File Personal Bankruptcy

In the old days, individuals could simply choose whether they wanted to file personal bankruptcy under chapter 7 or chapter 13. However, new bankruptcy laws passed in 2005 changed all that. Now, certain income guidelines are enforced to keep higher income individuals and families from filing chapter 7 bankruptcy and completely eliminating their debts. Before you begin the bankruptcy process, you’ll want to consider the new income guidelines and other new rules for filing personal bankruptcy.

Income Guidelines When You File Personal Bankruptcy

When determining whether you will be able to file personal bankruptcy under Chapter 7, there are two guidelines you can follow.

• Median Income- Under the new law, you should first determine how much money you bring into your household every month. You will then take this number and compare it to your state’s estimated median income for a household of your size. Each state’s median income is different. If your income is lower than the average income, you will most likely be eligible to file for Chapter 7 bankruptcy. If it is higher, you may be forced to file Chapter 13 bankruptcy.

• Mean’s Test- The second measurement of your income will be done with a process known as the mean’s test. This test will determine if you have extra money left over after making your required monthly bill payments to pay off any debts through Chapter 13 bankruptcy. The new law does change this process a little bit though. Only certain ‘allowable’ expenses are taken into consideration when determining your monthly bills. If you do not have enough money left over after your allowable bills have been paid, you may be able to file Chapter 7.

Other Changes that may affect Whether you Decide to File Personal Bankruptcy

Several other changes have occurred with the new bankruptcy laws that may affect whether or not you decide to file bankruptcy at all.

• Counseling- Prior to filing bankruptcy, you will be required to take a credit counseling course with an approved agency. These agencies are determined by the US. Trustee’s Office. These counselors will help you determine whether you should file for bankruptcy and will help you develop a payment plan with your creditors if it is possible. Before you can file for bankruptcy, you will need to present to the court a certificate stating you completed the class and any suggestions given by the counselor for a payment plan.

• Prices- The cost to file bankruptcy has increased, and with it, the prices of many attorneys. More and more lawyers are charging higher prices due to the fact the filing for bankruptcy is more costly and time consuming than every before.

• Address changes- According to the new laws developed in 2005, a filer may have to live in a location longer to be eligible for exemption when they file personal bankruptcy. This can determine which pieces of property are and are not exempt from being seized and sold by the court during a bankruptcy case.

If you are getting ready to file personal bankruptcy, make sure you know where you stand when it comes to income guidelines and other changes that have been made for bankruptcy.