Chicago Bankruptcy Attorney

Until recently many people in Chicago and across the country, were allowed to file a Chapter 7 petition and discharge their debts without any form of repayment. While the option of repayment existed, most people chose to erase their debts rather than go through the hassle of paying their creditors back. Congress felt compelled to step in a passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, which was subsequently signed by President Bush. Changes in the bankruptcy code are not new for citizens of the United States. Congress was authorized to make changes to the rules and regulations that govern the relationship between debtors and creditors since 1801. Since then, the legislators have amended the code many times. The 2005 changes, however, created the most significant changes in the code in nearly two decades.

In April of 2005, President George Bush signed into law some new regulations to be added to the existing bankruptcy code. Under the new regulations, debtors who file for any form of protection from creditors must meet several requirements. Firstly, debtors who file for new bankruptcies are required to complete a financial counseling course. Since a large number of filings are due to irresponsible personal finance management, the counseling course is designed to help people recognize and change their spending behaviors. This also helps to deter future bankruptcy filings because statistics show that many people who file bankruptcy will do it again in the future.

One way that the new bankruptcy code discourages abuse of the system is that it requires the signature of a lawyer for those who are considering bankruptcy. With the new guidelines, a petition cannot officially be filed unless a debtor has consulted with an attorney about other options that are available. This encourages a second look at the person's finances and the circumstances regarding the debt rather than just rushing to have them discharged. A comparison of the debtor's finances against the average income of the state's population plays a major role in the investigation.

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Other restrictions of the new code make it more difficult for debtors to file Chapter 7 in which they simply have their debts discharged. With the new regulations, the majority of cases are forced into a Chapter 13 that requires debtors to repay their debts with a scheduled payment plan. This process involves a court-appointed trustee to handle the finances of the debtor and a certain percentage of their regular income is delegated to the creditors. Repayment schedules are typically arranged so that the debts are paid within five years. Under the old code, however, it was much easier for debtors to file Chapter 7, which simply erases their debts without any form of repayment. Because of the new changes to the bankruptcy code it is highly recommended that you consult a bankruptcy attorney

October 17, 2005 saw the new guidelines to the bankruptcy code. The new code and guidelines strive to change irresponsible behaviors and discourage the number of filings without an investigation into the circumstances surrounding the event. Hopefully, debtors will re-evaluate their spending habits and financial management capabilities before rushing to court.