Before I summarize how the changes affect consumers, I’d like to provide my thoughts
on this one-sided piece of legislation.
My thoughts:
The new bankruptcy laws were written mainly by the banking conglomerates. In today’s
politics, money rules; the proof is in the millions spent lobbying and the donations
made to re-election campaigns. This bought a guaranteed ticket legislation would
pass. The result the rich get richer while the middle class is now the working poor.
As with any law there are always loopholes. In this case it is important I mention
two loopholes which benefit only the wealthy; the asset protection trust and the
homestead exemption.
Prior to the new law taking effect, many debtors where able to get a fresh start
by filing a chapter 7 thus leaving the creditor with zero. By changing the laws
one must now qualify making it much harder. This allows the creditor an opportunity
to recover the debt owed through collection efforts.
The dilemma here is at risk consumers are continually marketed for credit (mainly
credit cards) with the prediction that fees such as over the limit and late charges
will be assessed and collected. The consumer will try their hardest to keep making
the minimum payments. They will go so far as draining savings accounts, college
and retirement funds, until nothing is left. Meanwhile, the balance never goes down
and in some cases will actually climb due to all the “fees”.
As I stated in my opening, money rules and the new law demonstrates we have the
finest CONGRESS money can buy.
Here's the bill (S256) in its entirety.
How the Bankruptcy Laws Affect You
Means Test = Qualification Guidelines
Bankruptcy counseling required.
Chapter 13 Extended
State Exemptions:
Homesteads
Vehicles
Child Support and Alimony
Bankruptcy Lawyers are held accountable for supplying accurate information
Tithing
Asset Protection Trust
How Congress Voted – This should dictate your next vote
How the Bankruptcy Laws Affect You
The bankruptcy law change of 2005 was primarily written by MBNA. I would like to
note MBNA was a major contributor to the George Bush Campaign. The law is one-sided
and benefit only the wealthy.
Means Test = Qualification Guidelines
Applicants must pass a means test (to see if your income and/or ability to pay exclude
you from filing).
www.usdoj.gov/ust/eo/bapcpa/20061001/bci_data/median_income_table.htm
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Bankruptcy counseling required.
The new bankruptcy law requires consumers to attend credit counseling education
within 6 months before filing for bankruptcy. One must receive education from a
qualified center. In addition, consumers must complete and receive a financial education
certification before having their debts finally discharged.
Chapter 13 Extended
If you do not qualify and are pushed to Chapter 13 bankruptcy, the repayment period
is 5 years instead of 3 years.
State Exemptions
You must be a resident for 2 years before you can use the exemption in your state
Homesteads:
The exemption is limited to $125,000 of your state's homestead exemption if the
property was acquired within the previous 1215 day (3.3 years). The cap is not applicable
to any interest transferred from a debtor's previous principal residence (which
was acquired prior to the beginning of such 1215-day period). How does this work?
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Vehicles:
If there is security put in place within 3 years on your vehicle, you must pay the
full amount owed or lose the vehicle. This means the consumer would be required
to pay the entire amount of the loan instead of a reduced amount of what the car
is actually worth.
For example: you purchase a car at a 21% interest rate that is worth $4,000 When
you file bankruptcy the total payments under the terms would mean you pay $12,000
over the lifetime of the loan. The new law may require that you pay that full amount.
Child Support and Alimony:
These debts will now be 1st on the list as opposed to 7.
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Bankruptcy Lawyers are held accountable for supplying accurate information
Bankruptcy attorneys will be held accountable under the new law to report accurate
information or be subject to fees and fines. What this means is a lawyer can be
found liable if his client lies to him.
Tithing:
It has been said that tithing up to 15% of your income seems like a loophole. This
would allow a person on the edge of a Chapter 13 the ability to drop down low enough
to qualify for a Chapter 7.
Asset Protection Trust
The asset protection trust is a loophole for the wealthy allowing them to protect
substantial assets from creditors even after filing for bankruptcy. How it works
is a trust is established costing many thousands of dollars. Then there is the cost
of maintaining an in-state trustee.
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How Congress Voted – This should dictate your next vote
Eight U.S. states have passed laws exempting assets held in the United States from
federal bankruptcy laws. Prior to 1977 these trust were opened offshore. The few
that could afford to open a trust don’t have to be a resident of the state where
the trust is opened. The only requirement is to establish the trust through a financial
institution located there.
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