Filing for bankruptcy is a complicated process and the new bankruptcy laws make it even harder to file for one. If you are thinking about filing for bankruptcy, then making an informed decision is what you should aim for. You need to fully understand how the new laws affect your case.
How these new laws affect you depends on your circumstances. Basically one thing is clear, that they do not affect everyone the same way.
Ticket In
According to the new law, you need to attend a “ticket in” session before you can apply for bankruptcy. “Ticket in” refers to a credit counseling session. You need to attend this credit counseling session six months prior to filing for bankruptcy. This credit counseling session must be conducted by a non-profit organization that has been approved by the United States Trustees office.
After you have attended the “ticket in” session and you still feel that your debts have not been resolved successfully, you can opt for filing for bankruptcy. And this is where the changes in the bankruptcy law will affect your case.
Means Test
Let us assume that you are applying for Chapter 7. Previously it was upto the court to determine if you were eligible to apply for Chapter 7 or not. The judge would simply look at your case and also refer to past cases similar to yours and then decide.
However, under the new law whether you qualify for Chapter 7 bankruptcy or not depend on the means test. According to the means test, if your income is above average for your state and you are able to pay 25% of your unsecured debt, you are not eligible to file for Chapter 7. The income limit varies from state to state.
If your income is below average for your state but you have the ability to pay 25% of your unsecured debt, you may be allowed to file for Chapter 7. However, this can only happen after the court is convinced that you are not trying to misuse the system.
If you are not eligible for Chapter 7 bankruptcy, you have the option of filing for Chapter 13.
The new law does offer special accommodation in the means test for low-income veterans of the military, active duty military personnel and those who have serious medical condition.
Changes Relating To Chapter 13
If you decide to file for Chapter 13, the changes in the bankruptcy law will affect you. Earlier, the court would decide how much you needed to repay based on what the court considered to be reasonable and necessary expenses. However, now the court decides this based on the set of living standards set by the IRS. These living standards determine the reasonable amount that is necessary to pay for food, rent and other necessary expenses.
It is possible that you might find these living standards set by the IRS to be unreasonable as far as your case is concerned. If this is so, you can request for a hearing from the judge to contest these standards.
Other Changes
These are some of the big changes that have been made in the bankruptcy law. There are also some small significant changes that you should be aware about.
• Under the new law, more significance is given to a spouse’s child support claim over the creditors’ claim for your money.
• Under the new law, your property is more liable to be seized. Moreover, the property would be valued at the amount that it would cost to replace it. Earlier it was valued at what it could be sold for in an emergency fire sale.
• Under Chapter 7, some property is exempt from seizure. The recent changes in the law state that the debtor must have lived in the state for two years to qualify for exemption.
• If any of the client’s information is found to be false, the bankruptcy attorney might be required to pay fines or fees.
Understanding these changes in the bankruptcy laws can help you make an informed decision in your personal case.