With the change in bankruptcy laws in 2005 many people feel that they no longer qualify to file for bankruptcy. The fact is, very few people are adversely affected by the new laws. Even though the government made some revisions to the bankruptcy process, the average person will still qualify to file.
There was a lot of misinformation told at the time of the 2005 bankruptcy revisions. Creditors also used this time to apply scare tactics to debtors to try and get them to pay their debts. The facts are, if you can no longer pay your monthly obligations you will most likely qualify to file one of the bankruptcy chapters.
The bankruptcy laws are more complex than they used to be but most still qualify under the old laws. You must now take a “means test” to determine if you are eligible to file but this is only a test of your income versus your monthly obligations. The test allows the federal government to determine whether or not you are just attempting to get out of pay a debt or if you really do not have the means to meet your monthly obligations. The means test only added one factor to the bankruptcy laws and most people who want to fine will have no problem passing the test.
The means test will also determine what type of bankruptcy you qualify for. If you are found to not have the income needed to pay your debts you can file Chapter 7. This particular chapter is aimed at those who have lost their jobs during the recession and no longer have enough income to live on. If the test determines that you have enough income over and above your monthly living expenses you may have to file Chapter 13. This will allow you to repay your creditors at least a portion of what you owe them. Many people refer to this type of bankruptcy as reorganization. It essentially is a loan consolidation that allows you to pay one payment to the court trustee and the trustee will then divide the money up and pay your creditors. At the end of the bankruptcy period you will essentially be out of debt.
Another part of the new law for bankruptcy requires the filer to undergo credit counseling. This may be provided by a credit counseling firm or it may be offered by your attorney. This is something you should discuss with your attorney when you file. Counseling can help you avoid repayment problems in the future by teaching you how to manage your debt to income ratio. Many feel this is a waste of time but it is something that is required by the federal government. Since most people who need to file bankruptcy do so as a direct result of the recession many see the counseling as an expensive requirement.
The key to filing bankruptcy is to consult a credible attorney that is experienced in the bankruptcy laws. The average person cannot navigate the laws. Finding an attorney to help you can save you a lot of time and heartache in the long run.