Bankruptcy Law Changes Go Into Effect
It’s a new chapter for bankruptcy law in the United States and the page is turning in October – creating a rush of last-minute filers.
Congress passed legislation last spring marking the biggest overhaul of U.S. bankruptcy laws in more than 25 years. Effective Oct. 17, the new law creates a means test by which many people will not qualify for Chapter 7 bankruptcy, in which most unsecured debts can go unpaid. Unsecured debt is debt not backed by collateral, but by the integrity of the borrower (ex. credit card debt).
New Means Test Determines Chapter 7 Versus Chapter 13
The means test is based on median income levels and varies from state to state. If a single person in Texas makes more than $33,280 a year, he or she won’t be eligible to file for Chapter 7 bankruptcy and will have to file for Chapter 13 where you develop a five-year repayment plan. For married couples in Texas, the means test is just over $64,000. Couples making more than this amount can only file for Chapter 13.
Possible Increase in Attorney Fees
Besides the means test change, the new bankruptcy laws may spur an increase in the costs associated with filing for bankruptcy. Since there will be more paperwork to complete, it is likely attorney fees will increase. Bankruptcy filing already costs $600-$2,000. The fee increase could make filing for bankruptcy cost prohibitive for some people.
Education Requirements
In addition, after Oct. 17, persons seeking to file bankruptcy will have to get credit counseling prior to filing. Then, one must complete a financial management course.
For more information about the new bankruptcy laws, visit http://www.bankrate.com/brm/news/pf/20050927a1.asp
http://www.new-bankruptcy-law-info.com
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