Congress enacted laws in April 2005 that changed the game. No longer could consumers choose to file a U.S. Bankruptcy Chapter 7. This decision was determined by new laws and bankruptcy codes. The new code states that before a consumer can file bankruptcy they must complete a credit counseling session. Now, this session comes at a cost to the debtor. In addition, the agency providing the credit counseling must be approved by the U.S. government.
Furthermore, several tests that are included in the new U.S. Bankruptcy Chapter 7 codes must be administered. First, the "means test" is applied to the debtors’ income. This test includes the court getting written verification of the debtors’ tax returns and pay check stubs. Then, the court does an income comparison between the debtor and other workers in that specific state. The salaries of the taxpayers in that state are averaged, and this figure is called the mean standard. In order for a debtor to file a U.S. Bankruptcy Chapter 7, the income of the debtor must be an amount that is less than or equal to this mean income. Likewise, the next test is called the disposable income test. A debtor that did not meet the standards of the "means test" may pass the disposable income test. This test is basically a strict budget created by the court and legislation.
The attorney of the debtor must supply all normal living expenses that the client has. Then, the court will take the income verification and the living expenses and figure the difference. Those debtors that meet a certain income amount---determined by legislation---can proceed with filing a U.S. Bankruptcy Chapter 7 in the court. Those that do not meet this standard are left with one other filing option. Unfortunately, many Americans that need to file a U.S. Bankruptcy Chapter 7 can no longer do so. Many people abused the system, and the rest of society must deal with the new legislation. Those that are limited to a chapter 13 bankruptcy must adhere to strict monthly budgets.
Whereas the U.S. Bankruptcy Chapter 7 is a complete liquidation, the chapter 13 is a debt reorganization. The debtor must stick to a budget determined by the court trustee.
Bankruptcy is a difficult process; nevertheless, a competent attorney can make the process much easier. An experienced bankruptcy lawyer will be able to assist you with either a U.S. Bankruptcy Chapter 7 or Chapter 13. The attorney studies the complexities of the bankruptcy code, and they master these provisions. Thus, they are experts at being able to navigate the legal process.
In conclusion, after the completion of a U.S. Bankruptcy Chapter 7, a consumer can start completely over. This is the time for you to exercise caution and self-discipline. Many creditors may be flocking towards you, but it is important to be prudent about your financial decisions. With proper financial habits, you can rebuild a stronger, healthier financial future for you and your family.
