There were many effects of the economic downturn such as unemployment rate, decreased sales, and many others; which led to the poor financial conditions of businesses as well as individuals. Some businesses had to close due to very low sales and lack of cash inflow while individuals had to change their expenditures due to decreased income. Because of the loss of substantial money, many businesses and individuals find it hard to pay their debts and thus have to file for bankruptcy to receive protection from the court.
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During the economic crisis, many people file for bankruptcy as a way of relief from debts. So the government stepped in to check if all filings are legitimate or not and to further prevent abuse of rights to file, a new bankruptcy law was developed. Moreover, the new law aids consumers and companies alike to practice proper debt management and prevents recurrence of the same severe debt problem in the future.
It was like traffic officers came to study why a certain intersection frequently had accidents. Since they do not have control over drivers, they change signs and signals in that intersection to prevent any further accidents. This same thing happened with the development of the new bankruptcy law. The government reviewed the existing law to see which part was prone to abuse and changed that part to make it better. The changes have been made to ensure those who file bankruptcy are those who really need it.
The new bankruptcy law stipulates the level of income and the provisions that an individual or company should have to be eligible. It requires those who file should go through credit counseling as an initial step before filing. This way, they will be educated about how to manage their finances better to help them get back on track and they are also encouraged not to abuse their credit. In situations where the reason for bankruptcy is due to uncontrollable events, credit counseling still helps as it teaches the person or business owner how to prevent recurrence of bankruptcy in the future.
The income level and the credit counseling requirement were the two changes that were prominent in the new bankruptcy law but there were actually many more items that were changed from the old law. Somehow only the legal counselors and attorneys know these changes so it is better that those who are planning to file should first consult with a qualified counselor or attorney so they can better understand the new law better. They should not just rely on people experienced with filing before because they might not know about the changes.
Those who are in a dire strait should meet with an attorney who knows about the new bankruptcy law. Most of the attorneys offer free consultations so they will know if they are eligible for filing and at what Chapter is best suitable for their unique case. They will even know if filing is their best option at all. If it is, then the lawyer will advise the next step to take until the person or company attains the needed financial recovery.
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