The bankruptcy law in US was created with the intention of helping people in dire financial circumstances level up in life and to start afresh. There are different applications to the bankruptcy law to help you come out of debt like selling off all your assets and using the money to settle your dues.
Then depending on the case, you may be permitted to continue with your business so that you can use the revenue generated from it to pay off your dues, one by one.
Since the implementation of the bankruptcy law, a few changes have been made to them. While there are many changes to the law, the three major changes hat are worth mentioning, and which affect people the most are ticket in, the ticket out and the means test.
Ticked in
The term ‘ticked in’ refers to a credit counseling session the person filing bankruptcy, or you, should compulsorily attend. It is essential that you attend the credit counseling session about six months before you apply for bankruptcy.
This is to be done with the intention of finding out if there are other means of getting out of your financial crisis besides declaring bankruptcy. It is essential that this credit counseling session be carried out by a non-profit agency that is approved by the United State Trustees office.
Means test
The second term, ‘means test’, it is possible to find out if you quality for chapter 7 bankruptcy of the bankruptcy law. Here, your income is tested by a two part test where the first test uses a formula to find out if it is possible for you to pay 25% of your unsecured debts after exempting some expenses like rent and food.
In the second test of the bankruptcy law, your income is compared to the state’s average income. According to this test, if your income is above state average and if you can pay 25% of your unsecured debt, you cannot file for chapter 7 bankruptcy. On the contrary, the new bankruptcy law lets you file for bankruptcy under chapter 13.
According to the new bankruptcy law, it is possible for you to file chapter 7 if your income is lower than the state’s average but you can pay 25% of your unsecured debt. The new law also provides special accommodations for people in active duty military service, for military veterans and those suffering from serious medical conditions.
Ticket out
The third term ‘ticket out’ implies that you attend a financial education class form approved providers before finalizing your bankruptcy. These classes are approved by the United States Trustees Office, and are referred to as Debtor Education Class.
With the new law, the court uses the help of living standards set by IRS to find out how much you can pay for debts after determining how much you need to pay for rent, food and other expenses.
Besides all this, the new bankruptcy law will provide restrictions to homestead exemption and if any information on the client’s case is found to be inaccurate, the bankruptcy attorney has to face various fines and fees.