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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.

However, before we look at the major changes that have occurred we need to explain a little bit about the different kinds of bankruptcy one can now file for.

Chapter 7 - Of all the types of bankruptcy one can file for this is the most commonly used. Once a person files for Chapter 7, a trustee is appointed who will oversee the property and assets of the person who has filed for bankruptcy. If they can, they will obtain some of the person’s assets in order that they can be sold off and then the money raised is used to pay back the person’s creditors. Often after filing a Chapter 7, a person will discover that most of their debts will have been cancelled in their entirety, although many do not realize that not all types of debts are wiped out.

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 - With this form of bankruptcy also known as “Wage-Earner Bankruptcy” a proposed repayment plan will be set up in order to clear your debts. If this is then approved by a court, a trustee is appointed and they will collect the payments from you to distribute to your creditors. It is their job to ensure that you comply with the repayment plan at all times. This does not wipe out your debts.

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.

As well as the income limit restriction, anyone who wishes to file for Chapter 7 will actually have to undergo credit counseling before they can actually file their case with the court. Also as part of the new bankruptcy law, a person will need to also undergo additional counseling relating to learning how to control their budget and also the right way of managing the debts that they have. It is only after a person has participated in such counseling then the decision to whether the debts will be cancelled or not is made.