| Bankruptcy confirmation is a prerequisite for individuals | | | | Few people are capable of undergoing proceedings |
| filing for Chapter 13 protection. Also referred to as | | | | without legal counsel. BAPCPA requires attorneys to |
| 'reorganization', debtors are required to submit debt | | | | file statements regarding clients' financial status of |
| repayment plans through the court at the time of filing | | | | accuracy of information provided. |
| or within 15 days after submitting petitions. | | | | Many bankruptcy attorneys switched to new fields of |
| Bankruptcy confirmation hearings are used to | | | | law, making it difficult for debtors to locate lawyers to |
| determine if debt reorganization plans adhere to U.S. | | | | assist with their petitions. Those who remained in the |
| Code regulations. Chapter 13 payment plans document | | | | profession charge higher rates to cover litigation costs. |
| the amount and payment schedule. Payments are | | | | BAPCPA determines the amount of repaid debt |
| typically established on a biweekly or monthly schedule | | | | through the 'means test'; a tool which compares |
| and submitted to the court trustee. Trustees distribute | | | | debtors' income to that of their states' median income |
| payments to creditors according to the terms set forth | | | | level. When consumers earn more than median levels |
| in the reorganization plan. | | | | they must file Chapter 13 and establish a confirmed |
| Once petitions are filed, creditors are notified and a 341 | | | | repayment plan. If earnings fall below average income |
| creditors meeting is scheduled. 341 meetings allow | | | | levels, debtors may qualify for chapter 7; a chapter |
| debtors and creditors to meet face to face. Debtors | | | | which discharges all outstanding debts. |
| are given the opportunity to explain their financial | | | | Chapter 13 plans usually last between three and five |
| situation and ability to repay outstanding debts. | | | | years. These payments are in addition to normal |
| Creditors might agree to accept less than is owed, | | | | monthly expenses. Unexpected financial setbacks can |
| reduce interest rates, or remove penalties and late | | | | quickly cause debtors to fail out of bankruptcy. |
| fees. | | | | When consumers cannot adhere to repayment plans, |
| Information provided at 341 creditor meetings is | | | | creditors can petition the court for bankruptcy |
| provided under oath. When consumers provide falsified | | | | dismissal. If granted, consumers lose court protection |
| information they can be subjected to jail time and their | | | | and creditors can commence with collection action, |
| bankruptcy petition will be denied. | | | | including foreclosure. |
| New laws enacted by Congress in 2005 have made | | | | Personal bankruptcy can help consumers reduce |
| filing for protection more difficult. The Bankruptcy | | | | financial hardship. However, debtors should take time |
| Abuse Prevention and Consumer Protection Act | | | | to understand the pros and cons of this decision. Take |
| include stipulations requiring debtors to repay a portion | | | | time to research alternatives such as credit counseling, |
| of debts through reorganization plans. | | | | debt consolidation or debt settlement. |