The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
The new law establishes stricter criteria for Chapter 7 filing. A debt can typically be discharged in a Chapter 7 bankruptcy if it is unsecured, meaning that there is no collateral backing it up. This includes debts such as credit card debt, medical bills and most personal loans. A Chapter 13 bankruptcy case involves a three to five year repayment plan. To qualify for Chapter 13, you must have a regular source of income, have enough disposable income, and your debts may not be too high.
Contact a Chapter Seven Bankruptcy Lawyer to find out all your legal options and rights.
Makes The Means Test Complex :
- Living Costs
- Health Insurance
- Business Expense Needs
- Domestic Support Obligations
The central feature of the new bankruptcy law is a "means test." A means test stipulates that if your income is above a specified level, then you are not permitted to file bankruptcy under Chapter 7 and must use Chapter 13 instead. Chapter 13 requires that you enter into a repayment plan rather than simply liquidating your debts. In general, those with household income over the median income for their state are likely to be forced into Chapter 13 proceedings; however, this may not always be the case.
There are several allowable exemptions and deductions used in determining how much of a person’s income is available for paying unsecured non-priority debt (Chapter 13). While this makes the means test complex, it is an attempt to compensate for some basic required expenses such as basic living costs, health insurance, business expense needs, and domestic support obligations.
Another provision of the new law is that retirement accounts, up to $1 million, are exempt from consideration under Chapter 7. This is an improvement overall, since it does protect retirement financial security to some extent. "However," Gutter points out, "this may be a non-issue for families who lack any form of savings and who may have been hit with substantial bills in a short-term period."
Contact a Chapter Thirteen Bankruptcy Lawyer to find out all your legal options and rights.
According to the Association for Financial Counseling and Planning Education (AFCPE), one concern about the new law arises from one of the leading causes of bankruptcy: medical expenses. However, many bankruptcies are the result of medical expenses that have come due over time, and may reflect a lack of health care coverage, not overspending. Unfortunately, these expenses are not an allowable deduction, although health care insurance premiums are. The new law also gives landlords the right to pursue eviction proceedings following a bankruptcy.
Another modification of the new bankruptcy law is to strengthen the provisions limiting bankruptcy filings. Chapter 7 can only be filed every eight years; prior to this law one could file every six years. Chapter 13 previously had no limit on filings. Now, one can file Chapter 13 every two years, but cannot file for four years after having filed Chapter 7.
Bankruptcy Law Is A Federal Law. This Sheet Gives You Some General Information About What Happens In A Bankruptcy Case. The Information Here Is Not Complete. You May Need Legal Advice.
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