As you may have heard, the bankruptcy law has recently undergone significant changes. This is vital information, as the eligibility requirements for each chapter have changed. This article is for you if you are contemplating filing for bankruptcy or are planning to file for bankruptcy in the near future.
Qualification For Chapter 7
As indicated previously in this article, chapter 7 eligibility has been restricted. Before this change in the law, anyone could file for this form of claim, but those days are over. Now, consumers who register for this chapter are subject to salary limits.
To qualify for this chapter, your monthly income must be equal to or less than the state-mandated median monthly income for your family size. This is intended to restrict high-income families from filing for this form of bankruptcy. If your monthly income is greater than this median, you will be required to take and pass a test. This test is known as the ""means test.""
The """"means test"""" should be conducted as follows: deduct your monthly income from your debt payments and specific allowed expenses. This will produce what is known as ""disposable income."" If this income is actually less than or equal to the median income of your state, you will be eligible for chapter 7.
Alterations To Chapter 13
The seventh chapter is not the only one to have been altered. Likewise, Chapter 13 has been modified. Under the new law, filers will also be required to allocate all of their disposable income to the repayment of their debt, but the expenses subtracted from their real income (which yields the disposable income figure) will not be their actual expenses, but rather IRS-approved expenses. This modification only applies if the taxpayer's income exceeds the state median. In addition, these expenses will not be deducted from the monthly income, but rather from the average monthly income for the six months following the chapter 13 bankruptcy filing.
Another Variation
Before filing for either of the two chapters, individuals must complete credit counseling. What is the intent of this prerequisite? In doing so, you will determine whether filing for bankruptcy is truly your best option or whether you have other options before registering. Even if you have other options, it is not required that you choose them. You are only required to participate in counseling. No exceptions exist to this norm.
At the conclusion of your bankruptcy case, you must attend a second counseling session. You will acquire knowledge of personal financial management, which is fantastic news in my opinion.""
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