There have been several changes to U.S. bankruptcy laws since 2005 that make it harder to file in comparison to years past. When changes such as this are implemented towards a process that was created to protect the average consumer from financial ruin, it’s important to know how they will affect you. If you are considering filing for bankruptcy, it’s important to know what you’re options are.
There have been two major changes: Changes to the laws in 2005 and the more recent Bankruptcy Act of 2009.
In 2005, new bankruptcy laws made changes to filing for liquidation through Chapter 7 or repayment through Chapter 13. It became harder for higher income individuals to file for liquidation with a Chapter 7 bankruptcy. The filer’s income now has to be measured vs. the median income for others in the same state in order for the filer to qualify. It’s called the “means test” and to file you must pass it. It examines your disposable income or what is left after paying required debt. 2005 also saw the addition of the credit-counseling requirement. Filers used to be able to simply choose whether they felt that Chapter 7 or Chapter 13 was best in their situation, now if their income is too high, they might not get a choice. They might only have one option: Chapter 13.
More recently, in 2009, Obama’s Bankruptcy Act was introduced for consideration. It was designed to make changes to the original Act of 2005. While the Bankruptcy Act of 2005 was designed to make it harder to file for bankruptcy, the Bankruptcy Act of 2009 was designed to make it easier. The bill was specifically intended to help reduce interest rates and mortgage balances. It would have resulted in a higher number of Chapter 13 bankruptcy filings. Regardless, the senate shot down the new legislation. It only got 45 of the 60 votes it would have needed to pass.
As of now, we are still adhering to the tougher qualification standards for bankruptcy that were set by the Bankruptcy Act of 2005 and even though it’s now officially harder to file, we still see a significant number of filers every year.
If you need help determining whether or not you pass the “means test” or if filing for Chapter 7 bankruptcy would be appropriate in your financial situation, get in touch with a southern California bankruptcy expert today. Call a bankruptcy attorney at Westgate Law.