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In the USA today there have been some dramatic changes made in relation to the Bankruptcy Law. It is important therefore that all should know what these changes are just in case one finds themselves in a situation where they are required to file for bankruptcy.

But first let us take a look at the kinds of bankruptcy that one is able to file for, then later on, we will take a look at the changes that have been made to the bankruptcy law.

Chapter 7 - This is the most common type of bankruptcy that a person is going to file for and for which a trustee is appointed. It is this person’s job to oversee the person who has filed for bankruptcy and find the property and assets which may well be sold off by the trustee to help pay the person’s creditors. In most cases after filing Chapter 7, a person will find that most of the debts (although not all) which they have incurred, will be cancelled.

Chapter 11 - This form of bankruptcy filing is used mainly by businesses, but is available to individuals as well. But the cost and complexity of this form of bankruptcy filing is very undesirable to a great many people. What you will find is that the people filing for Chapter 11 are those whose debts are far in excess of Chapter 13 limits. But this form of bankruptcy does allow a business to continue to operate whilst helping to shelter it from some of the debts it owes.

Chapter 13 - Through a Chapter 13 a person will come up with a proposed repayment plan to pay back all their creditors. The court will then appoint a trustee just as they do with a Chapter 7 and it is this person who will collect the payments from the person who has filed a Chapter 13 and then pay these to the creditors. The main role of the trustee appointed to a Chapter 13 bankruptcy filing is to ensure that the person complies with the repayment plan that has been put in place at all times. Note that in this case, your debts are not wiped out.

Above we have taken a look at the types of bankruptcy that one is able to file for in the USA today. Now let us take a look at the changes that have been made to the law governing bankruptcy. One of the most dramatic changes that has taken place relates to Chapter 7. The change in the law now prohibits anyone who has a high income from actually employing Chapter 7.

So what this actually means is that in the future if you find that your income is higher than the median for your state after a means test is carried out, you will probably not be able to file Chapter 7. You will need to file for a Chapter 13 rather than a Chapter 7.

Also with the new bankruptcy law, all those who owe money will need to get credit counseling before they can actually file a bankruptcy case. Plus you will also need to undergo additional counseling with regards to budgeting and how to best manage your debts before they can actually be wiped out or assets liquidated.

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