BANKRUPTCY- Ch. 7 & 13
BANKRUPTCY
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What do the Changes to the Bankruptcy Law Mean to You?
A Summary of the 2005 Changes to the Bankruptcy Laws
After decades of what has often been referred to as “abuse” of the bankruptcy process, in
2005 Congress passed tougher bankruptcy laws. The following are the major changes to
the bankruptcy laws that affect consumers who are considering filing bankruptcy, and the
practical application of those laws.
The two basic types of personal bankruptcy actions are Chapter 7 bankruptcy and Chapter
13 bankruptcy.
• Chapter 7 bankruptcy is also referred to as “no asset” bankruptcy and is what most
people think of when they consider filing for bankruptcy. Under Chapter 7, a debtor’s
debts are discharged, or effectively wiped out by the court, and the debtor is not required
to pay off those debts.
• Under Chapter 13, a debtor works with a bankruptcy trustee appointed by the court
to set up a payment plan under which the debtor pays a percentage of his/her outstanding
debts.
The money is paid to the trustee in a lump sum, and the trustee then pays the creditors
according to the agreed upon payment plan until the debts are paid, at which point, the
debtor is discharged from further obligation on the debts.
Internet Credit Counseling Required
Debtors will be required to obtain a certificate from an approved debt/credit counseling
agency prior to filing for bankruptcy. Also, within 45 days after the 341 Creditor Meeting,
a Personal Financial Management certificate needs to be completed. Both certificates take
about an hour each to complete, and are done over the internet. Your answers are not
official and are NOT forwarded to the Bankruptcy Court. They are for educational
purposes only.
This is a new requirement, and places emphasis on debtors not only avoiding bankruptcy,
but learning how to manage their credit and de
• Prior to filing for bankruptcy, you will need to find an approved consumer
counseling service and attend the required classes to get your certification.
• After the 341 Creditor Meeting, you need to get a Personal Financial Management
certificate (within 45 days).
*Documentation
Debtors will now be required to submit detailed income and expense statements, details of
any debt repayment plans into which they have entered, tax returns, pay stubs and a
statement of any anticipated increase in income.
A Summary of the 2005 Changes to the Bankruptcy Laws
After decades of what has often been referred to as “abuse” of the bankruptcy process, in
2005 Congress passed tougher bankruptcy laws. The following are the major changes to
the bankruptcy laws that affect consumers who are considering filing bankruptcy, and the
practical application of those laws.
The two basic types of personal bankruptcy actions are Chapter 7 bankruptcy and Chapter
13 bankruptcy.
• Chapter 7 bankruptcy is also referred to as “no asset” bankruptcy and is what most
people think of when they consider filing for bankruptcy. Under Chapter 7, a debtor’s
debts are discharged, or effectively wiped out by the court, and the debtor is not required
to pay off those debts.
• Under Chapter 13, a debtor works with a bankruptcy trustee appointed by the court
to set up a payment plan under which the debtor pays a percentage of his/her outstanding
debts.
The money is paid to the trustee in a lump sum, and the trustee then pays the creditors
according to the agreed upon payment plan until the debts are paid, at which point, the
debtor is discharged from further obligation on the debts.
Internet Credit Counseling Required
Debtors will be required to obtain a certificate from an approved debt/credit counseling
agency prior to filing for bankruptcy. Also, within 45 days after the 341 Creditor Meeting,
a Personal Financial Management certificate needs to be completed. Both certificates take
about an hour each to complete, and are done over the internet. Your answers are not
official and are NOT forwarded to the Bankruptcy Court. They are for educational
purposes only.
This is a new requirement, and places emphasis on debtors not only avoiding bankruptcy,
but learning how to manage their credit and de
• Prior to filing for bankruptcy, you will need to find an approved consumer
counseling service and attend the required classes to get your certification.
• After the 341 Creditor Meeting, you need to get a Personal Financial Management
certificate (within 45 days).
*Documentation
Debtors will now be required to submit detailed income and expense statements, details of
any debt repayment plans into which they have entered, tax returns, pay stubs and a
statement of any anticipated increase in income.
