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What more can we say about the new bankruptcy laws? Given the news coverage of the bankruptcy changes that occurred in 2005, it is surprising that so many Americans and New Yorkers can still be completely in the dark about what the legislation actually entailed. Due to the sweeping reforms, the total number of consumers filing personal bankruptcy has dropped, but what about the new laws caused this precipitous drop. The purpose of this section is to briefly overview what the law changes mean to the average debtor in New York who is considering bankruptcy. The single biggest change mandated by bankruptcy reform was that more consumers are being forced to pay back at least a portion of their debt through Chapter 13 “reorganization” arrangements. Under this bankruptcy chapter, the debtor uses their monthly disposable income to make payments to a court trustee, who in turn distributes it accordingly to the consumer’s creditors. Other than the obvious (it hurts your credit and you have to pay off at least part of the debt), the other downsides to this plan are the following: -higher attorney fees due to the more complicated & time consuming nature of setting up a Chapter 13 payment proposal with the courts -some courts require the monthly payment to be deducted directly from the debtors paycheck, which means your employer could find out about your case. Although they cannot discriminate against you in any way on the basis of your bankruptcy, some people may find this unpleasant. So when are people actually being forced into Chapter 13 instead of Chapter 7 bankruptcy? In the majority of situations, it is when they earn more than the median income in the state in which they reside. Under these circumstances, the debtors is forced to pass an examination of their income and expenses to determine whether they could pay off at least part of their debt through a Chapter 13. This examination is known as the means test. Detailed below is median income information for consumers considering filing bankruptcy in New York. 2-person families 52,891 3-person families 62,882 4-person families 75,513 5-person families 72,803 6-person families 71,810 7-or-more-person families 68,267 Not sure about bankruptcy? The statistics show that you aren’t the only one. If you would prefer to pay off your debt without the severe credit impact of bankruptcy, submit a form and PayingPaul.Com will match you with a pre-qualified debt service for help! You can also find other relevant articles pertaining to credit & debt topics in New York on these pages: New York Consumer Credit Counseling Services New York Bankruptcy Laws New York Debt Collection New York Bankruptcy Figures 2004: 75,908 2005: 107,489 2006: 29,059 New York, as a state, has a relatively low bankruptcy rate compared to the rest of the nation, and the bankruptcy law changes in 2005 only exacerbated this trend. Between 2005 and 2006, the number of personal bankruptcy filings decreased by almost 73 percent. In total, that amounts to 78,438 less cases than the previous year. As mentioned before, due to the stricter requirements for qualifying for bankruptcy, as well as the higher fees imposed by debt lawyers, more New Yorkers are turning to credit management options for help with debt problems. |