New Chapter 13 Bankruptcy Laws

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Chapter 13 Bankruptcy Changes

...And they’re not alone—filing for Chapter 13 Relief has become an increasingly more common trend in recent years. In 2004, more than 1.6 million people filed for personal bankruptcy in the United States, according to the Administrative Office of the U.S. Courts.

That represents a whopping 600 percent increase since 1978, the year Congress relaxed bankruptcy policies. There is much debate over what has caused the number of bankruptcy cases to skyrocket in the past 27 years. Some lawmakers point a finger at credit card companies who use ruthlessly aggressive marketing tactics.

Others say the sharp increase is simply the result of debtors abusing the system. Regardless of the cause, an increase in bankruptcy leads to rising consumer-credit interest rates and a negative impact on credit scoring.

“If someone does not pay his or her debts, the rest of society ends up paying them,” many lawmakers complain. To thwart this type of debtor abuse, the federal government passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

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This 200-page law, most of which will take effect in October 2005, radically changes many aspects of personal bankruptcy filed under both Chapter 7 and Chapter 13 relief rules.

However, under the new bankruptcy laws, only consumers with an income below their state’s median income or who fall into this category after deducting allowable expenses, will be permitted to file for Chapter 7 bankruptcy. Those who do not fit this description will be forced to file under Chapter 13 relief rules.

In addition to the new law’s financial ramifications, each consumer who seeks bankruptcy relief will be required to obtain credit counseling and budget analysis from an approved, nonprofit credit counseling agency—before filing their paperwork. Consumers who plan to file for Chapter 13 Relief should take note of the following New Banlruptcy Laws that will take effect under this new law:

Currently, Chapter 13 filers make payments on secured credit items, such as automobiles, for only three years. The amount the consumer still owes after the three-year period is then discharged, in a process called “stripping down.” Under the new rules, the strip down period has increased to five years, thus forcing Chapter 13 filers to pay a larger overall amount on these secured loans.
In the past, Chapter 13 filers were required to pay only what their car was worth (“blue book” or fair market value) on their car loans. Under the new law, these consumers must pay the total loan amount, regardless of the car’s condition.
Loans for motor vehicles purchased within 910 days of a Chapter 13 filing must be paid in full.
Under the new law, the entire remaining balance on a secured loan is to be targeted for pay off, whether or not the loan amount exceeds the value of the collateral.
According to the new law, a bankruptcy attorney must certify their Chapter 13 filer’s financial statements to the court, which means that attorney will be held financially responsible if their client’s statements are false. As a result, some say that bankruptcy attorneys will likely charge more to assist consumers in filing for Chapter 13.
Currently, under what is called the “automatic stay” ruling, consumers filing for Chapter 13 bankruptcy immediately receive protection against creditors. However, under the new law, the court judge will decide whether or not a filer receives this protection depending on each particular case. In other words, filers will not be certain about the extent of protection they will receive and from which creditors they will be sheltered.
The new law allows ex-spouses of Chapter 13 filers to more easily enforce their former spouse’s child support and alimony payments.
All Chapter 13 filers must complete a personal finance management course before any debts can be discharged.
No Chapter 13 filing will be accepted if the debtor has filed Chapter 7, 11 or 12 within the previous four years.
Debtors cannot file for Chapter 13 relief until all tax returns have been filed.
The new rules do not permit relief from eviction proceedings commenced prior to the debtor filing for bankruptcy.

Also - under the New Banlruptcy Laws, when a consumer files under Chapter 13, his or her monthly expenses will be measured against the IRS National and Local Standard Expense guidelines. This means there are now stringent rules dictating how much a bankrupt consumer can claim as living expenses. This gives the court power to force Chapter 13 filers to eliminate or significantly trim down their spending on certain unnecessary luxury items, such as high-priced cars, expensive gifts, jewelry, extra-curricular activities for children, elaborate vacations and more.

With the onset of these rigorous new rules, some experts say it will be much more difficult for U.S. citizens to receive financial relief through bankruptcy. However, many lawmakers believe these changes will diminish the threat of consumers abusing bankruptcy practices while helping our country to build a stronger, more efficient system that will allow more Americans greater access to credit.

The real solution for many consumers may be a debt consolidation loan. Debt consolidation loans often reduce a consumers debt level by rolling multiple debts into one single payment. Our network of debt consolidation lenders will work with consumers with low credit scores so you can get the consolidation loan you need to avoid bankruptcy.

