Personal Bankruptcy Questions

If you look at the history of the bankruptcy laws in this country, it seems that there has been a continual tug of war between creditors and consumers.  Recently, the credit card companies and other members of the credit industry won the latest round in this ongoing battle.

In 2005, Congress passed a bankruptcy reform law which made some changes to the way people declare bankruptcy.  Among these changes are mandatory classes for credit counseling and financial management.  There’s also something called a means test, which requires people with higher incomes to prove that they need bankruptcy.

Many have complained about the latest law, but the truth is that bankruptcy is still feasible for many people who need it.  In fact, the new law doesn’t actually make very many people ineligible.  Rather, it simply adds more steps in the process.

One thing people have worried about is whether the new bankruptcy law has made it hard or impossible to stop the foreclosure.  After all, a family’s home is perhaps the most prized possession, and if the bankruptcy proceeding can’t give them some relief in this area then it is pretty much worthless.

The concern comes from the fact that consumers now have to take a credit counseling class before filing for bankruptcy.  Fortunately, the court can give them permission to take the class immediately after filing for bankruptcy if necessary, so the family can save their house from being foreclosed.  They still need to take the counseling class which is often available both locally and electronically.

Aside from the mean tests and the mandatory classes, anyone trying to declare personal bankruptcy will have to make their tax returns available to any creditors who request them.  These kinds of additional requirements make the process longer and more tedious, but they do not eliminate bankruptcy for people who really need it.