The good news is, YES, most people who need to file bankruptcy still can. However, the Bankruptcy Reform Act, its abbreviated name, has many new requirements that must be met before a person can receive a discharge under either a Chapter 7 or a Chapter 13. These changes are numerous and complex and cannot all be addressed in this limited space. For detailed information, please contact the Law Offices of Shaye Larkin and request a consultation. A brief synopsis, however, provided below:
A Chapter 7 discharge enables a bankruptcy debtor to be relieved of the obligation to repay dischargable debts - effectively providing what has been nicknamed "a clean slate" after about 3 and a half months time, provided all filing requirements and deadlines have been met. A Chapter 13 bankruptcy is more complicated, involves repaying a percentage of your debt over between 3 and 5 years, depending on the situation at hand. After all of the payments are made under the Chapter 13 Plan approved by the Court, the debtor receives their "discharge" of any remaining unpaid debt. If you are a business debtor, i.e., the bulk of your debt is either business or tax debt, you can file a Chapter 7 without having to go through what is now termed "the median income test" and "the means test".
If you are a primarily consumer debtor, whether or not you can file a Chapter 7 Bankruptcy is determined by two factors: your household income, "the median income test" and your expenses. Limitations on income are provided by the Census Bureau figures of median household incomes for your state and your household size. If your household income is less than the median amount in your state for your household size, you can file a Chapter 7 irrespective of what your monthly expenses are without being considered to be "abusing the system", and you do not have to go through what is called "the means test". Your expenses will still be analyzed, however, and it is possible if the Trustee finds any of your expenses to be unreasonable and unwarranted, you can still be required to either dismiss your case or convert to a Chapter 13, but this has always been the law, it is nothing new. If your income is above the median amount for your state and your size household, you must go through "the means test" to determine whether or not you can file a Chapter 7. You can still file a Chapter 7 if, after deducting all of your allowable monthly expenses, you either have less $100 left over per month, or you have more than $100 left at the end of the month, but less than $166.57 and the amount left over would be insufficient to repay 25% of your general unsecured debt over 60 months, you can still file a Chapter 7. If you have at least $100 left after deducting allowable expenses but less than $166.67, and that amount is sufficient to repay 25% of your debt over 60 months, a presumption of abuse arises unless it can be rebutted; it would probably be better to file a Chapter 13. If you have more than $166.67 left over after deducting allowable expenses, again, a presumption of abuse arises and a Chapter 13 should be filed instead. It is important to note that what is now deemed to be an allowable expense is very different than under the old bankruptcy rules. The Law Offices of Shaye Larkin can explain this to you in greater detail.
Other requirements under the new law include obtaining a "bankruptcy briefing" by an approved credit counselor within the 6 months before a bankruptcy is filed. It takes about 90 minutes, can be done over the telephone or by internet, and there is a fee waiver if certain requirements are met. A certificate must be filed with the court establishing the "credit briefing" has been completed. Additionally, a financial management course must be completed with an approved credit counselor and a certificate of completion must be filed with the court before your discharge can be issued. Again, there is a fee waiver if certain requirements are met. We can provide you with more information on approved credit counselors providing this service.
The above changes are merely a handful of all the changes imposed by the Reform Act. Changes are made to the allowable time between bankruptcies, to when the imposition of the automatic stay prohibiting creditors from engaging in collecting activities is required, to which types of debts are dischargable, to whether a person can protect their property using the state’s exemptions, and many other items. At your first appointment, The Law Offices of Shaye Larkin will provide you with more detailed information pertaining to your specific situation.
Whether or not you file for bankruptcy is your choice, but it must be an informed choice. We at the Law Offices of Shaye Larkin can provide you with the necessary information to ensure that your choice is an informed one. The new law will require you to be more organized, but we are there to help you. Please contact us for more information. We are a Debt Relief Agency and are happy to help people to file for bankruptcy.
