The New Bankruptcy Laws Make it More Challenging to File Chapter 7 Bankruptcy
The most recent changes to bankruptcy laws might cause it to be more challenging for you to file bankruptcy. If you're in a higher income bracket you'll no longer be permitted to utilize Chapter 7 bankruptcy. Instead, you'll have to file under Chapter 13 bankruptcy and pay off at least a few of your debts. If you would like to file bankkruptcy, you must take part in credit counseling before you'll be able to file. You're similarly required to attend further counseling in the area of budgeting and debt management. The supplemental counseling is a requirement to acquire a discharge of your debts. And, since the law imposes new requirements on lawyers, you might have a trickier time acquiring a attorney to accept your bankruptcy suit.
Modified Eligibility for Chapter 7 Bankruptcy
Under the older bankruptcy laws, you were permitted to select the type of bankruptcy that seemed best for you. In most all cases that would be a Chapter 7 bankruptcy liquidation rather than a Chapter 13 bankruptcy repayment. But, if you're in a high income bracket, the new bankruptcy laws won't allow you to use Chapter 7 bankruptcy.
To discover out whether you're able to file Chapter 7 bankruptcy under the new bankruptcy laws, you must first measure your "current monthly income" against the median income for a household of your size in your state. If your income is lower than or equivalent to the median, you'll be able to file for Chapter 7 bankruptcy. If it's greater than the median, however, you must pass a new test to file for Chapter 7 bankruptcy. The new test is called "the means test."
The intention of the means test is to see whether you have adequate free income, after taking off certain permitted expenses and mandatory debt payments, to make payments on a Chapter 13 plan. To determine whether you pass the means test, you deduct certain permitted expenses and debt payments from your current monthly income. If the money that's left after these computations is below a certain sum, you'll be able to file for Chapter 7.
Counseling Required
Prior to filing for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling with an agency accredited by the United States Trustee's office. The reason for this counseling requirement is that it helps you in discovering whether you really need to file for bankruptcy or whether an informal repayment program will help you recover your financial stability.
Counseling is essential even if it's evident that a repayment plan isn't viable for you. You're expected merely to take part in the counseling. You don't have to go along with any repayment program the agency provides. Even so, before you'll be able to file bankruptcy, you'll have to show any repayment program the agency offers along with a certificate proving that you finished the counseling.
Near the end of your bankruptcy lawsuit, you'll have to go to a new counseling session. This counseling session is fashioned to teach you personal financial management skills. You can't receive the discharge that cancels out your debts until you submit proof to the court that you accomplished this requirement.
Lawyers May Be Harder to Hire -- and a Great Deal More Pricey
The new bankruptcy laws do add numerous complex demands to bankruptcy cases. Many of these new demands impose more duties on lawyers leading to bankruptcy cases being more time intensive. Among the major new requirements on attorneys is that they must now personally vouch for the truth of all the information their clients give them. That extra requirement means that lawyers must spend lots of time on every bankruptcy case. Thus, they'll charge more to take each bankruptcy case. The new bankruptcy law demands have in reality forced a few bankruptcy lawyers out of the field totally.
Many Chapter 13 Filers Will Learn to Exist on Less
When you filed Chapter 13 bankruptcy under the previous bankruptcy laws, you had to contribute all of your usable income to your repayment plan. The older bankruptcy laws defined available income as that which you had leftover after paying your actual living expenses. The new bankruptcy laws have altered this computation. While you still must turn in all of your usable income, if your income is greater than the median in your state, you don't get to figure your available income based on your true expenses. Rather, you have to calculate your usable income utilizing permitted expense amounts prepared by the IRS. And these permitted expense numbers must be deducted from your average income during the six months before filing bankruptcy, not from your real pay every month.
More Changes
There are additional changes that can impact you negatively if you're filing or looking at filing bankruptcy. Do your research on the new bankruptcy laws and make sure you understand the impact they have on your bankruptcy filing.
