The law in bankruptcy changed in 2005, which made it harder for people to file for bankruptcy. Furthermore, filers with high incomes may no longer be allowed to make use of the Chapter 7 bankruptcy. Filers will now have to pay their debts as per the clauses mentioned in Chapter 13. Furthermore, as per the new law, the debtors are required to take credit counseling sessions as part of their bankruptcy. Besides this, the person is also supposed to take counseling for debt management as well as budgeting in order to ensure that they are capable of paying existing debts.
As per the previous rules, the debtors had the choice of selecting the bankruptcy type that best fit them, which made most of them to choose the Chapter 7 (liquidation) over the bankruptcy option of Chapter 13 (repayment). The 2005 law modifies this choice by ensuing that the filers with a considerably higher income cannot opt for the Chapter 7 bankruptcy. Furthermore, the debtor is asked to measure their monthly income in context with median income. If the current income comes within the same range as that of median income, the person is eligible for taking the Chapter 7 bankruptcy. The debtors are also required to take the Means Test, which enables the debtors to find out whether they will be able to have disposable income to them. One has to subtract the debt payments as well as allowed expenses to ensure their ability.
Besides the Means Test, the new law also emphasizes on counseling sessions pertaining to debt management. The purpose is to ensure that the debtor regains the composure to stand again on their economic feet. Counseling also ensures that the debtor is able to glide through any of the issues that may come up during the repayment period. Another of the problems that may come with the newer law is that of finding lawyers. The 2005 law has prompted attorney fees to shoot up, which means that the fees may vary as per the time that has been spent on the bankruptcy cases. As per the new law, debtors need to hand over their disposable income as dictated by IRS.
About the Author:
Jay King is a owner of BankruptcyIntro.com. We’ve all heard of large companies filing for bankruptcy or “going bankrupt” and most of us would think that particular company must be in trouble.