Janice was drowning in debt. She had $1,000’s of store credit card debt. You know the kind of credit cards that give Consumers 10% off of purchases? The problem is those same cards generally charge 20% in interest. What’s worse is that the interest rate on store credit cards is non-negotiable 90% of the time. I consider store credit cards ‘SUB-PRIME’ and a bad financial decision.
So Janice says out loud in frustration, “I’m thinking about saying forget it and filing for bankruptcy and being done with it”.
Janice didn’t know that the Bankruptcy Abuse and Prevention Act would make her filing more difficult than she had ever considered. I asked Janice if she knew that the Bankruptcy Laws had changed. Janice’s response was a quick “no”. Janice didn’t know the changes in the Bankruptcy Law and what she didn’t know was bound to hurt her. So I immediately intervened.
The Bankruptcy Abuse Prevention Act
“The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which opens a new era in the history of bankruptcy law and practice, was passed by Congress and signed into law by President Bush on April 20, 2005. ” ~ Source: United Stated Department of Justice
The Bankruptcy Abuse Prevention Act gives the U.S. new responsibilities in a number of areas, including:
1. The new “means test” to determine whether a debtor is eligible for chapter 7 (liquidation) or must file under chapter 13 (wage-earner repayment plan). This means that there is no such thing as a clean sweep bankruptcy anymore. The person filing bankruptcy has to:
A. Sell everything [liquidate] or
B. Payback the creditors through by wage garnishment
2. Supervising random audits and targeted audits to determine whether a chapter 7 debtor’s bankruptcy documents are accurate. This means that now the person filing bankruptcy has to be audited to ensure that they really need the protection and not trying to defraud the US Government.
3. Credit counseling that an individual must receive before filing bankruptcy and Financial education that an individual must receive before discharging debts in bankruptcy court. So you have to get debtors education before you are even allowed to file bankruptcy in the US.
Ok, so now Janice understands bankruptcy. She now knows how much of a pain it could be to try to undergo filing bankruptcy.
Bankruptcy Is Often Based On Bad Decisions
Cognitive Bias, is a big fancy word for the thoughts that lead to bad decisions. Bad decisions are often the result of ignorance, confusion, uncertainty and urgency. Janice wanted to get out of debt right now. Bankruptcy seems like a solution to many from a distance.
Who Says There Are No Short-Cuts?
I told Janice that Debt Settlement is safe, and works if she does it for herself. I showed Janice that the bankruptcy laws were changed to reduce bankruptcy. I informed Janice that getting out of debt was as simple as following the short-cuts provided by the U.S. Government. Getting out of debt is as easy as following the law.
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