Filing Requirements Under The New Bankruptcy Law
The "new bankruptcy law" actually isn't that new. It rolled out in 2005 and is officially called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, or BAPCPA for short.
Creditors want you to believe that the new law makes it harder to file for bankruptcy. That is not necessarily true.
The truth is that although the revised bankruptcy law stipulated new requirements to filing bankruptcy, Chapter 7 or 13 is still an option for most people.
Read on for information about the "new" Chapter 7 means test and fill out the below free evaluation form to see if you can file bankruptcy:
What Is the New Law and How Does it Affect You?
On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect, instituting new requirements for bankruptcy filers and attempting to curtail alleged instances of abuse of the bankruptcy system.
The product of the intense lobbying efforts for nearly a decade of the credit card industry, BAPCPA was crafted around the misrepresented idea that many people were recklessly racking up debt and using bankruptcy as a get-out-of-jail card when in fact, many people are forced to file bankruptcy due to unexpected medical illnesses, job losses or other setbacks.
Anyway, the goal of the new bankruptcy law was to make it "harder" for people to file bankruptcy. While the new law instituted more bankruptcy requirements, including the Chapter 7 means test, the credit counseling briefing before filing, and the debtor education course after filing but before receiving a discharge, it has not necessarily made it harder for people like you who may be interested in filing bankruptcy from actually doing so.
As an example, bankruptcy filings have increasingly made their way back towards pre-BAPCPA levels.
Specific Changes in the New Bankruptcy Law
Read the points below to learn about the main bankruptcy law changes.
Filers Must Obtain a Credit Counseling Briefing Before Filing for Bankruptcy
Before you can file bankruptcy, you must complete a credit counseling briefing from a UST-Approved Agency within six months of your bankruptcy petition.
Essentially, the credit counseling briefing is your ticket in to filing bankruptcy, making sure that you know what the bankruptcy process is all about. You should know that your bankruptcy case petition may be thrown out if you did not obtain a credit counseling briefing. A bankruptcy lawyer can help you through the process and can give the bankruptcy court the necessary proof that you completed the credit counseling requirement.
Filers Must Complete a Debtor Education Course Before Receiving a Debt Discharge
Before you can exit (be discharged) from bankruptcy, you must complete a UST Approved personal financial management debtor education course.
The debtor education course covers some important financial health topics, including how to create a budget and improve your credit score.
If you file Chapter 7 bankruptcy, you will have more limited time to complete the debtor education course, as Chapter 7 cases may take as little as three to five months to finish.
On the other hand, you will have more time to complete the debtor education course if you file Chapter 13 bankruptcy as your repayment plan may be anywhere from three to five years.
People Who Want to File Chapter 7 Must Pass the Chapter 7 Means Test
If you are interested in filing bankruptcy, the new bankruptcy law requires that you pass a means test. Basically assessing whether you are eligible for Chapter 7 bankruptcy protection, the Chapter 7 means test consists of two parts: 1) a comparison of your family’s income with the median income of the average family of the same size in your state, and 2) a calculation of your disposable income and unsecured debts.
While the means test may sound a bit complicated upon first glance, you should know that most people who want to file Chapter 7 bankruptcy have still been able to since the new bankruptcy law; as for those who aren’t eligible for Chapter 7 bankruptcy, they may still have Chapter 13 bankruptcy as an option.
A bankruptcy lawyer can help you determine whether you are eligible to file Chapter 7. Fill out the below free case evaluation form to ask an attorney if you can file bankruptcy under Chapter 7.
Other New Bankruptcy Law Changes
There are other details to the new bankruptcy laws. While not as prominent as the changes detailed above, other changes with the new bankruptcy law include:
- Fewer Automatic Stay Provisions: One of the most appealing elements of the bankruptcy process is the automatic stay, a court order which stops all collection actions against you during your bankruptcy case. Prior to the new bankruptcy law, the automatic stay delayed or stopped eviction actions, driver’s license suspensions, legal actions for child support and divorce proceedings. After the new bankruptcy law, these actions are no longer halted when filing bankruptcy.
- Required Tax Returns and Proof of Income: Whether you intend on filing
for Chapter 7 bankruptcy or Chapter 13 bankruptcy, the new bankruptcy
law requires that you show proof of your income and tax returns.
- Higher Priorities for Unpaid Child Support and Alimony: With the new bankruptcy law, family members who are owed child support or alimony take by the bankruptcy filer take precedence over any other creditors.
Is It Harder to File Bankruptcy Now?
Initially, the credit industry took pride in the fact that consumer bankruptcy filings dropped after the inception of the new bankruptcy law. Of course, what they failed to notice was that many people rushed to file bankruptcy prior to BAPCPA out of a fear that they wouldn’t be able to do so in the future.
So while bankruptcy filings were significantly down in the first couple of months after the new bankruptcy law (based on the fact that many people filed before BAPCPA, thus skewing the filing numbers), consumer bankruptcy filings have continued to reach pre-BAPCPA levels.
This indicates that while there may be more work to file bankruptcy nowadays, it is still an option for most people.
In terms of determining whether you may be able to file bankruptcy, you should examine your situation in more detail with a bankruptcy lawyer.
After you make the effort to get in touch with a bankruptcy lawyer, be sure to take some time learning more about bankruptcy throughout Bankrutpcy.Me, where it’s all about you when it comes to addressing your financial situation.
The above summary is not legal advice. Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.