Bankruptcy at a Glance

The new bankruptcy laws have caused changes to the previous qualifications making it harder to file. A Chapter 7 bankruptcy filing, where your debt is forgiven, is even harder to qualify for now. Because of this, Chapter 13 bankruptcy filings, where you still pay back your debt, are being awarded instead of Chapter 7. On top of having to pay back your debt in full, Chapter 13 can follow you for your whole life.

The Bankruptcy Abuse Prevention & Consumer Protection Act

President Bush signed the The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 into law on April 20, 2005. The law is effective for filings commenced after October 17, 2005. The new legislation requires all Chapter 7 or 13 bankruptcy petitioners to complete a credit counseling course from an approved non-profit credit counseling agency, and prior to discharge the consumer must also undergo a debtor education course.

New Legislation Guidelines

Repayment Period

The new act increases the previous Chapter 13 repayment period of three years to five years.

Auto Loans

For car loans of less than 2 ½ years from the date of filing, a debtor might be required to pay the full loan amount.

Means Test

The means test compares the income of the petitioner to the median income in their state. Upon these results a petitioner might be required to repay a portion or all of their debt under Chapter 13 in lieu of a full discharge under Chapter 7.

IRS Decision

The IRS guidelines are used in determining reasonable living expenses to equate net income for the means test.

Credit Counseling

Before filing, petitioners are required to complete a credit counseling course from an approved non-profit credit counseling agency.

Debtor Education

Prior to discharge the consumer must undergo a court approved debtor and financial management education course.

Know your rights and educate yourself on the personal risk to you and your family that bankruptcy brings. Yes, bankruptcy is an answer to debt relief, but is it the right answer for you?