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Bankruptcy Laws |
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The basic purpose behind the bankruptcy laws is to assist the debtors who are in financial difficulties and cannot pay back their debts. They need to be provided an opportunity to make a fresh start in their life. The bankruptcy laws aim at preparing a bankruptcy plans that help the debtor to resolve his debt liabilities by dividing his assets among his creditors. The division of assets takes place under the supervision of the court and therefore is quite organized and orderly. Counseling Before filing for Bankruptcy It appears that more and more importance is now being attached to educating those who are considering applying for bankruptcy. It is now mandatory for all debtors to go for credit counseling before they apply for a bankruptcy suit. They also need to understand the importance of budgeting and debt management before their debts are discharged by the courts. It may be noted here that if a bankruptcy applicant omits the credit counseling, his creditors can raise objection with the bankruptcy court and the court may annul its discharge or debt liquidation orders. Therefore those applying for bankruptcy under chapter 7 or chapter 13 must get counseling from a counseling agency, which is duly approved by the United States Trustee Office. Another purpose of this counseling is to give the applicant an idea whether he really deserves to file for bankruptcy or whether an informal payment plan, without seeking the formal intervention of the court, will help the debtor back on his economic feet. Credit counseling is required for yet another reason. It is to ensure whether or not a repayment plan is a feasible solution. Quite possibly the applicant may be sincere in his belief that some of his debts are really unfair and do not require payment. For example, a person may have been fined in a drunken driving case while he may not have been actually drunk to the punishable limit. The stipulation therefore is that the applicant must participate in the credit counseling program even if the repayment plan suggested during the counseling sessions is not acceptable to him. It may, however, be noted that if the counseling agency does come up with a repayment plan, the applicant will have to submit that plan with his application to the court. The plan would be an additional proof that the applicant has completed the counseling and can file for bankruptcy. Credit counseling also helps the counselors to decide whether the applicant is really qualified to apply for bankruptcy and if so, under which chapter. There are certain applicants who have higher incomes. They cannot be allowed to apply under Chapter 7. They are advised to apply under chapter 13 so that they can at least pay some part of their debt. Such applicants are advised under these new requirements that they will not be able to find the lawyer to represent their case under chapter 7 in the bankruptcy court. Once your bankruptcy case is finalized, you may have to attend yet another counseling course, during which it is mandatory for you to learn the personal financial management. The court will grant you discharge to wipe out your debts only after you submit proof of having attended the second counseling session. To find out the approved credit counseling agency for you in your area, contact the US Trustee office or log on to the Trustee's website www.usdoj.gov/ust and click the link for "Credit Counseling and Debtor Education." There are exceptions to this requirement in certain cases, such as those involved in military activities at a war zone, accidents and similar unavoidable situations. |
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