Personal Bankruptcy - Bankruptcy Laws and the Changes Made

It is not just in the recent times, personal bankruptcy is oldest and the best way to free oneself from the trouble of unsecured loans. Personal bankruptcy was in great demand during the disastrous period of recession as market was surrounded by bad economy, inflation and unemployment. But it also has its draw backs such as creditors lose their money and it also affects consumer status of the debtor.

Creditors lose their money as the debtor files for personal bankruptcy dismissing unsecured loans, making them lose their financial stability. Increase in number of bankruptcy eventually lead to increased loss suffered by creditors which in turn made them bankrupt. This entire scenario resulted in destabilizing of economy. Thus there was a serious need to change the bankruptcy laws.

Finally federal government resolved the situation by altering the bankruptcy laws and making it difficult as compared to before to file for bankruptcy. Federal government has also introduced new laws for chapter 7 type bankruptcy which can dismiss debtor's entire unsecured loans. These days consumer are made to clear a test or qualify a particular criteria before, in order to file for bankruptcy. Thus government introduced the concept of means test. Some extra constraints are also added which includes going through multiple sessions of credit counseling before means test. Until and unless the debtor qualifies in the means test he is not allowed to file for bankruptcy.

In the means test for personal bankruptcy, the authority inspects consumers mean income and compared it with state average income. They also investigate whether the consumer is able to save some extra money for a basic standard of living as specified by the federal government. If the consumer exceeds the average state income than he is disqualified and if not he is eligible to file for bankruptcy. The daily expense of a consumer also plays an important role in deciding whether he is eligible for the bankruptcy or not. Once rejected consumer should not harass authority by continuous attempts for filing bankruptcy. He could face serious consequences for such misbehavior. If a consumer keeps nagging even after the rejection, he is forced to pay the entire amount to the creditors that to with plan decided by the federal court. Further if he doesn't abide by the plan specified by court, he may face severe legal action. The changes in the law were made to reduce bankruptcy and force people to opt for debt settlement which is a far better alternative than bankruptcy.

With the new FTC laws recently passed, debt settlement is a legitimate alternative to filing bankruptcy. Creditors are ready to negotiate and now you won't have to pay a fee unless your debts actually settle. Check out the following link to locate legitimate debt relief companies in your state for free help.