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In April 2005, Congress made sweeping changes in U.S. bankruptcy law that will go into effect on October 17, 2005. It's called the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," and it means big trouble for Americans struggling with debt problems.

Bad Credit Credit Creditres What effect will the new law have on the practice of Debt Settlement (also called Debt Negotiation)? Will creditors still be willing to negotiate with consumers seeking to avoid bankruptcy? Will lump-sum settlements for 30%, 40%, 50% still be possible now that this tough new law has been passed?

When you declare bankruptcy, you are taking an official legal action — essentially saying, "I cannot repay all of my outstanding debts and want to make a fresh start." Unfortunately, a Chapter 13 bankruptcy filing will remain on your credit record for at least seven years, and Chapter 7 bankruptcy filings can stay there for 10 years. Either of these bankruptcy filing can affect both your credit score and how lenders perceive your credit worthiness.

Bad Consolidation Credit Debt The short answer is "YES." It will be "business as usual" in the collection industry. People that choose to file bankruptcy will definitely be affected for the worse, as I'll outline below, but those who choose to privately negotiate their way out of debt will notice very little difference. Creditors will still negotiate. Deals will still be made. And nothing much will change in the world of collections. In fact, there will be more need than ever for a viable alternative to bankruptcy.

//www.bankruptcyaction. USbankstats.htm ^{304 //www.abiworld. 1980annual.html Many consumers who complete a bankruptcy find that bad debts that were supposed to be discharged as part of the bankruptcy are later erroneously included on credit reports. Robert Weed, an Alexandria, Virginia attorney, said he regularly must file motions in federal bankruptcy court in order to get creditors to stop reporting discharged debts and to get the credit reporting agencies to remove them.}

Bad Company Credit Repair The credit card banks lobbied with millions of dollars to get this law passed. They've been working at it for about a decade. Now they are celebrating. These are the folks that think the bankruptcy system has been abused by wealthy individuals, who have defrauded creditors when they could have repaid their debts.

On March 10, 2005, the Senate passed S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. President Bush signed the bill into law, which became effective on October 17, 2005. The following summary discusses changes in the consumer bankruptcy law affected by the bill. Unless otherwise noted, all references are to the United States Bankruptcy Code (“Code”). Either directly or indirectly, the content of the new law will have a material effect on consumer debt, real property transactions and home ownership.

Bad Card Credit Credit The facts tell a different story:

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Bad Car Credit Loan 1. During the period from 1995 to 2004, bankruptcy filings doubled, while in that same period, credit card industry profits TRIPLED.

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Bad Credit Loan Mortgage 2. Credit card companies have not been held accountable for their targeting of "easy credit" to individuals who could not afford such loans, which in turn has contributed to the wave of bankruptcies over the past decade.

Auto Bad Credit Loan 3. For people 60 or older, 85% of bankruptcies are caused by medical bills or job loss.

Bad Credit Mortgage Refinance 4. A divorced woman is 300% more likely to file bankruptcy than a married woman.

Bad Credit Refinance 5. African-American and Hispanic homeowners are 500% more likely to file bankruptcy than white, non-Hispanic homeowners.

Bad Credit Mortgage Second 6. Approximately HALF of all bankruptcies are filed because of medical expenses due to lack of health insurance, or lack of adequate coverage leading to uncovered expenses.

Bad Credit Loan Student 7. The median income of bankruptcy filers is $25,000. (So much for the "rich" abusing the system.)

Bad Card Credit The new law was a GIFT to the credit card banks, pure and simple. Some estimates show that it will add another $5 BILLION to the industry's bottom line. In other words, the bill is about profits and not much else.

Bad Credit Financing Since my whole approach is about AVOIDING bankruptcy, I won't go into a detailed analysis of the provisions of the new law. But just to summarize, the net effect is that many (if not most) people seeking relief under Chapter 7 bankruptcy will be forced to file under the Chapter 13 version instead. In plain English, that means that most filers will be forced to pay back a portion of the debt over a 3-5 year schedule set by the court.

Bad Credit Home Loan Mortgage One of the worst aspects of the new bill is the use of IRS "allowable" expense schedules for determining your monthly budget. In other words, your actual living expense are thrown out the window in favor of the IRS standards (and we all know how generous the IRS can be!). So if your actual rent is $1,300 per month, and the IRS says it should be $1,045 for your county and state, that's TOUGH! The court will only allow the $1,045, period.

Bad Credit Loan People In short, people attempting to file bankruptcy after October 17, 2005 are in for an extremely rude awakening! Goodbye cell phones, cable TV, high-speed Internet access, movies, meals with the family, and anything else beyond the minimum allowable expenses as determined by the IRS and the courts.

Bad Card Credit Credit People So what makes me so certain that the banks will be as eager as ever to settle with consumers for 50 cents on the dollar or less? Simple. Two words: stealth bankruptcy.

Bad Credit Guaranteed Loan Hundreds of thousands of Americans are going to discover the new reality of this tough law, and they are going to forgo the court system of filing bankruptcy in lieu of what I call "stealth bankruptcy." A stealth bankruptcy is when you move (with no forwarding address), change your phone number, and drop off the radar screen to live on an all-cash, no-credit basis. Many people already choose this path rather than deal with the invasion of privacy that comes with formal bankruptcy. After the new law goes into effect, HUGE numbers of people will go this route.

Bad Credit Refinancing The banks will settle as they always have. They will be more starved than ever to take a good deal when you offer it to them. Consider these points:

Bad Credit Equity Home Loan A. The creditor doesn't know whether or not you'll still qualify under Chapter 7 or Chapter 13. They still face the risk that you will qualify for Chapter 7 and end up discharging your debt in full, which means they get NOTHING.

Bad Credit Loan Payday B. Even if you file Chapter 13 under the new guidelines, the creditor will still only receive 30-50% of the debt on average (much less in some cases).

Bad Credit Repair C. Under Chapter 13, it will still take the creditors 3-5 YEARS to recover that 30-50%.

Bad Credit Home Loan Uk D. A lump-sum of 30-50% TODAY is far better than the same amount collected over 3-5 years.

2nd Bad Credit Mortgage Of course, I certainly expect debt collectors to use the new law to harass and intimidate people who don't know and understand their rights. You can expect them to say things like, "You can't file bankruptcy under the new law, so you'd better pay up today!" They will bully and threaten as always, but at the end of the day, they will still accept reasonable settlements. As I said, it will be "business as usual" in the world of collections.

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Bad Consolidation Credit Loan Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation's largest debt settlement firms, he teaches consumers a do-it-yourself method of debt negotiation & settlement. Expert training via audio-CD plus personal coaching helps debtors achieve professional results at a fraction of the cost. To learn more, please visit http://www.zipdebt.com

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