Bankruptcy Chapter 7 Often Open Doors To More Debt
For individuals with a ton of unsecured debt and very few assets it is usually advised they seek financial relief under bankruptcy Chapter 7. Under this proceeding all debts are eliminated at the time of discharge and the person begins over with a clear financial record. Although the bankruptcy will remain on their credit report for many years following discharge of the debts, even person who have filed bankruptcy Chapter 7 can be eligible for taking out loans and credit cards.
In order to file for bankruptcy Chapter 7 a person must first take a means test to determine if they have the means with which to pay of their debt through a Chapter 13 filing. If they have sufficient income to make payments calculated on their disposable income after paying normal living expenses, they may be required to enter a Chapter 13 agreement with the bankruptcy court and make monthly payments to the court trustee until al outstanding bills have been satisfied.
If the person seeking to file bankruptcy Chapter 7 is unemployed or lacks sufficient income to pay their typical living expenses, they may be eligible for petition the court to discharge their debts. Once this petition is granted and the debts have been removed, they are free to begin accumulating debt all over again.
New Laws Take Side Of Grieved Lenders
Under the old bankruptcy laws, the individual could determine the direction of the their bankruptcy and many creditors were complaining that individuals were accumulating debt over a seven year period and filing for bankruptcy Chapter 7 essentially eliminating all the debt they had accumulated. Most of this debt was unsecured in the form of credit card debt or medical expenses. Additionally, despite steps taken by the court to detect fraud in income and asset reporting, many were able to skirt these areas and maintain control of their assets.
Many of the bankruptcy Chapter 7 rules remain in place such as any sudden income received within six months of filing bankruptcy Chapter 7 has to be turned over to the court for dispersal to the creditors. Another issue that was resolved in bankruptcy proceedings was no longer permitting student loans to be discharged through the court unless certain criteria is met.
Many private lenders pushed for this exclusion in bankruptcy Chapter 7 as many students were taking out large loans to pay for their college education and prior to beginning a high-paying job based on their education would file for bankruptcy Chapter 7, essentially allowing them to receive a free education.
