New Bankruptcy Laws for Chapter 13 Bankruptcy Attorneys.
In 2005, new bankruptcy laws were put into place to prevent abusive bankruptcy filings. Known as the Bankruptcy Abuse Prevention and Consumer Protection Act, the bill was enacted to prevent consumers from racking up debt and filing bankruptcy to avoid repayment.
Prior to the new bankruptcy laws, it was quite easy for consumers to file personal bankruptcy. In many instances, consumers were able to file without the assistance of bankruptcy attorneys. Today, filing bankruptcy is considerable more difficult. Not only do consumers need to retain a lawyer, they must also pass a 'means' test and obtain credit counseling from an agency approved through the U.S. Trustee Program.
The BAPCPA 'means' test compares the debtor's average income for six months prior to filing bankruptcy and compares it with the median income for the state in which the debtor resides. If the debtor's income falls below the median income average, the debtor is eligible to file Chapter 7 bankruptcy (liquidation).
The new bankruptcy laws invoke a second step of the 'means' test, where living expenses are deducted from the debtor's income. This amount is multiplied by 60 to determine the amount of income available for five years, which is used for repayment of outstanding debts. If this amount equals $10,000 or more, the debtor will be required to file Chapter 13 bankruptcy (repayment plan).
In October 2008, the new bankruptsy laws will adopt a new median income plan. These figures are based on median income by family size. A complete list of income levels by state can be found at the U.S. Trustee Program website operated by the U.S. Department of Justice.
Although the new bankruptcy laws make it more challenging to file bankruptcy, consumers can still obtain debt relief through Chapter 7 or Chapter 13. The cost to file personal bankruptcy has increased and anyone considering bankruptcy should retain the services of a qualified lawyer.
Prior to filing bankruptcy, debtors should consider various bankruptcy alternatives including credit counseling, debt consolidation or debt settlement. Learn more about the various options available in our comprehensive article database.