Bankruptcy can certainly come in handy when it's time to protect your finances - and your mental well-being. After all, if you've been struggling to repay insurmountable debts for years now, filing for a Chapter 7 or Chapter 13 bankruptcy can give you the light at the end of the tunnel you've been searching for.
But that doesn't necessarily mean bankruptcy will give you the blanket protection you've been searching for. Under the revised bankruptcy laws, there are certain rules and regulations that could have an impact on your Chapter 7 or Chapter 13 petition. In rare instances, these regulations may make it hard for you to even qualify for bankruptcy.
Take a look to see how these bankruptcy regulations could affect you:
- Before these bankruptcy regulations, any individual could file for bankruptcy regardless of how much money they made. However, new laws mean that bankruptcy courts must assess each petitioner's income to see if they're earning above the average for their area. If the courts determine that you're making more than the average cost-of-living, then you'll be required to make payments to your debtors for up to five years. After those five years are up, most of your debts will be discharged per usual bankruptcy standards.
- Newer bankruptcy regulations also make it incredibly hard to include student loans in the petition. Like alimony and child support, student loans cannot be dismissed unless the petitioner can demonstrate that repaying this debt will be detrimental to their standard of living. Proving this can be incredibly difficult, and bankruptcy courts will look everywhere to find a way to make you pay for these loans. In one famous case, a petitioner was denied the opportunity to dismiss her student loans during bankruptcy because her live-in boyfriend made a reasonable amount of income. Have your bankruptcy attorney help you meet this evidence standard if you want to dismiss your student loans.
- Not all of the regulations are bad news; in fact, bankruptcy courts have now made it easy to stop foreclosure proceedings incurred by missed mortgage payments. Under new bankruptcy laws, lenders are required to halt all foreclosure proceedings against your home as soon as you file. If you're at risk for foreclosure, don't wait to file for bankruptcy - taking quick action could preserve your home.
Contact your bankruptcy attorney to determine if any of these bankruptcy regulations affect you.