How New Bankruptcy Laws Forever Changed Debt Relief Options
In 2005, new bankruptcy laws were enacted by Congress under the Bankruptcy Abuse Prevention and Consumer Protection Act. Nearly 6 years later, consumers are still confused about BAPCPA and how it forever changed their opportunities to obtain debt relief.
Prior to the new bankruptcy laws, debtors often filed Chapter 7 which allowed them to give back assets used as collateral to secure loans through establishing a bankruptcy trust. Once debtors were paid remaining items are returned to debtors and any outstanding debts written off.
Often referred to as ‘fresh start’ bankruptcy, Chapter 7 was one of the better options for those who didn’t mind relinquishing personal property and valuable assets. In fact, debtors were given the option to reaffirm debts for items such as their house or automobile, so in essence they didn’t lose anything other than financial baggage.
Today, the only way to enter into Chapter 7 is if earned income is below state median income levels. For example, the median income for residents in Orange County, California is ,200. Debtors who earn more will be forced to petition the court for financial relief under Chapter 13 bankruptcy.