Refinance Guige

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Step 1: Check your credit report
<p>If you are considering refinancing your mortgage, one of the first steps you should take is checking your credit. By refinancing, you are requesting a new loan with better terms and rates, so you want to be sure all of your credit information is correct, allowing you to get the best possible interest rate. <br />
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Your credit report is based on information gathered by the three credit bureaus (Experian, Equifax and TransUnion). They gather your personal information and credit payment history to compile your credit report. From that they calculate your credit score, a number between 300 and 850. 850 indicates the strongest possible credit score and 300 is the worst. <br />
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When refinancing, lenders will look at your credit report and credit score to determine your credit worthiness. Lenders offset the risk of lending to someone who has a low credit score by increasing their interest rates or lowering the limit they are allowed to borrow. That is why you want to be sure that all of the information on your credit report is correct. Otherwise, you could be charged a great deal more than you deserve, all because of a simple error. <br />
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Since mistakes sometimes occur, especially with people with similar names and social security numbers. If you find an error on your credit report, immediately contact the credit bureau to have the error fixed. This can take time, so it's important to do this before you begin the refinance process. <br />
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And don't forget, you entitled to a free credit report once a year from each of the three credit bureaus. You can also get a free credit score with a trial membership in the LendingTree Credit Monitor program. </p>
<p><a href="http://www.emjcd.com/click-1762781-10499336?url=www.lendingtree.com/smartborrower/Guide-to-refinancing-your-home/Step-2-Find-the-right-loan-for-your-needs.aspx">Next step: Find the right refinance loan for your needs</a></p>
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Step 2: Find the right loan for your needs
<p>Refinancing is taking out a new mortgage, often with better interest rates and terms, to pay off your old mortgage. But there are other reasons to refinance, and when refinancing you should have a goal in mind. Do you want to lower your monthly payments? Save interest over the life of your loan? Use your home equity to pay for college expenses? Your goal will determine which type of refinance mortgage is right for you. <br />
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It's important, however, to understand the differences between the types of refinancing available, along with their costs and benefits, before deciding which option is right for you. <br />
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<strong>What type of refinancing is right for you? <br />
</strong><br />
<strong>1. Rate and Term Refinancing</strong> <br />
For many people, the aim of refinancing is to either lower their monthly payments, pay their mortgage down faster, or reduce the amount of interest on their loan. These homeowners generally wish to keep their loan amount the same, while simply changing the way they pay it off. This is called rate and term refinancing, and it may be desirable: </p>
<ul>
    <li><strong>To get a better fixed interest rate. <br />
    </strong>If interest rates have fallen since you took out your mortgage, refinancing may enable you to get a better rate and lower monthly payments. For example, a $160,000 fixed rate mortgage with a 30-year term at 8 percent requires a monthly payment of $1,175. Lowering the rate to 6 percent drops the monthly payment to $960. </li>
    <li><strong>To stabilize your payments.</strong> <br />
    Perhaps the interest rate of your adjustable rate mortgage has gone up every adjustment period and you're concerned the trend will continue. Locking it in for a fixed term at its current rate may mean higher payments initially but will prevent you from being hit with increasing monthly payments should interest rates continue to rise. </li>
    <li><strong>To obtain better loan features.</strong> <br />
    Your credit rating might have been mediocre when you took out your mortgage, but it has since improved. Refinancing may enable you to get a lower rate or, in the case of an adjustable rate mortgage, a more protective cap (a limit on how much your payments can increase). </li>
    <li><strong>To build your home equity more quickly.</strong> <br />
    A recent change in your financial situation may make it possible for you to pay off your loan faster by increasing your monthly payments. Refinancing a 30-year $100,000 mortgage at 6 percent with a 15-year $100,000 mortgage at the same rate would raise your monthly payments from $600 to $844 but allow you to pay down the principal in half the time and save you almost $64,000 in interest over the life of the loan. However, you can also build equity more quickly without refinancing by making additional principal payments each month. </li>
    <li><strong>To reduce your monthly payments. <br />
    </strong>If you are having difficulty meeting your monthly payments, you may wish to refinance your mortgage for a longer term. For example, increasing the term of a $150,000 mortgage at 7 percent from 15 years to 30 years would reduce your monthly payments from $1,350 to $1,000. </li>
</ul>
<p><strong>2. Cash-out Refinancing</strong> <br />
The other major category of refinancing involves taking out a new mortgage with a larger principal than the one you're currently carrying. This is called cash-out refinancing and its goal is not simply to pay less interest, but to turn some of your home equity into cash. (Remember, though, that the loan is secured by your home.) For example: </p>
<ul>
    <li><strong>To free up money for a major expense.</strong> <br />
    You may have built up $180,000 in equity after 20 years of mortgage payments, and now you have two children whom you want to help through college. Rather than taking out a personal loan (which generally carries a higher interest rate with no tax advantage), you can refinance your mortgage, adding $40,000 to the principal, and use that money for tuition. </li>
