American Debtor Education is Now Mandated by Congress. People in Debt Will be Forced to Learn Why but Will That Save Them From Credit Schemes Rigged by Evil Bankers?
American debtor education is a legally required mandate that states that debtors must take a debtor education course in order to be able to file for bankruptcy.
This course must be taken along with a credit counseling course that teaches people how to control their credit. The law was created by the Bankruptcy Abuse Prevention and Consumer Protection Act which was created in 2005 and signed into law by President Bush to make filing for Chapter 7 bankruptcy more difficult.
Chapter 7 bankruptcy is the process of liquidation that goes on during bankruptcy as opposed to reorganization that goes on under other bankruptcy codes, and it is the most common type of bankruptcy being declared in the country, so there is something to be proud of.
Debtor education must be taken within six months of filing for bankruptcy, or the debtor could reconsider and file for Chapter 13 bankruptcy, although the program is experimental.
Bankruptcy Act Requires American Debtor Education
The 2005 Bankruptcy Abuse Prevention and Consumer Act was a bill passed by the Republican Congress and signed into law immediately by George W. Bush in order to make it more difficult for American citizens and businesses to file for bankruptcy.
The act was designed to push people away from declaring Chapter 7 bankruptcy, the most popular form of bankruptcy in which the debtor liquidizes their assets. The program is designed to encourage Americans to declare Chapter 13 bankruptcy in which a debt is forgiven after a certain portion of the debt has been paid.
One of the mandates in the act was the necessity of a debtor to undergo debtor education and credit counseling classes in order to educate the debtor about bankruptcy law and the ways and means by which a person can get out of it.
American Debtor Education: Chapter 7
Chapter 7 bankruptcy is the most common form of bankruptcy in the United States and can be filed by both businesses and individuals.
When a business can no longer pay off its debt, it can file for Chapter 7 bankruptcy. When a business files for Chapter 7, it must stop all of its functions. After this, a selected Trustee takes over the company and sells any assets and uses the revenue to pay the creditors. In large companies, trustees might only sell parts of the companies while the core business remains untouched.
If an individual files for Chapter 7, all of that individual’s assets, except some select exemptions, are sold off by a Trustee and the creditor or creditors are paid with the revenue. Chapter 7 is the most abused form of bankruptcy which is the reason that the Bankruptcy Act was passed.
American Debtor Education: CHAPTERS 11 AND 13
Other forms of bankruptcy are Chapter 11 and Chapter 13.
Chapter 11 bankruptcy is more common for businesses rather than individuals as it allows a financial and business reorganization within the bankruptcy laws. Because Chapter 13 is a similar thing for individuals, this is mostly used by businesses to restructure their business and give the creditors priority earnings.
Chapter 13 is a way that individuals can reorganize their finances. Under Chapter 13, a debtor can pay of his debt over a certain period of time. On the one hand, the person winds up paying less than they owed, but at the same time, this filing stays on their credit report for a long period of time.