[fancy_header bgColor=”#0a74f5″ textColor=”#fffffff”]The New Bankruptcy Law[/fancy_header]
Now that the new bankruptcy law is in effect, the landscape has changed for those who are considering bankruptcy. Some filers with higher incomes won’t be allowed to use Chapter 7, but will instead have to repay at least some of their debt under Chapter 13. All debtors will have to get credit counseling before they can file a bankruptcy case — and additional counseling on budgeting and debt management before their debts can be wiped out. And, because the law imposes new requirements on lawyers, it may be tougher to find an attorney to represent you in a bankruptcy case.
Here are some of the most important changes:
Under the old rules, most filers could choose the type of bankruptcy that seemed best for them — and most chose Chapter 7 (liquidation) over Chapter 13 (repayment). The new law will prohibit some filers with higher incomes from using Chapter 7.
Under the new rules, the first step in figuring out whether you can file for Chapter 7 is to measure your “current monthly income” against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7. If it is more than the median, however, you must pass “the means test” — another requirement of the new law — in order to file for Chapter 7.
The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that’s left over after these calculations is below a certain amount, you can file for Chapter 7.
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