Bankruptcy law is governed by federal and state statutes that give protections
to both the debtor and the creditor. The law defines a way for debtors
to get out of debt without harming their ability to lead a productive
life in the future.
Federal bankruptcy laws were updated in 2005, under the Bankruptcy Abuse
Prevention and Consumer Protection Act (BAPCPA), which was passed to make
it more difficult for individuals to file for bankruptcy. It eliminated
the automatic eligibility to file for Chapter 7 bankruptcy and forces
the repayment of some of an individual's debt under
Chapter 13 bankruptcy. Until 2005, most personal bankruptcy cases were filed as
Chapter 7 Bankruptcy because debts were discharged and did not have to be repaid. A "
Means Test" was added to the law so that those with the means to pay some of
their debts now must file for Chapter 13 Bankruptcy. Under Chapter 13
bankruptcy, an individual must develop a repayment schedule for debt repayment.
These payments are generally made over a 3 to 5 year period. The discharge
under Chapter 13 bankruptcy is not issued until the last payment has been
received by the bankruptcy trustee.
Changes to the federal bankruptcy laws also created the requirement that
everyone seeking bankruptcy protection must undergo credit counseling
before filing for Chapter 7 or Chapter 13 bankruptcy.
Those who have filed bankruptcy must also go through additional budget
and credit counseling prior to the discharging of debt.
It also increased the fees associated with bankruptcy and the paperwork
necessary for filing.
The initial step in the means test to determine eligibility to file Chapter
7 bankruptcy is to determine an individual's income. To do this, you
will be required to state your income for the past 6 months. That number
will be used to determine annual income. If a person's annual income
is below the average income for the area in which they live, they will
automatically qualify for Chapter 7 bankruptcy. If not, the means testing
continues in order to determine if there is any disposable income to facilitate
a payment plan under Chapter 13 bankruptcy.
For more information call us at 866-210-1722 or fill out the form below.