First and foremost, the Bankruptcy Act requires debtors to seek credit counseling before filing for bankruptcy, and verifiable evidence of that counseling will be required before your case will be heard (see below). This new provision in effect forces consumers to seek out all alternatives to debt reduction before filing for bankruptcy. Then, money management training (paid for by the filer) is required before any debt can be discharged
Chapter 7 or Chapter 13?
Traditionally, consumers have had the option of filing for bankruptcy under Chapter 7, which eliminates consumer debt entirely, or under Chapter 13, which provides some relief but requires good faith payments on unsecured debt for a period of three years. The new Act examines an individual’s monthly cash flow; if you earn above your state’s median income and your living expenses leave you with at least $100 per month left over to pay towards debt, your options are limited to the more stringent demands of Chapter 13. Furthermore, the Chapter 13 repayment period has been extended from three to five years. Chapter 13 will also make it harder for a filer to retain recently acquired high value property (two-and-a-half years for automobiles, one year for other significant purchases). Previously, an individual could retain ownership of these goods if he or she was able to pay a sum equal to the resell value at the time of the bankruptcy claim. Under the new law, the consumer will be required to pay the full value of the purchase in order to avoid forfeit.
State of Residence
Regulations for claiming bankruptcy vary from state to state, and some states make it considerably easier to file bankruptcy than others. In fact, several states have laws more forgiving than the existing federal provisions. The new program will impose a bankruptcy waiting period, requiring two-years’ residency in any given state before filing for bankruptcy. This is intended to keep people of jumping ship--that is, moving to states with favorable laws and immediately filing for bankruptcy. If you do try to file within two years of an interstate move, you’ll be subject to the tougher laws of the two.