'Death of Bankruptcy' Greatly Exaggerated
Despite what you may have read in the media, the sky has not fallen on the bankruptcy laws.
Yes, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) has made some far reaching changes to the U.S. Bankruptcy Code, which may make it more difficult for some debtors to qualify for a Chapter 7 'clean slate' bankruptcy.
However, if you are truly in financial need, you should still be eligible for some form of bankruptcy protection when you file under the new bankruptcy laws.
Make no mistake about it, the new law will require more work to complete a case-more work for both you and your attorney.
Unlike the prior bankruptcy law, you will be required to verify your income and expenses and your bankruptcy lawyer will be required to substantiate your claims.
Accordingly, this will require you to spend a great deal of time digging up pay stubs, receipts, and other documents to support your claims.
Your card's annual percentage rate (APR) is one of the most important things to understand, because some cards can have several APR's, depending on how you use it.
Some cards may have one APR for balances, a different APR for balances transferred from other credit accounts, and a third APR for cash advances.
Other cards have an APR that has one rate when you open it, and changes to a higher rate after the introductory rate period expires.
Furthermore, under the new 'means test,' to establish whether you are eligible for a Chapter 7 bankruptcy, you will have to develop an accurate estimate of your current income by going back six months and then comparing it with an IRS chart to determine whether you fall below or above your state's median income based on the size of your family.
If you make less than the median, you should qualify for a Chapter 7 bankruptcy, the simplest of bankruptcy procedures, without any additional work by you.
It is estimated that 85 percent of the people who file for bankruptcy will have incomes below the median and thus will be eligible to file under Chapter 7.
If, however, your income is above your state's average, and you don't have any 'special circumstances' that would permit you to file under Chapter 7, you still may be able to qualify for a Chapter 13 bankruptcy.
In most Chapter 13 bankruptcies, you and your attorney will put together a five-year payment plan for you to repay a portion of your debts to your creditors. In exchange, some of your debts will be discharged, and you may be able to keep many items of your property, such as your home and your car.
Another new wrinkle under BAPCPA is its pre-filing and pre-discharge educational requirements.
Before you file a case, whether it is a Chapter 7 or Chapter 13, you are required to attend a credit-counseling session offered by an approved credit counseling agency.
Then, before you are entitled to receive your discharge, you must attend a class on personal financial management.
Yes, filing bankruptcy under the new law may require more work for you and your attorney, and in some cases, Chapter 13 may be your only option.
But, if you are truly having financial difficulties, the new law should still permit you to get a fresh start.
