Bankruptcy, Changes to Chapter 7 and 13...

The latest changes to bankruptcy law make it harder for some people to file bankruptcy. Some filers are no longer allowed to use Chapter 7 bankruptcy, but will instead have to repay some of their debt under Chapter 13. All debtors now have to get credit counseling before they can file a bankruptcy case -- and additional counseling on budgeting and debt management before their debts can be wiped out.

Let us guide you through these new changes.

In a Chapter 7 bankruptcy, you are allowed to keep certain exempt property. Most liens, however (such as real estate mortgages), survive. Other assets, if any, are sold (liquidated) by the interim trustee to repay creditors. Many types of unsecured debt are canceled. Common exceptions to discharge include child support, most taxes, most student loans, and fines and restitution imposed by a court for any crimes committed by the debtor.

A disadvantage of filing for personal bankruptcy is that a record of it stays on your credit report for 13 years. This may make credit less available and / or terms less favorable for you. That must be balanced against the removal of actual debt from your record by the bankruptcy, which tends to improve your credit worthiness.

Under Chapter 13, the reorganization bankruptcy for consumers, you can usually keep your property and you partially or fully repay your debts. You use your income to pay all or a portion of your debt over a mandated upon time period. At the end of the time period, the balance of what you owe on most debts is erased. In this situation, the court must approve your repayment plan and your budget.