The New Bankruptcy Laws Make it More Difficult 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 allowed to utilize Chapter 7 bankruptcy. Instead, you’ll have to file under Chapter 13 bankruptcy and pay off at least a few of your creditors. If you would like to file bankkruptcy, you must take part in credit guidance prior to filing. You’re also required to go to additional counseling in the area of budgeting and debt management. The extra counseling is a prerequisite to acquire a release of your debts. And, since the law imposes new demands on attorneys, you might have a tougher time getting a attorney to accept your bankruptcy case.

Modified Eligibility for Chapter 7 Bankruptcy

Under the old bankruptcy laws, you were allowed to select the type of bankruptcy that appeared best for you. In most all cases that would be a Chapter 7 bankruptcy liquidation instead of a Chapter 13 bankruptcy repayment. But, if you’re in a high income bracket, the new bankruptcy laws won’t let you to file Chapter 7 bankruptcy.

To find out whether you’re able to file Chapter 7 bankruptcy under the new bankruptcy laws, you must first evaluate your “current monthly income” against the median income for a family unit 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 more than the median, however, you must pass a new test to file for Chapter 7 bankruptcy. The other test is known as “the means test.”

The purpose of the means test is to ascertain whether you have sufficient free income, after deducting certain permitted expenses and mandatory debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you deduct certain allowed expenses and debt payments from your current monthly income. If the money that’s left over after these computations is under a specific amount, you’ll be able to file for Chapter 7.

Counseling Prerequisites

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 necessary even if it’s obvious that a repayment plan isn’t doable for you. You’re required merely to take part in the counseling. You don’t have to consent to any repayment plan the agency offers. Even so, before you’ll be able to file bankruptcy, you’ll have to show any repayment plan the agency proposes along with a certificate certifying that you completed the counseling.

Near the end of your bankruptcy suit, you’ll have to attend another counseling session. This counseling session is fashioned to teach you personal financial management skills. You can’t have the discharge that cancels out your debts until you show proof to the court that you finished this requirement.

Lawyers May Be Harder to Hire — and a Great Deal More Pricey

The new bankruptcy laws do add numerous complicated requirements to bankruptcy filings. Some of these brand-new requirements impose more duties on attorneys leading to bankruptcy cases being more time intensive. Among the major new demands on lawyers is that they must now personally ensure the accuracy of all the info their clients give them. That extra demand means that attorneys must spend significant amounts of time on every bankruptcy suit. Thus, they’ll charge more to handle each bankruptcy suit. The new bankruptcy law requirements have actually squeezed a few bankruptcy attorneys out of the field totally.

Some Chapter 13 Filers Will Learn to Survive on Less

When you filed Chapter 13 bankruptcy under the previous bankruptcy laws, you had to dedicate all of your available income to your repayment plan. The old bankruptcy laws defined usable income as that which you had leftover after paying your actual living expenses. The new bankruptcy laws have changed this computation. While you still must hand over all of your disposable income, if your income is greater than the median in your state, you don’t get to figure your available income based on your real expenses. Instead, you have to calculate your spendable income using allowed expense sums prepared by the IRS. And these allowed expense numbers must be deducted from your average income during the six months before filing bankruptcy, not from your pay every month.

Added 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 term Chapter 7 bankruptcy is a term that is thrown about a great deal in the media, but clear and concise explanations of the term are usually not offered. Because of this, there is some confusion as to what exactly chapter 7 bankruptcy actually is and this sometimes leads to people making critical errors when filing!

Having to go through the proceedings necessary in bankruptcy is the last thing people want to do. However if their debts add up to more than what they have coming in sometimes this is unavoidable.

Numerous kinds of bankruptcy proceeding exist including but not limited to chapter 11 and chapter 7. In this article our focus is going to be on chapter 7 since this is more for individuals.

Chapter 7 bankruptcy explained

According to the law and the United States court system, Chapter 7 bankruptcy refers to liquidation of assets that are not legally exempt from liquidation in order to pay off creditors and debtors.

Chapter 7 is an option open to individuals, businesses, partnerships and corporations. There is, however, a special clause open to the individual within the framework of this chapter filing that is not available to the other entities.

That special clause is known as a “discharge.” What a discharge refers to is the freeing of the individual from certain debts.

How to get started filing chapter 7 bankruptcy

If you need to file for chapter 7 bankruptcy some of the things you will need are the following: proof of your full income as well as expenditures, proof of your existing liabilities and assets, statements for your financial affairs, copies of any expired executive contracts, and of course copies all your tax returns.

For the public there are a series of additional items that are necessary. They will include but are not necessarily limited to the following: copies of your reports for credit counseling as well as any payment plan programs, statements of income/employee payments and in the case of being a student, copies of documents stating interest payments on one’s student loans.

If you are in a situation where filing chapter 7 bankruptcy or any other bankruptcy type is a necessity, make sure you take a visit to the US courts website. Also make sure that if you do need to take action in the way of a bankruptcy proceeding you get a good professional lawyer to deal with your case.

Bankruptcy is an official, legal declaration of a debtor’s inability to pay off large amounts of debt. There are two kinds of bankruptcy available to debtors in the United States – Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 bankruptcy is the most common kind of bankruptcy in the United States. The best benefit of Chapter 7 bankruptcy is that all dischargeable deaths are immediately wiped out — you don’t have to wait or pay off any remaining debts (at least the ones that are legally dischargable).

In Chapter 13 bankruptcy, the debtor will have a repayment plan so that they can pay off all their debts over a period of time. Some debts may be erased immediately, but this doesn’t always happen. One major advantage of Chapter 13 bankruptcy over Chapter 7 bankruptcy is that the debtor may be allowed to hold on to some assets which would have been otherwise liquidated under Chapter 7.

Don’t think chapter 13 bankruptcy is a complete easy street. However, here are a few examples of the kinds of debts which can only be cleared under Chapter 13 bankruptcy: – Debts from a divorce or settlement agreement – Court fees – Home Owners Association, condominium, or coop fees -Retirement plan loans – Non dischargeable tax debts – Debts from a previous bankruptcy.

Not all of your debts will be erased under either Chapter 13 or Chapter 7 bankruptcy. The following debts cannot be discharged under any kind of bankruptcy: – Alimony, child support, and other domestic support obligations – Student loans, except in extreme cases of “undue hardship” – Criminal penalties, and any debts you incurred as a result of committing fraud or other illegal or “malicious” acts.

Income tax debts can be discharged, but only under certain circumstances. The restrictions include, but are not limited to, that you filed a tax return for the year you owed the taxes, and the tax debt must be from a tax return filed at least two years before your bankruptcy filing.

Bankruptcy filings require that the debtor report all creditors and their addresses; debts which are not listed cannot be discharged. If the creditor has moved without providing a forwarding address, or the notice is lost in the mail or notice cannot be sent for any reason out of the debtor’s control, the debt will be wiped away as long as it is legally dischargeable. However, debts which cannot be assessed for reasons which are under the debtor’s control (e.g. the debt is not listed or the address given is incorrect) may not be discharged.

Filing bankruptcy doesn’t mean that your financial life is over. You may still have liens on your house, but at least now no one will be able to garnish your wages or access your bank account. Do expect to have difficulty getting loans. Cash is going to be your best friend for the next few years.

While filing for bankruptcy can relieve one of the burdens of debt, a debtor must do his or her due diligence to make sure that all dischargeable debts are, in fact, discharged and to know which debts cannot be discharged. Though a person sometimes must file for bankruptcy because of medical bills or other forces beyond their control, remember that you control what becomes of your life after bankruptcy.