Bankruptcy rates in the US nearly doubled between 1994 and 2004, prompting the government to pass new bankruptcy laws. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2004 made it harder to file for Chapter 7 bankruptcy and imposed stricter rules for Chapter 13 bankruptcy. Major changes under the new law include requiring debtors to have filed tax returns for the past four years and making it more difficult to discharge certain debts. Chapter 13 bankruptcy allows debtors to keep some assets by proving limited debt and income, establishing a repayment plan within 3-5 years. Both Chapter 7 and 13 bankruptcies still require repayment of certain non-dischargeable debts like taxes, student loans, and child support.

1. Bankruptcy Law: Some Important Facts
As applying for loans, credit cards and other forms of credit are easier to come by, so are the
bankruptcy rates in the United States. In a ten year period, between 1994 and 2004, bankruptcy
rates in the United States nearly doubled. The government's reaction was to take a closer look
at reasons parties were filing for bankruptcy, new laws were instated to ensure that individuals
and businesses had valid reasons for applying for bankruptcy.
One of the primary laws regarding bankruptcy that was passed in the United States in 2004 is
the Bankruptcy Abuse Prevention and Consumer Protection Act. This law just went into effect in
October 2005, but has already caused quite a stir in the financial and bankruptcy law arenas.
Besides making it more difficult to qualify for Chapter 7 bankruptcy, or complete bankruptcy,
the law imposes stricter rules and budgets on Chapter 13 debtors.
A major change the law makes throughout the United States is the need for debtors to have
filed tax returns for four years in a row before qualifying for bankruptcy. As well, dischargeable
debts, or those debts where personal liability is taken away by the court system, is more
difficult to come by. The Act requires that debtors prove good reason for dischargeable debt
and is even requiring more debtors to take responsibility with non-dischargeable debt budgets.
As far as the two major types of bankruptcy laws are concerned, Chapter 13 bankruptcy is that
which allows the debtor to keep some assets upon proving only limited debt and a steady
income. This bankruptcy is excellent for those debtors who have gotten themselves into major
financial difficulty but still have means of paying for some assets. The court will set up a
repayment schedule and budget that allows for full repayment of mortgages or cars within
three to five years.
Keep in mind that in either type of bankruptcy, an individual is almost always required to still
pay for taxes, student loans, alimony, child support or court related fees. This is the place
where many bankrupt parties are misled in the Chapter 7 bankruptcy, as it is often referred to
as "a fresh start". While the court can set up payment plans to help the debtor repay public
policy debts, even Chapter 7 debtors will still be required to make payments.