How will New Chapter 13 Laws Affect Bankruptcy Filing

The chapter 13 laws allow individuals, commonly called debtors, to repay their debts over a specific amount of time. However, the Bankruptcy Abuse Prevention and Consumer Act of 2005 have changed the eligibility requirements of filing personal bankruptcy. The Act, according to the Moran Law Group, was created on the belief that more debtors filing chapter 7 bankruptcy could, if they wanted to, repay their debts. Thus, the Act tries to ensure that people eligible for filing chapter 13 do. Nevertheless, the individuals who actually want to file chapter 13 after the Act passed must meet the mandatory requirements before filing bankruptcy.

New Chapter 13 Laws Include Taking a Means Test

Before the new law, people could file either for chapter 7 or 13 bankruptcy depending on their financial circumstances and which bankruptcy option they wanted. In other words, if they had the money to pay their creditors, they could still choose chapter 7 which eliminated their debts—without repayment. The Act, however, requires individuals use a formula called the means test to calculate their eligibility. People must add their income after all their bills are paid then subtract it from their state’s median income for their household size. Thus, if individuals have a household size of 2, they would compare their state’s median income for 2 people. If people have enough disposable income (the money left over after the debts are paid), then they qualify for chapter 13. If they don’t have enough disposable income, then they automatically are eligible for chapter 7 and won’t have to repay debts.

The New Changes Makes It Mandatory for People to Undergo Credit Counseling

Credit counseling is mandatory before and after individuals file for bankruptcy. The U.S. Bankruptcy requires everyone planning to file for bankruptcy to enroll in one session of credit counseling within 180 day of their actually filing. The pre-bankruptcy credit counseling session is conducted with a credit counselor over the phone, in person or online. The counselor reviews people financial situations and discuss alternatives to filing for bankruptcy such as talking to creditors. Also, before bankruptcy cases can be discharged, or completed, individuals have to take the post-filing debtor education course. The course is conducted online, over the phone and in person. However, people learn new debt management options.

Seek Legal Counsel

Bankruptcy lawyers can help people considering bankruptcy. In fact, they can assist anyone by explaining all new chapter 13 laws.