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The year 2005 was witness to one of the most significant overhauls of the personal bankruptcy in more than half a century. The new laws enacted by Congress and signed by the President will make it much more difficult for many consumers to walk away from credit card debt, overdue bills and other debts.

This overhaul of the bankruptcy system was designed to cut down on the perceived abuse of the system by people who could afford to pay the money they owed but chose to file bankruptcy instead. These new laws, however, are likely to affect more than just those who were out to cheat the system. It is important for every consumer, no matter what their current financial situation, to understand the new bankruptcy laws and how they could potentially be affected.

The two types of bankruptcy filing

There are two distinct types of bankruptcy filing, Chapter 7 and Chapter 13. When an individual files for Chapter 7 bankruptcy protection, all of his or her assets (minus any assets exempted by the state) are liquidated, with the proceeds being used to pay the creditors. The remaining debts are cancelled under a Chapter 7 filing, providing the individual with a fresh start.

A Chapter 13 filing is somewhat more complicated, with the bankruptcy filer being put on a payment plan which can last up to five years. Any debts which have not been repaid by the end of the plan term are cancelled.

The intent of the new law

The intent of the new, more restrictive bankruptcy filling law is to force more consumers into the more restrictive Chapter 13 bankruptcy filing, thus forcing more consumers to pay back a greater percentage of what they owe.

Perhaps the biggest change in the new bankruptcy law is the qualifying test. Under the new bankruptcy law, each individual’s income will be subjected to a two part means test. The first means test uses a formula to exempt expenses like rent, food and other necessities in order to determine if the debtor is able to pay back at least 25% of the non-priority unsecured debt. This unsecured debt includes things like credit cards.

The second part of the means test compares the income of the bankruptcy filer to the median income level for the state. Those who are determined to be able to afford to pay back 25% of their debt, and whose income falls above the median for the state will be required to use the Chapter 13 bankruptcy filing, while those who fail the means test will be permitted to file under the more generous Chapter 7 rules.

Brooke Sikula is a freelance writer based in Ventura, CA and writes on a wide range of topics from home improvement to credit repair and everything in between. She is a regular contributor to loan-mortgage-auto.com loan-mortgage-auto.com and home-improvement4u.com home-improvement4u.com For more information and advice on credit issues, check out credit-card-faq.com credit-card-faq.com

You must start making efforts towards managing your debts and bringing them to reduced level from where it becomes a lot easier to pay off debts. This is necessary step or you may soon be facing a financial crisis. Debts are a lot complicated issue than is thought and surely you would like to ensure a fault free debt management. It would therefore be wiser if instead of trying your hands at it, you give charge of debt management to an experienced company of the field.

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In today’s world, when even the most modest financial transactions are made via plastic, it’s easier than ever to get caught up in a spiraling twist of rising credit card debt. You don’t MEAN to do it, but an outing charged on your credit card here, the groceries paid for with credit cards there, a pair of theatre tickets and a drink at the pub after work - and before you know it, the interest kicks in and that £15 evening out has turned into another £5 in interest charges… and then there’s the late fees on top of that, and the extra that you pay to advance yourself a few quid till pay day - this wasn’t at all what you had in mind when you decided to apply for a credit card!

If your credit cards are managing your life instead of you using them to manage your money, it’s time for you to step in, take the reins and get control of your credit card UK debt. Yes, that’s far easier to say than it is to do, but there are proven ways to bring the spiral of credit card debt to a dead halt. Here are some methods that work to curb runaway debt from financial and debt experts.

1. Stop using your credit cards.
The very first step in stopping debt from piling up is to stop adding to it. Put away your credit cards and start paying cash for everything. If you like the convenience of paying with plastic, use your debit card rather than charging things to a credit card. You still don’t have to carry cash on you, but you won’t be paying any interest on debit transactions.

2. Set a firm goal for yourself.
As simple a thing as it seems, setting a goal for yourself - in writing - can make a major difference in your determination to rid yourself of debt once and for all. Sit down with all your credit card bills and total up all that you owe, then set a target date to be completely debt free.

3. Use the divide and conquer method to bring credit card debt to manageable levels.
There is a tried and true method that brings your debt tumbling down more quickly than any other. Some call it the snowball - I call it divide and conquer. The idea is to set your sites on ONE credit card and knock it out of the picture. Add up the minimum payments on all of your credit cards, then figure out how much more than that total amount you can put toward your bills each month. Now - choose the card on which you owe the least amount. When you make out your accounts for the month, pay JUST the minimum on every credit account but that one. Put the rest of your bill payment money on that one card. Do that until you’ve completely paid off that card - then do the same with the next highest account. With each card you knock off, you’ll have more money that you can apply each month to the next card in line. You’ll be surprised how quickly your debt comes down.

4. OR apply for a credit card for debt consolidation.
Pay off your credit cards by taking out yet another credit card? A moneyeverything.com/cards 0% balance transfer card is another way to rein in runaway debt. Nearly every company offers at least one balance transfer credit card. Compare terms and rates at comparison sites to find the one with the best terms for you, then apply for a credit card at a comparison site and transfer your outstanding balances from the rest of your cards to one with no interest at all. From there, apply the same principle as the divide and conquer - figure out how much of your monthly income you can put toward eliminating your debt, and pay it faithfully, on time every month till you owe nothing.

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