Bankruptcy laws dictate several important aspects about the process. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was implemented, making some significant changes to the laws. Since then we have seen a big change in the pattern and trends of bankruptcy filings. As a result, it is important for consumers to understand what these changes were and how they impacted the filings numbers in the United States.
Why The Change
Prior to the passage of the new laws in 2005, filing for Chapter 7 bankruptcy was fairly easy and there were few regulations in place to prevent many from filing despite their financial ability to resolve their debts. In order to weed out some of those who were not completely financially insolvent, the new laws were passed to make Chapter 7 qualification standards more strict. Further, the laws added several new requirements of debtors participating in the process to minimize the chances that they would need bankruptcy protection again in the future.
What Are The Changes
The most notable change comes in the form of a Chapter 7 means test. This test compares a debtor's income to the median income level of their state of residence. Anyone whose income is less than the median income of their state may qualify for Chapter 7; whereas those with an income above the median income of the state would not, but may instead qualify for Chapter 13.
The new bankruptcy laws also increased the filing fees associated with the process. The average cost for filing a Chapter 7 case is now around $306, up from $299 prior to the 2005 changes. The cost of filing for Chapter 13 now costs around $281, up from $274 in previous years.
The 2005 bankruptcy law changes now require additional steps to be completed by the debtor if they are to obtain a successful discharge of their debts. The most important addition being the credit counseling course requirement, which requires debtors to attend and complete a 90 minute instructional course. This course covers topics about money management skills, using credit wisely and debt relief options. Once complete, debtors must submit the certificate of completion to the court within 180 days of the discharge.
Debtors must also submit copies of their income through paycheck stubs and proof of their expenses in the form of bills or bank statements. The new law also requires a debtor to be current on their tax returns and submit returns for at least three years prior to filing.
The Lee Law Firms aims to help local residents resolve their debt issues and achieve a financially healthy future. Their mission is to provide high quality legal representation that to assist hard working people lower monthly debt payments, stop wage garnishment, prevent foreclosures, and stop calls from creditors. The Lee Law Firm bankruptcy attorneys have many years of experience in all aspects of Chapter 7 and Chapter 13 Bankruptcy in Dallas.
