The new changes in Bankruptcy Law might prove to make it tough for a few people to file for bankruptcy; know the laws and your options.
Understanding the Latest Bankruptcy Laws
Few filers featuring high incomes are also not allowed any longer to use the Chapter 7 bankruptcy law but will need to repay some of the debt falling under Chapter 13 bankruptcy. Even more, the debtors are now required to get proper credit counseling before filing a bankruptcy and extra advice on debt management as well as budgeting before the debts can be totally wiped out. Because the bankruptcy law imposes latest requirements on the attorneys as well, it is often hard to find a suitable lawyer to represent one in the bankruptcy case.
Under the earlier bankruptcy rules, the filers were able to select the kind of bankruptcy which seemed most effective for them thereby choosing mostly the Chapter 7 i.e. liquidation bankruptcy over the repayment i.e. chapter 13 bankruptcy. The latest bankruptcy law prohibits some of the filers with high incomes to use Chapter 7 bankruptcy only.
How Important is the Means Test?
The main purpose behind means test is to know whether one has sufficient disposable income or not. In order to know whether one passes this means test, one needs to subtract the specific allowed costs as well as dent payments from the present monthly income. In case the income left after the calculations is far below some specific amount, one can file for the Chapter 7 bankruptcy.
If one is looking forward for a convenient option to know the eligibility under this means test, using the online calculator for means testing can prove to be very useful. Once one enters the zip code, this means test calculator utilizes applicable expenses as well as income standards for the country, state and region for determining the eligibility.
Knowing Your Monthly Income
Under the latest rules, another thing that needs consideration to know whether one can file bankruptcy under Chapter 7 is to know the current monthly income. In case the income is lower than or similar to the median, one can file for Chapter 7 bankruptcy.But in case it is more, one needs to pass the means test.
Moreover, before one can file for bankruptcy in Chapter 7 or Chapter 13, one needs to get complete credit advice or counseling with an institution that is approved by office of the United States Trustee. The main objective behind this counseling is to offer the debtor an idea of if he or she really requires filing for bankruptcy or if the informal repayment process can get him or her back on the right economic feet. Then, towards the very end of bankruptcy case, the debtor will require attending counseling to learn the personal economic management. Just after one submits the proof to court that one fulfilled the requirements, one can get the bankruptcy discharge helping to wipe off the debts. This counseling is also required even when it is certain that some repayment process is not actually feasible or one is facing the debts which one finds unfair and do not wish to pay for.
Chapter 7 Bankruptcy Laws
Under the Chapter 7 bankruptcy, all of the non exempt property of a debtor is eventually sold and the procedure of the same is distributed to the particular creditors. In most instances in which this occurs Chapter 7 is used, the debtor is possessed with no assets thus a fresh start occurs at a faster rate.
Chapter 13 Bankruptcy Laws
A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause."
Other Bankruptcy Laws
While bankruptcy cases are filed in United States Bankruptcy Court (units of the United States District Courts), and federal law governs procedure in bankruptcy cases, state laws are often applied when determining property rights. For example, law governing the validity of liens or rules protecting certain property from creditors (known as exemptions), derive from state law. Because state law plays a major role in many bankruptcy cases, it is often unwise to generalize some bankruptcy issues across state lines.