Congress took steps a few years ago to make it harder for people to file for bankruptcy. This was done in response to pressure from retailers and other companies that said they were losing money because more people were filing for bankruptcy. At first, bankruptcy laws were made to help people whose debt got out of hand. They were meant to give people a fresh start.
But as time went on, many people took advantage of the bankruptcy laws and filed for bankruptcy as often as the law allowed to get out of paying their bills. Because people took advantage of the system too often, stricter rules were made to protect creditors, who were often the ones who lost when people used the system to their advantage. New laws were made so that people couldn't just get out of their responsibilities.
The bankruptcy laws are there to help people who are in too much debt get a fresh start. By making financial and debt management a part of the bankruptcy process, people will get the help they need while weeding out those who use the laws to create debt and have the court wipe it out every now and then.
Most of the time, the law still lets people who can't get out of their debts any other way get rid of all legally dischargeable debts. But it also makes it harder to meet the new laws' requirements. This could stop some people from filing for Chapter 7 or Chapter 13 bankruptcy, which would help them with their money. This would make their financial situation worse.
In 2005, the U.S. government seemed to agree with credit company lobbyists when it decided that too many people were allowed to file for bankruptcy to get out from under debts they had made themselves. Many people pointed to a few cases where people who could pay their debts simply filed for Chapter 7 bankruptcy and left the creditor with the balance.
The new law was meant to give consumers more help with managing their debt, but it also added a lot of requirements, such as the need to use credit counselling services before filing for bankruptcy. The counselling is also meant to offer alternatives to bankruptcy, with the goal of getting more people to switch from Chapter 7 bankruptcy to Chapter 13 filings, which will give the creditors money.
The new bankruptcy laws added more work for both the debtor and the lawyer. This meant that more information was needed to file for bankruptcy, and there were also many new financial requirements that are starting to look like the current income tax code. Many lawyers will need to specialise in bankruptcy in order to understand the new rules and regulations and the requirements for reporting.
The new law also has penalties for both lawyers and clients who try to use false information in a bankruptcy petition on purpose. If the court finds a violation, the court trustee can ask for the attorney fees and client costs. This gives the trustees more reason to look over all court filings with more care.
