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Tuesday, September 27

There's Always Three Squares and a Rack in Debtor's Prison -- I Hope.

Bankruptcy May Be a Smart Move Before Law Changes: John Wasik

(Bloomberg) -- "We're all vulnerable to financial disasters that can lead to personal bankruptcy, whether they involve natural disasters, divorce, illness, disability or death of a bread winner.

"Some of the conventional advice concerning financial calamity is best ignored. Bankruptcy isn't always a good solution and it can create even more financial headaches.

"Odd as it may sound, it may make sense to consider filing for Chapter 7 bankruptcy before Oct. 17, when a new law goes into effect that is more hostile toward debtors. This means you may be able to wipe out your debts and have an easier time of starting over. After that, bankruptcy will be more onerous than ever.

"While the new bankruptcy law shields as much as $1 million in retirement funds, it offers less protection for every other asset, including homes and cars.

"Only $5,000 per child is protected in education savings. And you can't exempt more than $125,000 in home equity unless you've resided in a state for three years and four months. I know that sounds bizarre, but this is one tough law for consumers.

"Unlike the present law, the new legislation requires mandatory credit counseling, a debt-repayment program and filing of numerous forms such as tax returns, which then become public documents".

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Strict bankruptcy law new blow for victims

"When Congress agreed this spring to tighten the bankruptcy laws and crack down on consumers who took on debt irresponsibly, no one had the victims of Hurricane Katrina in mind.

"But four weeks after New Orleans flooded and tens of thousands of other residents of the Gulf Coast also lost their homes and livelihoods, a stricter new personal bankruptcy law scheduled to take effect Oct. 17 is likely to deliver another blow to those dislocated by the storm.

"The law was intended to keep individuals from taking on debts they had no intention of paying off. But many Katrina victims are likely to be caught in the net".

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