    <li><strong>To consolidate debt.</strong> <br />
    Perhaps you have $50,000 in credit card debt with interest rates as high as 18 percent. Now that you have curtailed your spending, you decide to refinance your mortgage, adding $50,000 to the principal and locking it in at 6 percent. This will allow you to consolidate your debt and pay it off at a third of its present rate. </li>
    <li><strong>To combine first and second mortgages.</strong> <br />
    If you have a first mortgage of $100,000 and a home equity loan of $30,000, each with a different lender, you may wish to raise the principal of your first mortgage to $130,000 to cover both loans, with the aim of getting a better rate and more convenience. </li>
</ul>
<p><strong>Is refinancing right for you?Â <br />
</strong>As there is a cost involved with refinancing, you must determine whether refinancing makes financial sense for you. The benefits of refinancing add up over time, so if you're planning to move in a year or two, any potential savings will likely never be realized. In addition, factor in that you may be extending the time it takes to own your home "free and clear." In general, the longer you plan to stay in your current home, the more sense it makes to consider refinancing. </p>
<p><a href="http://www.emjcd.com/click-1762781-10499336?url=www.lendingtree.com/smartborrower/Guide-to-refinancing-your-home/Step-1-Check-your-credit.aspx">Step 1: Check your credit report and score.</a></p>
<p><a href="http://www.emjcd.com/click-1762781-10499336?url=www.lendingtree.com/smartborrower/Guide-to-refinancing-your-home/Step-3-Compare-offers-and-perform-break-even-analysis.aspx">Next step: Compare offers.</a></p>
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Step 3: Compare offers and perform break-even analysis
<p>Once you're decided that refinancing makes sense for your situation, you need to shop around so you can compare offers and perform a detailed break-even analysis. <br />
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<strong>The break-even point <br />
</strong>In the end, deciding whether the cost of refinancing is worth it comes down to a simple question: "How long will it take before I start to save money?" In theory, this is a simple calculation. You start with the amount you will save by lowering your monthly payment. Then you add up all the costs associated with refinancing and divide the total by your monthly savings. This will reveal the number of months it will take to reach the break-even point. <br />
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For example, let's assume that refinancing would lower your payment from $1,000 to $800 (for a savings of $200 per month) and your prepayment penalty, closing costs and points add up to $5,000. Divide $5,000 by $200 and you'll see that it would take 25 months to realize the savings. <br />
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In reality, however, your break-even point also depends on other factors, including your tax situation and whether you pay closing costs upfront or add them to the principal of your new mortgage. If you are refinancing and your home has appreciated in value, you may also be able to save by canceling your private mortgage insurance. <br />
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<strong>Comparing offers <br />
</strong>One of the first things you should look at when comparing refinance offers is the interest rate. Even a slight difference in interest rates can mean a lot of money over the life of a loan. Make sure you understand if the rate offered includes discount points, which is money you pay up front to lower your interest rate. <br />
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But the interest rate isn't the only rate to look for. Another good benchmark for comparing offers is their annual percentage rate (APR). This figure combines the interest costs and other fees charged by a lender over the life of the loan, and expresses them as a yearly percentage. Make sure to ask for an itemized list of what's included in each APR calculation, so you know you're making a fair comparison, as some lenders don't include all of their fees in the calculation. <br />
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Other details matter too: Do the lock in terms vary? Is there a pre-payment penalty? What are all the closing costs and fees? Ask for a read a Good Faith Estimate (GFE) for each loan, and ask questions if something doesn't make sense. </p>
<p><a href="http://www.emjcd.com/click-1762781-10499336?url=www.lendingtree.com/smartborrower/Guide-to-refinancing-your-home/Step-2-Find-the-right-loan-for-your-needs.aspx">Step 2: Find the right loan for your needs.</a></p>
<p><a href="http://www.emjcd.com/click-1762781-10499336?url=www.lendingtree.com/smartborrower/Guide-to-refinancing-your-home/Step-4-Closing.aspx">Next step: Close on your refinanced mortgage.<br />
</a><br />
</p>
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Step 4: Closing
<p>Completing a refinance is much simpler than closing on a home purchase. Without another party involved there are fewer hurdles. <br />
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Your lender will likely require that your home be appraised again before closing on your loan. Lenders use your appraisal to determine your loan amount, to ensure that the home isn't worth less than what they are lending. You may also want to review your private mortgage insurance policy at this point; if your loan-to-value ratio is less than 80 percent, your lender most likely won't require this. <br />
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Once the appraisal is complete, closing should be simple, though it will still require a fair amount of paperwork. It's still critical to ask your lender for all the loan paperwork a few days in advance so you have time to review it. </p>
<p><a href="http://www.emjcd.com/click-1762781-10499336?url=www.lendingtree.com/smartborrower/Guide-to-refinancing-your-home/Step-3-Compare-offers-and-perform-break-even-analysis.aspx">Step 3: Compare refinance loan offers. <br />
</a></p>
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New Chapter 13 Bankruptcy Laws

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Chapter 13 Bankruptcy Changes

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