Look for a rush to the federal courthouse in the next few weeks.
A change in federal bankruptcy laws has many folks who have been putting off filing for creditor protection getting in line. They want to take advantage of the existing law which many believe is easier on debtors.
The new rules, approved by Congress and signed into law by President Bush, take effect Oct. 17. They were eight years in the making. Among the most controversial changes are a provision setting up an income test. Debtors with wages above their state's median income who can pay back at least $6,000 ($100 a month) will be forced into Chapter 13 protection.
They still can file for Chapter 7 protection, which if approved by a judge, erases debts entirely after certain assets are forfeited.
A story by Associated Press business writer Marcy Gordon explains banks and other credit companies wanted the changes to crack down on compulsive shoppers, gamblers and multi-millionaires who buy expensive homes in states with liberal homestead exemptions to shield assets from creditors.
Two other important provisions of the law are educational. It will require credit counseling courses within 180 days of filing and makes credit card billing statements spell out how long it would take to pay the debt off if only minimum payments were made.
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A rush to the courthouse to beat bankruptcy laws
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