become better aware of their spending habits and to assist them in becoming more financially stable.
There is also a change for chapter 13 bankruptcy filers and a new income demand of personal finances.
After paying for regular living expenses, any disposable income remaining must now go toward repaying any loans.
The IRS now determines the allowed actual living expenses, not the actual living expenses, if their income is higher than the median income in their state or per capita. Before filing for bankruptcy, you need to carefully consider all your options and become well informed on the legal aspect surrounding any new laws that may pertain to your personal situation.