What You Need to Know About the New Bankruptcy Laws
September 6th, 2006 Debt
For many years bankruptcy was a relatively simple process, even if it was traditionally seen as a last resort. Many people were able to simply use the bankruptcy laws to walk away from their debts and get a fresh start.
While this relatively simple bankruptcy law helped many people to get out from under their burden of debt, to say that creditors were displeased would be an understatement. In 2005, the credit card and banking industry were successful at helping to pass the Bankruptcy Abuse Prevention and Consumer Protection Act, and this act institutes some important changes that any consumer contemplating a bankruptcy filing will need to be aware of.
These changes will affect those consumers whose income is above the median income for your state. For this test the income of the debtor is compared to that of the median for the state. The size of the family is taken into consideration and compared to the median for the state. Those whose incomes are determined to be above the median for the state will need to go through a bankruptcy test in order to determine if they qualify for debt forgiveness, also referred to as a Chapter 7 bankruptcy filing. If the bankruptcy court decides that the debtor could afford to pay at least $100 a month toward debt repayment after paying living expenses, they may be required to file for the more stringent requirements of Chapter 13 bankruptcy.
When looking at the level of spending the IRS uses its own guidelines, and these guidelines allow approximately $200 a month for food and less than $800 for housing and utility payments. Those debtors who suffer from serious medical problems, those in the active military and veterans may be eligible for special treatment when it comes to this new income test.
Another important change is the fact that credit counseling is now required for those seeking bankruptcy protection. This credit counseling requirement is designed to help those seeking bankruptcy protection stay out of trouble in the future, and this credit counseling must be undertaken within 180 days of the bankruptcy filing date.
What all these changes mean is that it has never been more important to seek the services of a qualified bankruptcy attorney. A skilled attorney can help you navigate the sometimes confusing world of the new bankruptcy law, and help you maximize the benefit of this last resort.