The economic factors wreak havoc on the personal budgets of many Americans. Now more than ever, people have difficulty making ends meet and staying current on all their obligations. Debt relief for individuals as well as businesses provides many a chance to breathe and regroup. Reliable bankruptcy representation helps put the typical bankruptcy filer at ease.
No longer are people who file bankruptcy defined by job title or rank, and gone is the social stigma that once surrounded bankruptcy proceedings. Bankruptcy is a very real option for those looking to retake charge of their financial future from the fresh start bankruptcy provides.
Filing for bankruptcy used to be relatively simple, as far as deciding which chapter to file. However, in 2005, the United States Congress passed the Bankruptcy Abuse and Consumer Protection Act that now places financial requirements on those seeking relief in Bankruptcy Court. The controversial Act sought to strike an economic balance by placing consumers in a debt reorganization rather than a debt liquidation. This is the difference between a Chapter 13 and a Chapter 7.
A Chapter 13 filer repays a portion of their unsecured debt through the Chapter 13 Plan. On the other hand, a Chapter 7 filer discharges (or eliminates) unsecured debt while keeping current on debts secured by property. In either type of filing, when the debtor chooses to keep property, the debt secured by the collateral must be repaid.
When given the option to repay a portion of unsecured debt versus not doing so, most people prefer to file a Chapter 7. However, the determination of which chapter to file is not up to the consumer. The Bankruptcy Abuse and Consumer Protection Act determines whether a filer is eligible to file a Chapter 7. The determination is made by reviewing the level of income compared to the amount of monthly secured debt. This calculation is complex and confusing, and is one of the biggest changes made to bankruptcy law. The Act put in place a test by which a figure is arrived at to determine whether filing Chapter 7 would be considered an abuse of bankruptcy. The test is referred to as the "means test". The means test calculates monthly gross income as it relates to secured debt. An average income for the filer’s geographic location is presumed and, upon completion of the test, the availability to file Chapter 7 is determined. If you are not eligible to file a Chapter 7, that does not mean you are not eligible for bankruptcy relief. In that instance, the proper course would be to file a Chapter 13.
Bankruptcy is a valuable tool in your efforts to rebuild your credit score and get back on your feet after financial hardship. If you are having difficulty with your finances, contact an experienced bankruptcy attorney for an appointment to discuss your debt relief options.