File For Bankruptcy? New Laws for Chapter 13 and Chapter 7 that You Need to Know

What You Should Consider Before Filing Bankruptcy

With the new bankruptcy law in effect, many people are wondering what the changes are. While there are plenty of new things to take into consideration, most of the people affected will be those who wish to apply for Chapter 7 or Chapter 13 bankruptcy. Here are some of the basic changes that are most likely to affect you, should you decide to file for bankruptcy protection.

Old eligibility: Previously, any debtor could choose between Chapter 7 or 13, according to what they perceived their circumstances. Chapter 7 is more lenient, but also has more stringent income requirements. However, if it looked as though the debtor might not be qualified, he or she could switch to Chapter 13 at any time, without any repercussions.

New eligibility: Things are different now. Chapter 7 cannot be considered without first passing a means test. Initiating bankruptcy filings are more difficult because of this. Additionally, rather than looking at current income, Chapter 7 looks at the previous six months' income. If you lost your job less than two months previous, you might be in trouble. Additionally, the means increased. If the debtor can possibly repay $6,000 or more to creditors over five years, Chapter 7 is not an option.

Old filing procedures and prices: Previously, anyone could file for bankruptcy. If there was not adequate cause, the case was dismissed and no penalties were paid. Many lawyers kept bankruptcy fees down to be competitive, allowing more people access to legal bankruptcy advice.