Major Intent of Bankruptcy Reform:
The motto of the bankruptcy program is : "Bankruptcy is for those persons who are unable to pay their debts, not for those who just don't want to".

Accordingly, the major intent of bankruptcy reform is to require people  who can afford to make some payments towards their debt either outside the bankruptcy process (see Financial Counseling Course) or through a Chapter 13 bankruptcy (see Means Test),  while still allowing others (who can't afford to pay their debts) to have their debt erased. Those people are able to pay some of their debt must file Chapter 13.   Those who are able to pay all their debts will not be permitted to file under either chapter.   They will be screened out by the financial responsibility course (the initial counseling session).

Major Changes to the law:

A Financial Responsibility Course screens out those able to pay their debts

Means Test:
This will identify debtors who have the financial capacity to pay some money to their creditors. The test consists of several steps, as follows:

STEP # 1:
Is the family earning above the median income for their state?
You can check to see if your income is above the median income for your state. State Median Incomes

If the answer is "No", Chapter 7 can be filed!  Caution: Other rules may still prevent you from being able to file a Chapter 7.

STEP # 2:
If the answer is "Yes" to STEP # 1 , do you have excess monthly income of more than $166.66/month to pay $10,000 of your debt over a 5 year period?

If the answer is "No" you must answer another question.    If "Yes", Chapter 7 cannot be filed but Chapter 13 may be filed!

STEP # 3:
If the answer is "No" to STEP # 2, do you have excess income of greater than $100/month to pay over the next 60 months at least 25% of your unsecured debt?

If the answer is "No",  you can file Chapter 7, but if the answer is "Yes" chapter 7 cannot be filed, but Chapter 13 may be filed!

A Financial Management Course has been created to teach those who have been permitted into the system how to handle their finances with the hope that they will not have to file bankruptcy again.

Sounds complicated? Confused?  Go HERE!

Proof of Income MUST be supplied:
Debtors filing Chapter 7 or Chapter 13 bankruptcy, must provide to the trustee, at least seven days prior to the 341 meeting, a copy of a tax return or transcript of a tax return, for the period for which the return was most recently due.

State Exemptions:
You cannot use the exemptions in your state of residence unless you have lived there at least 2 years.

Counseling:
Financial Counseling You must have finished counseling within the last 180 days before you can file, to determine whether you are able to handle your debts outside of the bankruptcy process.   Remember the motto of that process; if can can pay your bills the law says that it doesn't want you clogging up the system with a bankruptcy.     If you do not go through with this counseling any bankruptcy you file will be dismissed.

Financial Management Counseling But we are not through yet; you must also go through another counseling session to get your discharge.    Here the system hopes to teach you how to handle your finances.   This session must be done or you will not get a discharge of debts which are eligible for discharge. 

Child Support and Alimony:
These debts would go from a priority of 7th to 1st.

Tithing:
Up to 15% of your income can be given to charity. This is seen by some as a loophole allowing people who may be just over the thresh hold of having to file Chapter 13 to drop down low enough to file Chapter 7.   You will have to prove that you have been doing the tithing, saying so does not make it so.

Law Offices of Andrew Bodor 

Call us toll free at (800) 924-7403 to make an appointment

for that FREE CONSULTATION  before it's too late.

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As seen on TV:   "Don't close the door to your future. . . ."