In effect, the process is as follows. Six months before you intend to file for bankruptcy, you must seek out credit counseling. Some people argue that this is a further debt loaded onto people who are trying to resurface from owing money. If you do not earn more than the median annual income for your region, you can file for Chapter 7 bankruptcy. However, if you are earning more than the median annual income for your region, and have enough excess money to pay $10,000 over five years to pay 25 percent of your unsecured debt, then you may only file for Chapter 13 bankruptcy. In addition, once you have filed for bankruptcy you will have to wait between two and four years more before you can file for bankruptcy again. Currently, about 1 million people file for Chapter 7 bankruptcy each year. Of that million, an estimated 30,000 to 100,000 debtors can pay according to the Chapter 13 standards.

Some people are hoping that this new turn of events will lead credit card companies to lower interest rates, as they are a large part of the reason that people find themselves in debt. The new law says that these companies must tell and inquiring customer how long it would take the consumer to pay off a debt if they submit the minimum payment at each invoice period. In addition, you are entitled to give as much as 15 percent of your income to charity, an aspect that may push you into the Chapter 7 or Chapter 13 category, depending on how it affects your final formula.

While the new law makes significant adjustments to the old bankruptcy system, it is still important that you make every effort to keep away from any type of bankruptcy filing. Though people are debating about the good and bad outcomes of the alterations, it is best to seek out strategies that can help you avoid filing altogether. Filing for bankruptcy can haunt your record for seven years or more, regardless of the payments that you can or cannot make.

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