The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 were actually devised to make it more difficult for consumers to file bankruptcy. This law makes chapter 7 of bankruptcy more difficult than chapter 13. In chapter 7 of bankruptcy, all or some assets of the filer are liquefied and debt payments are made from that money. Most of the debt is eliminated from the filer's account. American government passed this bill to stop abusing chapter 7 of bankruptcy. On the other hand, chapter 13 was made relatively easy. In chapter 13 of bankruptcy, debtor's debt payments are reorganized with the creditor through the bankruptcy court. This type of bankruptcy can take you 3-5 years to pay the debt.
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Also, the waiting time between consecutive bankruptcy petitions was extended to 8 years in case of chapter 7 bankruptcies. Paper work and filing fees were also increased. Attorneys, who handle filer's bankruptcy case, were advised to provide right information to court otherwise, the court has powers to take any action against them. Due to this enforcement, attorneys decided to increase their fees too.
The Worst thing was the increment in the payable amount in case of chapter 13 bankruptcies. Now no one is able to avail chapter 7 bankruptcy easily. Before filing a petition, a test is conducted and incomes are investigated and if the debtor's income is above the median income level then his case for chapter 7 of bankruptcy is discharged.
Credit counseling is made essential for all those who file a petition for bankruptcy. They have to take regular training from an institution approved by the trustee. After a debtor's case is accepted for bankruptcy, he has to attend another counseling program. This law was passed to protect credit card companies from fraudulent debtors. Before this law, every debtor was going for chapter 7 of bankruptcy. New amendments made debt settlement a more viable option than bankruptcy. Few amendments were made regarding chapter 13 of bankruptcy too. This was done so that debtors might go for filing chapter 13 of bankruptcy. This law has really reduced the number of bankruptcy filers.
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