Confused About New CA Bankruptcy Laws?
Redding Bankruptcy Attorney Patricia Johnson Can Explain
Beginning October 17, 2005, new federal bankruptcy laws went into effect that slightly changed the way people file for bankruptcy. The changes spawned some rumors that are not necessarily correct, so it is important to get the facts from a seasoned professional. The overview below covers some basics, but an attorney can provide the most thorough information and answer your unique questions. Redding bankruptcy lawyer Patricia Johnson has years of experience helping people in financial binds find good, honest solutions to their problems. She can explain the new bankruptcy rules and requirements in plain English.
Eligibility
New eligibility rules do not make it harder for someone to file bankruptcy, in most cases. They simply make the bankruptcy type for which each person must file clearer. People with higher incomes may no longer, in many cases, file for a Chapter 7 bankruptcy (liquidation), and instead must use the type that requires them to pay back a small percentage of their debts, Chapter 13 bankruptcy.
The Means Test
Lawmakers created the “means test” to make it easier for people to determine the type of bankruptcy they can file under the new laws. The test essentially requires that you measure your current monthly income, and then compare it with the median income for a household of equal size in the state where you reside. People with an income less than or equal to the median can file for a Chapter 7 bankruptcy, while those with a median income above the median must answer a series of other tests and may have to opt for a Chapter 13 bankruptcy.
An attorney can help you measure your income and find out which type of credit relief you may lawfully obtain.
Credit Counseling
Anyone wishing to file for bankruptcy must now complete a debt counseling course from a certified agency. Enrolling in credit counseling does not require you to follow through on any debt repayment plan if they propose one. However, you do have to take the course even if it is obvious a traditional payment plan would not make sense considering the magnitude of your debts. This course takes perhaps two hours – you list your income and all your debts, then speak with a counselor who issues the certification.
Other Changes
People who must file for a Chapter 13 bankruptcy have to pay all of their disposable income to their repayment plan, but ‘disposable’ is figured differently. Now, they may pay what is left after “allowed” expenses (rather than “actual” expenses). The IRS dictates what items qualify as “allowed” expenses. If though you are eligible to elect to file Chapter 13, then you can also use reasonable, actual expenses.
Additionally, the new laws change the length of time a person must have resided in his state before he can use that state’s exemption laws, which affects the amount of personal property he may keep.
And Plans must be for at least three years if you elect to file but may be for five, or must be for five years if you are required to do Chapter 13. In either case, you never pay more than you owe.
The changes these new laws implemented are complex. It is best to speak to an attorney who has your best interest in mind and who will apply the new rules to your unique situation. Redding bankruptcy attorney Patricia Johnson can provide trustworthy, ethical guidance to get you back on your feet financially. Do not let your debts continue to grow. Contact her directly and start on the path to financial freedom today.