The United States Bankruptcy code provide protection for debtors against creditors by allowing debtors to file for chapter 7 or chapter 13 bankruptcy protection. Chapter 7 bankruptcy is an option for people who pass the means test, meaning that they make under the median income for their state. Chapter 13 bankruptcy, on the other hand, is the choice offered to working individuals. In chapter 13 bankruptcy, debtors create a payment plan to repay and reorganize their debts. Chapter 13 bankruptcy laws can be complex, so it is a good idea to consult an attorney before filing for bankruptcy protection.
Chapter 13 bankruptcy laws have changed in recent years in order to stop debtors from abusing a system that was put into place in order to help them out of financial ruin. In order to eligible to file for chapter 13 bankruptcy, debtors must have a steady job with a regular income. This is because chapter 13 bankruptcy entails repayment of the debt through payment plans. Under the payment plans, debtors may choose to repay their debts in periods of either 36 or 60 months. Under current laws, debtors must show to the court that they will be able to meet their financial obligations for the duration of the payment plan. Before chapter 13 bankruptcy laws were changed, the U.S. Bankruptcy code allowed judges to have discretion in determining the living expenses of debtors. They were allowed to factor in considerations such as medical needs, disabilities, cost of living in an area, and so on. However, with new bankruptcy laws, judges' hands are tied by a set standard to which they must adhere. This makes it difficult to consider living expenses on a case by case basis.
Also, new chapter 13 bankruptcy laws provide for punishments for those filing for chapter 7 falsely. Chapter 7 bankruptcy discharges most debts, unlike chapter 13 bankruptcy. In order to qualify for chapter 7 bankruptcy, individuals must pass the means test, which is accomplished by earning less than the filer's state median income. Those individuals who have been granted chapter 7 bankruptcy because of fraud or abuse can have their status revoked and changed to chapter 13. Abuse is assumed if a debtor makes more than $166.67 in income at the time of the filing.
New chapter 13 laws also require that people who are filing for it must take classes in money management and personal finance before and after filing a petition for bankruptcy. These classes must be approved by the bankruptcy courts and are mandatory. If individuals fail to complete the courses, their bankruptcy status may be revoked, removing any bankruptcy protection from creditors that they may have had.
Chapter 13 laws also require that an individual complete more paperwork, detailing their financial situation, disclosing information about income, assets, liabilities, debts, creditors, tax returns, and identification. After the files are processed, debtors are required to file a payment plan within 180 days of petitioning the court for bankruptcy.
The laws and regulations regarding chapter 13 bankruptcy are complex. Even though money may be scarce, it is advisable to hire proper representation to make sure that everything is in order and the bankruptcy filing is approved without incident and in the best interest of the debtor.
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If you live in Alabama, Florida, Missouri, New York or Wyoming, please click here for additional information.
By an Act of Congress and the President of the United States, we are a federal Debt Relief Agency. Attorneys and/or law firms promoted through this Web site are also federally designated Debt Relief Agencies. They help people file for relief under the U.S. Bankruptcy Code. Disclosures Required Under the U.S. Bankruptcy Code.