The US bankruptcy code was overhauled in 2005, and the changes made it more difficult to obtain a Chapter 7 filing. Those who cannot pass the Chapter 7 means test are required to file for Chapter 13, where some debts must be repaid. The new laws require all filers to go through credit counselling before filing for Schaumburg Bankruptcy. In this article are listed some of the biggest changes in the US bankruptcy code.
The Means Test
Before 2005, most people could choose their preferred type of bankruptcy, and most filers chose Chapter 7 because of its lack of a repayment requirement. However, 2005’s changes kept some high-income filers from requesting a Chapter 7 case. The first step in determining eligibility for Chapter 7 is the means test, which measures current income against a state average. If a filer’s income is equal to or less than that average, they can file for Chapter 7. The intent of the means test is to find out whether a filer has enough income to repay at least some of their debt.
Before filing for Chapter 13 or Chapter 7, filers must finish a credit counselling course with a company approved by the US Trustee’s office. The counselling gives filers an idea of whether bankruptcy is really needed, or whether a repayment plan would be more effective. All clients requesting bankruptcy must go through counselling, even if it is obvious that they cannot repay the debt. Near the end of the case, the filer must take a financial management course.
Hiring an Attorney Makes Chapter 7 More Expensive
Major changes in Schaumburg Bankruptcy law added requirements that made it more costly and tedious to hire legal representation. Attorneys’ fees have risen, and the law imposed stricter requirements on bankruptcy lawyers. The lawyer must personally attest to the accuracy of information provided by the client, which means more time spent on each case.
Learning to Live on Less
Under the previous rules, those filing for Chapter 13 had to use every bit of disposable income to repay debts. 2005’s changes added a layer of complexity; although filers must still surrender all disposable income, they have to use IRS-mandated figures to determine that amount. Allowable expenses must be taken from the average income for the six months prior to filing. These requirements and others can make a substantial difference in the amount of assets a client can retain. Visit Ledfordwu.com for more details.
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