Key Changes In The New Bankruptcy Laws

It is very important for both the debtors and the creditors to be aware of the new bankruptcy laws because the more informed they are the better they will be able to defend their respective claims. Following are some of the key changes that the new bankruptcy laws have brought to the bankruptcy code. These changes are effective from October 17, 2005.

Means Test

Now choosing the type of bankruptcy is no more a matter of choice. If you are planning to file for bankruptcy, the bankruptcy court will ask you to pass the Means Test and based on the results of the test, the court will decide which type of bankruptcy is best suited for your specific bankruptcy case. If you know what exactly the Means Test is, you can yourself assess the results and take an informed decision. As per the Means Test, it is assessed that depending upon the all the sources of income that you have, how much money will be left to you after paying off the allowable day to day necessary expenses. If the money left to you is less than the median monthly income of the state, you qualify for the Chapter 7 bankruptcy. On the other hand, if the amount is much more than the median monthly income of the state, you will be asked by the court to file for chapter 13 bankruptcy. Therefore, in order to take the right decision in order to decide the type of the bankruptcy you should file for, it is important for you to apply the Means Test before you file the court petition for bankruptcy.

Expense Allowances Are Set By The IRS

It is not you who will decide about your day-to-day necessary expenses, but these are the allowances set by the IRS. Therefore, while you are performing the Means Test yourself, you should keep in mind that the food allowance is about $200 a month, the housing allowance is about $800 a month, etc. Here, you must note that even if your actual expenses for food and housing are more than the set amount, you will be allowed to deduct only that much from your monthly income.

Credit Counseling Is Mandatory

Under the new bankruptcy laws, it is now mandatory for the debtor to avail the services of government approved credit counselor. You will have to avail such services within one hundred and eighty days of filing bankruptcy.

The new bankruptcy laws have made the bankruptcy code more complex. However, at the same time, it is a sincere effort in order to protect people from bankruptcy frauds.

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