Over the last seven years many people have been complaining about the changes to the bankruptcy code that ended up with the BAPCPA 2005. Many of the complainers have been bankruptcy attorneys because they believed that most of the changes are necessary. It seems that the creditors got the most bang for their buck in lobbying to make these changes. Just like I said in part one of this article, if Congress had just waited a couple years none of this would've been necessary. The idea that most people love to file for bankruptcy is crazy. No one really wants to file for bankruptcy except the few that want to defraud their creditors. These are more the exception to the rule than the norm. Adding credit counseling to a bankruptcy filing does not deter anyone from filing for bankruptcy, especially those folks who are crooked. For them, it is just one more hoop to jump through.
One of the biggest changes to the bankruptcy code was the addition of the means test. The means test was added to the bankruptcy code to make people qualify to file Chapter 7 bankruptcy. With the idea that Congress believed too many people were abusing the bankruptcy system, they wanted people to qualify to file Chapter 7 and eliminate those individuals that are capable of paying back at least a portion of their debt. If the person doesn't qualify, they will be forced into Chapter 13 bankruptcy that includes a 3 to 5 year repayment plan. Prior to the changes in 2005, Chapter 7 bankruptcy was the standard for personal bankruptcy. If you heard someone talking about filing bankruptcy, they were probably talking about Chapter 7. What the means test does is it takes a six-month look back timeframe, starting with the month prior to the filing of the bankruptcy petition. The person will add the last six months household income, divided by six and multiply by 12, giving them their annual income. Next, the person will compare their household income against the median household income of their state. If they make more than the median income, they probably will have to file Chapter 13 bankruptcy. There is way more to this formula to qualify someone to file Chapter 7 bankruptcy. Adding this alone has almost made it imperative for the average Joe who might have filed a do-it-yourself bankruptcy in the past, will now need to hire a bankruptcy attorney to get the proper results.
The individual filing for bankruptcy will also be required to fill out a household living expense schedule that is also part of the qualification. Basically, the bankruptcy court wants to make sure the individual filing has no more than $170 a month of disposable income left over after paying all of their household expenses. You have to remember that this does not include any of the debts that will be wiped out in the bankruptcy discharge. Once again, for anyone that has something to lose, it is a good idea to hire a bankruptcy attorney can navigate through these new landmines.
One of the biggest changes to the bankruptcy code was the addition of the means test. The means test was added to the bankruptcy code to make people qualify to file Chapter 7 bankruptcy. With the idea that Congress believed too many people were abusing the bankruptcy system, they wanted people to qualify to file Chapter 7 and eliminate those individuals that are capable of paying back at least a portion of their debt. If the person doesn't qualify, they will be forced into Chapter 13 bankruptcy that includes a 3 to 5 year repayment plan. Prior to the changes in 2005, Chapter 7 bankruptcy was the standard for personal bankruptcy. If you heard someone talking about filing bankruptcy, they were probably talking about Chapter 7. What the means test does is it takes a six-month look back timeframe, starting with the month prior to the filing of the bankruptcy petition. The person will add the last six months household income, divided by six and multiply by 12, giving them their annual income. Next, the person will compare their household income against the median household income of their state. If they make more than the median income, they probably will have to file Chapter 13 bankruptcy. There is way more to this formula to qualify someone to file Chapter 7 bankruptcy. Adding this alone has almost made it imperative for the average Joe who might have filed a do-it-yourself bankruptcy in the past, will now need to hire a bankruptcy attorney to get the proper results.
The individual filing for bankruptcy will also be required to fill out a household living expense schedule that is also part of the qualification. Basically, the bankruptcy court wants to make sure the individual filing has no more than $170 a month of disposable income left over after paying all of their household expenses. You have to remember that this does not include any of the debts that will be wiped out in the bankruptcy discharge. Once again, for anyone that has something to lose, it is a good idea to hire a bankruptcy attorney can navigate through these new landmines.