|
Phoenix Arizona
Bankruptcy Attorney
“Can I Still File for Bankruptcy Relief?”
For most
consumers, the 2005 bankruptcy law provides few barriers
Many people have the
false impression that individuals can no longer file for bankruptcy
protection and relief because of the changes to the bankruptcy laws as of
October 17, 2005.
This is not true. The process is more
cumbersome and involves more disclosure of information. Most consumer
debtors will find that they can file the most common consumer bankruptcy
(a Chapter 7 bankruptcy). Those bankruptcy filers will be able to wipe out
their unsecured debts while keeping their house and their vehicles (so
long as their payments are kept current) as well as their personal
property and their retirement benefits. Upon discharge of their debts
(approximately four months after filing), debtors are free to go on with
their lives.
Among the changes in
the law that effect individuals filing bankruptcy are the additional
requirements of taking two courses and the application of a "means test." Bankruptcy debtors are required to take a consumer
credit
counseling course from an
approved provider
prior to filing their
bankruptcy case. The course must be taken less than six months prior to
filing the case, and the exceptions are extremely narrow. After the case
is filed and before the discharge is entered, debtors must take a
financial management course from an approved provider.
One of the more
publicized changes is the addition of the means test (see related
articles) to determine
eligibility for a consumer to file a Chapter 7 bankruptcy. The means test
is a device to require high-income earners to pay off a greater portion of
their unsecured debt via a five-year repayment plan.
The means test has
several steps to determine eligibility to file a Chapter 7. The first is
household income. For example, a household of four with earnings of less
than $60,000 is eligible to file under Chapter 7 without any further
qualification. If the debtors have greater income than permitted by the
first stage, then their reasonable and necessary expenses (using IRS
collection guidelines) are considered. Thus, the debtors in a household of
four and earning more than $60,000 could still be eligible to file Chapter
7 bankruptcy, if their disposable income is less than $100 per month after
reasonable and necessary expenses are subtracted from their earnings.
Another result of the
changes are an increase of court filing fees to $299 (and perhaps another
$50 if a current proposal is passed by Congress) and an increase of
attorney fees corresponding to the increased workload associated with the
new disclosure requirements.
The bottom line is
that bankruptcy relief continues to be available to consumers despite the
October 2005 changes to the bankruptcy laws. Eligibility to file and your
decisions regarding filing are best discussed with an experienced
bankruptcy attorney. No two persons' circumstances are alike, and the
answer to an individual’s question is lengthier and more specific to those
individual and unique circumstances.
These
topics are discussed in greater detail elsewhere on this website, along
with the following issues raised by the changes in bankruptcy law.
|