The most recent changes to bankruptcy laws might cause it to be more challenging for you to file bankruptcy. If you're in a higher income bracket you'll no longer be permitted to utilize Chapter 7 bankruptcy. Instead, you'll have to file under Chapter 13 bankruptcy and pay off at least a few of your debts. If you would like to file bankkruptcy, you must take part in credit counseling before you'll be able to file. You're similarly required to attend further counseling in the area of budgeting and debt management. The supplemental counseling is a requirement to acquire a discharge of your debts. And, since the law imposes new requirements on lawyers, you might have a trickier time acquiring a attorney to accept your bankruptcy suit.
Modified Eligibility for Chapter 7 Bankruptcy
Under the older bankruptcy laws, you were permitted to select the type of bankruptcy that seemed best for you. In most all cases that would be a Chapter 7 bankruptcy liquidation rather than a Chapter 13 bankruptcy repayment. But, if you're in a high income bracket, the new bankruptcy laws won't allow you to use Chapter 7 bankruptcy.
To discover out whether you're able to file Chapter 7 bankruptcy under the new bankruptcy laws, you must first measure your "current monthly income" against the median income for a household of your size in your state. If your income is lower than or equivalent to the median, you'll be able to file for Chapter 7 bankruptcy. If it's greater than the median, however, you must pass a new test to file for Chapter 7 bankruptcy. The new test is called "the means test."
The intention of the means test is to see whether you have adequate free income, after taking off certain permitted expenses and mandatory debt payments, to make payments on a Chapter 13 plan. To determine whether you pass the means test, you deduct certain permitted expenses and debt payments from your current monthly income. If the money that's left after these computations is below a certain sum, you'll be able to file for Chapter 7.
Counseling Required
Prior to filing for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling with an agency accredited by the United States Trustee's office. The reason for this counseling requirement is that it helps you in discovering whether you really need to file for bankruptcy or whether an informal repayment program will help you recover your financial stability.
Counseling is essential even if it's evident that a repayment plan isn't viable for you. You're expected merely to take part in the counseling. You don't have to go along with any repayment program the agency provides. Even so, before you'll be able to file bankruptcy, you'll have to show any repayment program the agency offers along with a certificate proving that you finished the counseling.
Near the end of your bankruptcy lawsuit, you'll have to go to a new counseling session. This counseling session is fashioned to teach you personal financial management skills. You can't receive the discharge that cancels out your debts until you submit proof to the court that you accomplished this requirement.
Lawyers May Be Harder to Hire -- and a Great Deal More Pricey
The new bankruptcy laws do add numerous complex demands to bankruptcy cases. Many of these new demands impose more duties on lawyers leading to bankruptcy cases being more time intensive. Among the major new requirements on attorneys is that they must now personally vouch for the truth of all the information their clients give them. That extra requirement means that lawyers must spend lots of time on every bankruptcy case. Thus, they'll charge more to take each bankruptcy case. The new bankruptcy law demands have in reality forced a few bankruptcy lawyers out of the field totally.
Many Chapter 13 Filers Will Learn to Exist on Less
When you filed Chapter 13 bankruptcy under the previous bankruptcy laws, you had to contribute all of your usable income to your repayment plan. The older bankruptcy laws defined available income as that which you had leftover after paying your actual living expenses. The new bankruptcy laws have altered this computation. While you still must turn in all of your usable income, if your income is greater than the median in your state, you don't get to figure your available income based on your true expenses. Rather, you have to calculate your usable income utilizing permitted expense amounts prepared by the IRS. And these permitted expense numbers must be deducted from your average income during the six months before filing bankruptcy, not from your real pay every month.
More Changes
There are additional changes that can impact you negatively if you're filing or looking at filing bankruptcy. Do your research on the new bankruptcy laws and make sure you understand the impact they have on your bankruptcy filing.
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If you're thinking about bankruptcy, visit The Bankruptcy Law Info Center, and get a copy of The New Bankruptcy: Will It Work for You?
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