Bankruptcy. have the laws on it changed?

I’ve heard that declaring bankruptcy doesn’t necessarily free you of any outstanding debts anymore. Is this true? If so, what’s the point?

I’m not about to declare bankruptcy but this is a discussion some of us were having today.

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This entry was posted on Sunday, September 28th, 2008 at 10:51 pm and is filed under Bankruptcy Law. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

8 Responses to “Bankruptcy. have the laws on it changed?”

1. bill b Says:
   September 30th, 2008 at 7:14 pm

   The answer may be here.

2. Lori K Says:
   October 3rd, 2008 at 5:25 pm

   Yes, the laws HAVE changed. It’s no longer quite so advantageous to declare bankruptcy and certain debts are not wiped out. It’s been a big shocker to some who have been using the bankruptcy loophole.

3. Sandy G Says:
   October 6th, 2008 at 4:20 pm

   The laws have changed, and depending on the type of bankruptcy you declare you can be freed from all debts or pay it back over a certain amount of time. I know that in Chapter 7, you have to liquidate some assets to pay off debtors, and in Chapter 13, all the debts are combined and you pay them all back through the court over a time from 36 – 60 months.

4. spifiman1 Says:
   October 9th, 2008 at 7:07 pm

   The laws have changed dramatically, if you make over the minimum income (varies by State) you are forced into chapter 13 which make you pay people back, The only people that qualify for chapter 7 anymore are the truly desperate who make very little money.

5. First Lady Says:
   October 10th, 2008 at 12:05 am

   The laws changed in October of 2005. It makes it harder to file chapter 7 and forces more people into chapter 13. That’s really about it, though. If you have a certain amount of disposable income, you have to file chapter 13. Certain debts are not dischargable…student loans, child support, alimony, IRS taxes, etc.

6. buyhawkeye.com Says:
   October 13th, 2008 at 12:03 am

   Yes. The laws changed late last year. It was a special interest piece on behalf of the credit card companies. Beyond that, it is still a workable system. Bankruptcy is not a right, but a privilege afforded in many countries. It is designed to protect the weak, but has been subject to tremendous abuse in recent history (the concept has been around for a very long time).

7. strangefire2004 Says:
   October 13th, 2008 at 6:05 pm

   Yes. The laws were reformed in Oct. 05.
   Specific answer to you question is no, what you heard is NOT true. And, the point of bankruptcy is still the same.
   The are a few more hoops to jump through, and there is a means test which evaluates your household income over the past six months. The means test can be a challenge to those who have an upper-middle class income.
   But the truth is, 90% of people who qualified for Chapter 7 bankruptcy prior to the law change will still qualify under the new laws.
   The changes to the debts that are dischargeable is complex, and in most cases don’t even come up. They doesn’t even affect most individual consumer bankruptcies.
   As far as consumer debts (ie credit cards, medical debts, personal loans), the laws really haven’t changed.
   Student loans, most taxes, civil penalities, child support, and some other specific debts are NOT dischargeable. But they have not been dischargeable since long before this latest reform.

   Anyone considering bankruptcy should have a consultation with a reputable bankruptcy attorney. They almost always offer free consultations. Like I said, there ARE a few more hoops to jump through (more expensive, need more paperwork, mandatory credit counseling & debtor education), but with the help of an attorney, they are easily navigable.

8. DLeibowitz Says:
   October 13th, 2008 at 11:20 pm

   It could relieve you of many debts. Some people must pay disposable income over 3-5 years. Most don’t. Most debts are dischargeable. Recent taxes aren’t. Student loans aren’t. Domestic Support Obligations aren’t. Quite a few others may not be but this varies from case to case. But it can help you recover from financial calamity, health calamity, divorce, unenmployment, etc.