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Filing Bankruptcy Chapter 13 and 7 – New Laws Change Rules – Credit Counseling Services Required – How to Choose a Non-Profit Company

May 31st 2006

Filing Bankruptcy Chapter 13 and 7 – New Laws Change Rules – Credit Counseling Services Required – How to Choose a Non-Profit Company


There are two types of bankruptcy for consumers facing financial trouble, Chapter 13 and 7.  The new bankruptcy laws have made it more difficult for consumers to file 7, which allow you to start over by erasing your debts with the exception of back taxes, child support, alimony, and most student loans.

According to the Financial Planning Association (FPA), the court is allowed to sell off most of your assets except for certain exempt assets. The states determine what is exempt, but generally your home or at least some of its equity, clothing, a car, furnishings, life insurance (though not necessarily all the cash value), pension assets, and tools of your trade are exempt.


By making chapter 7 more difficult, more consumers are force into chapter 13.  Consumers looking to file under chapter 7 must meet strict income means testing and tighter expense and homestead-exemption standards.  Courts will have less discretion about deciding which Chapter a consumer can file.

There may be some things you should do before you decide to file for bankruptcy. CERTIFIED FINANCIAL PLANNER™ professionals recommend that consumers explore alternatives including cutting expenses.  The FPA says “pare down your expenses to the basics: food, housing, car payments, insurance, and so on. Forget the new digital music player, designer clothes, dinners out, vacations.”


It is recommended you boost income.  Maybe sell some of your possessions and put the money towards the debt.  You will likely have to sell the stuff when filing Chapter 7 anyway. 

Check your expenses.  Can you save money by switching automobile insurance companies?  Also consider cutting some of the TV channels you receive from cable or satellite.  Start eating at home more.    


Stop using the credit cards. You may want to call your credit card companies to see if they will give you a lower rate.  It may help to talk to the supervisor and maybe even threaten to take your debt elsewhere as a last resort. 

The new bankruptcy laws require credit counseling before filing for bankruptcy. In some instances this may help prevent a filing.  They can help find ways to reduce your debt and may help with lenders to consolidate all your loan payments into a single payment.  Be careful though, according to the FPA some counseling services use unscrupulous practices that actually make matters worse for consumers, according to Congressional investigations, so be sure you choose a reputable nonprofit counseling service.      

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Dan Wilson
Best Syndication

Books on  Credit Card Debt

Keywords and misspelling: counceling bankrupcy

Important:  The material on Best Syndication is for informational purposes only and is not meant to be advice. You should always seek professional advice before making financial decisions. 
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Copyright 2005 Best Syndication                   Last Updated Saturday, July 10, 2010 09:48 PM