Debtor

There are options available to overcome financial hardship and get a fresh start. For many, Chapter 7 bankruptcy can provide the quickest and most cost effective relief possible.

In October 2005, the laws which govern Chapter 13 bankruptcy changed. One of the more significant ways the law changed dealt with the eligibility requirements for filing for Chapter 7 and Chapter 13 bankruptcy.

Before the new law, consultations with an attorney would allow the client to choose what type of bankruptcy they felt suited them best. However, the new law is framed to reduce the number of Chapter 7 filings by only allowing people who fall under their median state income, adjusted for family size and inflation, and people who meet rigorous standards under the means test to file for it. The rest of the people who don’t meet these standards must be evaluated by a series of complex, mathematical formulas that change annually to match new median incomes and expense standards. Clients who do not qualify through the means test will be required to file for Chapter 13 bankruptcy. The new law also extended the Chapter 13 term from a three- to five-year term, to a mandatory five-year term. Throughout the mandatory five-year term, the client must be supervised and represented before they can receive their discharge.

The decision to file for bankruptcy is not one to take lightly. With the multiple bankruptcy plans available and the changes to bankruptcy law that occurred in 2005, it is important to be an informed about options from various scenarios. If you are considering filing for bankruptcy but have concerns about what may happen should your income change, here is an overview of the facts.

Chapter 13 is called the wage earner’s plan and allows people with a regular income to develop a plan for repayment of debt.  Even people who are self-employed can file for Chapter 13.