NEW BANKRUPTCY LAWS

Since the bankruptcy law change in 2005, there have been a lot of misunderstandings about bankruptcy.  For instance, many people have been led to believe that almost no one can file for Chapter 7 bankruptcy anymore. That’s simply not true. 

Although the new bankruptcy law that took effect in October 2005 added some hoops for debtors to jump through, consumer bankruptcy attorneys and credit counseling agencies have found from the beginning that the Chapter 7 means test actually prevents very few debtors from filing under Chapter 7. 

Some credit counseling agencies have said that by the time most debtors come to them for the newly required pre-filing credit counseling, they have no other realistic option! 

The safety net of bankruptcy is still available to most consumers in financial crisis. 

A local bankruptcy attorney can help you understand the new bankruptcy and help you get qualified for the bankruptcy that will work out the best for your situation.  So that you can make an educated decision about the best next step for you fill out the form below for a free bankruptcy case evaluation

BANKRUPTCY LAW CHANGES

Changes made with the Bankruptcy Abuse Prevention and Consumer Protection Act "BAPCPA" significantly changed the U.S. Bankruptcy code effective on October 17 2005. Making it more work and less easy for some to file bankruptcy.

The credit industry lobbied congress for ten years before getting the changes they wanted with the bankruptcy laws. They did this so consumers couldn't use bankruptcy as financial planning. For instance getting into huge credit card debt, with no means of really paying them back and then just declaring bankruptcy to wipe their slate clean.

This doesn't mean bankruptcy is impossible to file now a days it just harder; meaning its going to take more work and understanding the laws. Even under the new laws few people are actually disqualified from filing for bankruptcy.

Do you still qualify for Bankruptcy
To see if you are qualified please take our free bankruptcy evaluation form.

Chapter 7 Changes
Under the old law most people would file bankruptcy under Chapter 7. The new law prohibits people in a higher income level from filing under chapter 7. Your current monthly income level measured against the median income for your household of your size in your state will come into play here.

Your income:
Less than or equal to the median-ou can file for bankruptcy.
More than the median-you must pass the means test

Means Test
The means test is to figure out your disposable income. Certain allowable expenses that are determined by IRS guidelines are subtracted from your income. The value of that number will give you your disposable income.

3 things to look at when you arrive at your disposable income number
-If it is less the $6000 over the next five years you will be qualified for Chapter 7.
-If it is greater than $10,000, you can only file, you can demonstrate special circumstances.
-If you are between $6,000 and $10,000 a second calculation is done. This one will compare your disposable income over the next five years to a percentage of your unsecured debt. (This will show if any repayment to your creditors is possible) If it is less than 25% of your unsecured, non-priority debts, you will qualify.

Before you can File Bankruptcy
Before you can do any bankruptcy filing under chapter 7 or chapter 13, you have to complete credit counseling with an agency approved by the United States trustee office.
You will have to submit to the court a certificate showing that you completed the counseling. Also near the end of your bankruptcy you will attend another counseling session. This is to help with your future financial planning and management. The court will also you need proof that you completed this before you bankruptcy will be approved.

Chapter 13 Changes
You must devote all your disposable income; that is calculated using allowed expense amounts dictated by the IRS (if your income is higher than the median in your state) not your actual expenses. Also these amounts must be subtracted from your average income during the six months before filing.

Keep in mind that even though the new laws make it harder for some people to file, it is not impossilbe. With guidance a local attorney can give you the right bankruptcy help for your personal sitution.