What The New Bankruptcy Law Means For Those With Bad Credit

Most people have heard about the new bankruptcy law which will make it harder for people to get out of debt. Those who choose to file Chapter 7 bankrutpcy will find themselves paying much higher fees to lawyers, and the rates for these fees may be increase as much as 90 percent. They will also be given more time to review the documents of those who attempt to file for bankruptcy.

In addition to this, consumers trying to file for bankruptcy can expect to have delays as their case moves through the court. This is primarily due to the large number of people who have been trying to file for bankruptcy before the new law passed. Statistics indicate that at least 200,000 people have filed for bankruptcy in the weeks leading up to the passing of the law. If you file for a Chapter 7 bankruptcy, you can expect to have most of your property liquidated in order to pay off your debts. If you file for a Chapter 13 bankruptcy, you can expect to be placed on a repayment that will last about 5 years.

Many members of the federal government feel that these strict laws will stop people from abusing the bankruptcy system. They argue that people often get into debt they know they can't afford so that they can use bankruptcy as an easy way out. Despite this, many consumers claim that the new law will allow the credit card industry to make billions of dollars each year due to the large number of people that will file a Chapter 13 bankruptcy.

Under the new law, people who file for bankruptcy must also sign up with an approved credit counseling service six months before they file for bankruptcy. Consumers must also take money management classes, and the cost for these classes will come out their own pockets. Before the new law, judges were able to determine if you qualified for Chapter 7 bankruptcy. With the new law, a calculation is used to determine if your income will allow you to pay at least 25% of your unsecured loans.

As you can see, this new law is bad news for people who have bad credit. While bankruptcy was a way to wipe the slate clean in the past, this is no longer the case. This is an important reason that you should avoid taking on heavy amounts of debt. Things are getting harder for those who are not responsible with their personal finances. The credit card companies and banks are seeking to reduce their losses, and those who don't properly manage their credit are the targets.

If you have bad credit, the first thing you want to do is begin making your payments on time. Making timely payments comprises a large percentage of your credit score, and being late on your payments is a great way to get your credit lowered. If you are paying your bills via checks, start looking at online payment services. These payments will be made electronically and you don't have to worry about a check getting lost in the mail.

Another thing you will want to do is simplify your life. Don't try to have your cake and eat it too. If you don't have a large income, decide what you are willing to sacrifice. If you have a large mortgage, consider purchasing a used car instead of getting a car loan. Look for bills you really don't need and cancel them. Begin using cash for making purchases instead of credit cards. Reducing certain expenses you have will keep you from defaulting on your loans. This will help you avoid situations where you may have to file for bankruptcy.

More Information:

• Credit Action
• National Debtline
• Debt help from Advice Guide