While Americans continue to struggle with a depressed economy, people often seek ways to get out of burdensome debt. Bankruptcy allows people to stop creditors who may be harassing them with unwanted and threatening phone calls. Desperate homeowners trying to save their houses use bankruptcy as a way to stop the foreclosure process. When the unemployment rate rises, more people use their credit cards to make ends meet. This results in crushing unsecured debt that may take up to ten years or more to pay off. The interest and penalties keep accruing while consumers are barely able to make the monthly minimum payment. Many financial experts predict that the nation won't see an economic turnaround anytime soon.
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Harder to Discharge Debts
In 2005, the United States Congress passed the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA). The primary purpose of this legislation was to make it more difficult to qualify for Chapter 7 bankruptcy, which allows individuals to discharge nearly all of their unsecured debts. There was a flurry of people who rushed to file their bankruptcy petition before the new laws went into effect.
The new bankruptcy law requires petitioners to pass a "means test" before they can qualify for a Chapter 7 case. If they are not eligible, they must file under Chapter 13 and formulate a repayment plan. If the debtor's income is less than the median income for a household the same size, in the same geographic region, they qualify for Chapter 7. In California, the median annual income for a family of four is $79,477. Anyone who makes more than that would not be eligible for Chapter 7.
Bankruptcies Will Continue to Rise
The housing market has dropped to an all-time low and businesses still aren't hiring. In February 2011, Google reportedly received over 75,000 job applications after announcing their plan to hire 6,000 new workers throughout the year. That's a 15 percent increase from the previous record originally set back in 2007. Companies who are guilty of outsourcing jobs to foreign countries hit American workers hard in their efforts to find cheap labor. There is enormous competition for jobs and people with Master's degrees are applying for positions well below their skill set and experience. Debt consolidation programs fail to help consumers actually get out of debt. They are still responsible for paying back their creditors, which doesn't really provide financial relief. Debt settlement companies have been under fire recently for conducting scams bilking hard working Americans out of money while lying about the services they falsely promise to provide. The number of bankruptcies will continue to rise in 2011 as the jobless rate remains high and food costs continue upwards. Families are finding it harder to feed their families and they have stopped taking expensive vacations or purchasing luxury items.
Getting Advice From a Bankruptcy Lawyer
When a person files their bankruptcy petition, the federal court issues an automatic stay. This means that creditors can no longer legally contact a consumer about a debt. Just the stress of nasty phone calls is enough to push anyone over the edge as collection agencies become more aggressive in their efforts to collect a debt. Recent television news shows have profiled these sharks showing how they use illegal tactics to threaten consumers. Bankruptcy starts to look a whole lot more appealing for many people who have had enough. Before making any major financial decision, consult a bankruptcy attorney for advice about your specific situation.
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