Importantly, the preponderance of 2005 amendments pertain to consumer debtors and consumer debt. The majority of amendments do not apply to individuals whose debt is essentially business-related.
Although it may be partially true that the 2005 amendments make it more difficult for consumers to file for bankruptcy, you must examine the nature of your debts in greater detail.
Prior to 2005, there was no means test. One of the most significant modifications to the bankruptcy code in 2005 was the implementation of a means test. Simply stated, a debtor or debtors' household earning more than the average household in their respective geographic location must provide detailed financial information regarding the six-month period immediately preceding the bankruptcy petition filing. If the debtor passes the means test, they are eligible for Chapter 7 bankruptcy. If you fail the means test, you are ineligible for Chapter 7 and must evaluate alternative options.
The majority of individuals are unaware that the means test only pertains to those with primarily consumer debt.
What constitute commercial debt?
Consumer debts are debts incurred by an individual predominantly for personal, family, or household reasons (e.g., credit card charges at electronic and clothing stores).
What are business debts?
Non-consumer debts are debts that are incurred predominantly for profit and not for personal, family, or household purposes, such as debts incurred as a result of a business or investment properties. Additional examples include personal guarantees for business loans, credit lines, etc.
Numerous courts have determined that certain income taxes and medical obligations also fall under this classification of non-consumer debts. A recent decision determined that non-dischargeable student debt should not be considered consumer debt because the individual incurred the debt with an eye toward profit (if the debtor became a dentist, he would incur the debt for a profit purpose even though he did not complete his education).
Why is this all significant?
It is crucial to have a qualified bankruptcy attorney evaluate your specific debts and case. This is to ensure that the attorney has the correct information to determine whether or not the new laws enacted in 2005 apply to your case. It is possible that the means test does not apply to your case, making it simpler for you to qualify for Chapter 7 bankruptcy.
For this reason, I do not discuss a potential client's case over the phone; a free consultation is required in order to provide my clients with the finest service and advice.
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