The Bankruptcy Abuse Prevention and Consumer Protection Act became effective on October 17, 2005. Since then it has become much more difficult to file, especially for wage earners.
Chapter 7 bankruptcy, usually referred to as ”straight bankruptcy,” allows the consumer to discharge most debts. However, your earnings must be less than your state’s median income. If they are not, you must pass a “means test” to determine your eligibility. You also cannot file if you already have had a Chapter 7 bankruptcy within the previous eight years.
Chapter 13 bankruptcy differs from chapter 7 in that you can pay off your debt or part of it within three to five years if you have a regular income. In either case you must have completed credit counseling within six months before filing. For that you must sign with a qualified agency in your locality. As in chapter 7, the number of years that a bankruptcy stays on your credit record has been increased to ten years. In either case it will be hard to obtain credit in that time period or to buy a home.
The loopholes contained in the new law can benefit only the wealthy. Asset protection trusts are very costly (in the thousands to set up and maintain) and homesteading usually doesn’t work for the average person of modest means. It does depend on the state where you reside and how long you’ve owned your home.
Chapter 11 Bankruptcy is usually referred to as a “reorganization bankruptcy.” A small business owner or an independent contractor has to utilize chapter 11, but it’s expensive and complex. You must consult a bankruptcy lawyer, so you will have to pay attorney’s fees. Because of chapter 11’s complexity, an experienced bankruptcy attorney is no luxury. Then you will face a high case-filing fee, and quarterly fees to the U.S. trustee that will be appointed by the court.
Finally, not all debts can be discharged under the above chapters. Taxes, government loans, alimony and child support do not qualify. However, your retirement accounts are protected.
If you are looking for alternative to bankruptcy and want to get out of debt, Fast Track’s Debt Settlement Program may work much better for you. This program offers ethical and dedicated debt settlement service to assist you in achieving your goals. Fast Track’s specialist will contact your creditors and negotiate with them.
When we start your plan we establish an affordable monthly payment which is deposited in a settlement account in your name. Once you have the required funds in your settlement account, we will contact your creditors and make settlement offers. We will continue to work with them until all debts in the plan have been settled. Fast Track’s goal is to settle all debts in the plan for 40%-60% of what you owe.
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