Monday, January 15, 2007

Personal Finance Woes

From my weekly (AM) radio segment titled "Legal Minute".

Many folks spend beyond their means during this time of year and before they know it, they are being swallowed up in debt. The way out used to be declaring personal bankruptcy under Chapter 7 which permitted the canceling of all debts. But, Congress made some key changes to the personal bankruptcy laws. One of the most notable changes to Chapter 7 is that the debtor – the person filing the bankruptcy – prove that his or her income is less than the state median income. In addition, the consumer cannot obtain relief under Chapter 7 if his or her current monthly income, less all debts and allowable expenses, is greater than $100 per month. Debtors who meet this threshold would be shifted out of Chapter 7 and into a 5 year repayment plan under Chapter 13. The creditor has some duties as well. Under the new law, credit card companies are required to inform consumers up front what they are expected to pay, and what penalties they will face if they are late on a payment. Stricter laws make personal bankruptcy a last resort. Spend wisely.