Chapter 7 Bankruptcy Now Has A Means Test
Of all the various chapters for filing bankruptcy in the US, chapters 7 and 13 are the most popular. In fact 85% of all filings are under chapter 7, probably as this is perceived as the “best” type of bankruptcy, leaving the debtor free from any debt on discharge, unlike chapter 13 where debts have to be repaid under a repayment plan.
The biggest attraction of chapter 7 bankruptcy is that despite the fact that all ones assets are sold and the proceeds distributed amongst creditors, an individual is then debt free. And therein lies the problem.
The problem is that it is possible that the sale of an individuals assets will fall far short of the amount of money owed, leaving creditors out of pocket by some distance.
Often this is just a sad reality of life, but until a few years ago chapter 7 could be used by the unscrupulous simply to get rid of debt that they could in fact afford to repay, albeit with a little rearranging of their debts.
To get over this problem, the 2005 Bankruptcy Abuse prevention and Consumer Protection Act bought in a means test. This is only applicable to individuals and consumer debt.
The means test was introduced to ensure that only those who genuinely cannot repay their debts can claim chapter 7 bankruptcy.
The means test works by taking the applicants average earnings over the past 6 months before filing, and deducting certain monthly expenses to arrive at the net “disposable income”.
If you fail this part it gets a little complicated, as the court then decides if you are in a position to pay off at least some of your unsecured debt.
If you income is found to be greater than the median then you have to go through some complicated calculations. The problem an individual faces once they fail the first part of the test, is determining if your “disposable income” figure is sufficient, after paying monthly “allowed” expenses, to pay at least a proportion of your unsecured debts (credit cards for example).
The problem here is that different states have different rules as to what are the allowed amounts for day to day living expenses. However, if your “disposable income” is more than a certain amount, you fail the means test and are prevented from filing for chapter 7.
Bankruptcy is a drastic step, in spite of what other people might say to you. It can destroy your financial future as your credit score drops. Although chapter 7 is the most popular form of bankruptcy, it might be worth looking at chapter 13 bankruptcy law. If you would like further free information and advice, visit www.chapter13bankruptcylaw.net.
Chapter 13 Bankruptcy: What’s The Plan?
It always help to have a plan. Plans are are a good idea for relationships, business, and life in general. When filing Chapter 13 bankruptcy, a plan is not only a good idea, it’s required by law.
As an Orlando bankruptcy lawyer, I help my clients formulate a Chapter 13 payment plan to accomplish their financial goals. Depending on my client’s situation, through their payment plan, which can usually last anywhere from 36 to 60 months, I can help them catch up a mortgage payment, eliminate a second mortgage altogether, wipe out credit card debt, save money on a car loan, or handle IRS debt.
The Debtor, the person filing the Chapter 13 bankruptcy, has to file a payment plan at the outset of the case. The plan’s job is to tell everyone what goals the Debtor wants to achieve during the time the Debtor is in bankruptcy. The plan also instructs creditors how they will be dealt with, and tells the Chapter 13 Trustee who to pay and how much to pay each creditor.
There are many choices to be made by the Debtor when developing a plan at the beginning. Many times, I see Debtors in Court who have not constructed a plan capable of being understood by creditors or the Trustee. Sometimes, as a result, the Debtor’s case can be dismissed. When this happens, the Debtor will have a bankruptcy on his credit report, but none of the benefits he could have received had the plan been done correctly.
Hiring an experienced Orlando bankruptcy lawyer who has successfully represented clients through the Chapter 13 process in Orlando is a must if you want a smooth ride through the case. In the vast majority of cases I file for my clients, so long as the Trustee payments are being made, my clients never have to appear in Court. More importantly, my clients accomplish the goals they set out to achieve at the beginning of their case.
Having a plan is important, especially in Chapter 13 cases. Having a plan that successfully navigates you through the case and relieves you from overwhelming debt is even better.
Looking for help with filing Chapter 13 bankruptcy, then visit www.khuntergoffpa.com to find the best Orlando bankruptcy lawyer for you.