Important aspects of Bankruptcy Law that you should be aware of before filing for bankruptcy.

Bankruptcy law is being constantly updated, and each time the courts review the situation, they succeed in recognizing and closing another loophole. Lawyers acting for individuals and companies who have declared bankruptcy, either chapter seven or chapter thirteen, have to protect the interest of their clients against the courts and their creditors. However the courts have come up with some new variations which make it very hard to skip around a simple fact. The fact is that the responsibility of courts regarding bankruptcy law is to protect the debtor from their creditors as well as protecting the creditors against any illegal act that will disallow the creditors from receiving as high a percentage of the funds owed to them.

Nowadays every personal bankrupt has to undergo a form of means test.  Anyone undergoing this test under bankruptcy law must declare all forms of income as well as all personal expenses, which must be agreed by the court. There are strict criteria set out, that are not particularly generous. Any balance between earnings and expenses must be passed on to the creditors.

Many people simply underestimate the power and reach of bankruptcy laws, which are both state and federal. Some states are more flexible than others as far as setting out living expenses and other issues of bankruptcy laws. This does not mean that a person who is considering filing for bankruptcy can move around from state to state looking for the best terms. The bankruptcy terms will be applied in the state where the bankrupt has lived for the previous two years.

Some may find it a little demeaning but the court expects that the bankrupt will attend a course in credit counseling. The course has to be completed within 180 days of declaring bankruptcy, and has to be paid from the net income of the bankrupt.  Bankruptcy law expects that the person filing for bankruptcy will have completed this course as well as needing to prepare and present a full report on the state of his financial affairs on the day that they intend to declare bankruptcy. This must include a list of creditors, either secured or unsecured and details of expected income and maximum living expenses. Other items that the court requires are the debtor’s most recent tax return, a form of photo ID and pay slips.

All these figures and facts have to be certified by a lawyer or notary public and are not deductible from the trustee estate. These figures must be totally accurate, and any form of misrepresentation will be dealt harshly by the court, with both the lawyer and their clients being held equally responsible, and heavy fines imposed.

To sum up, as a result of some gross disregard of bankruptcy laws by many parties, the courts have had no option but to button up many of the anomalies in the system that were being taken advantage of. Anyone considering bankruptcy must fully consider the implications and the fact that bankruptcy is not to be taken lightly. Anyone taking the step should consider the facts and be prepared to hire a good insolvency lawyer to guide them through the process.