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Chapter 7 is significantly more difficult to file since 2005.

Chapter 7 is significantly more difficult to file since 2005.
"In 2005, Congress made significant adjustments to the bankruptcy code in an effort to make it more difficult for individuals to file for Chapter 7 bankruptcy. The intention was to thwart the bankruptcy plans of those who had abused the system. Since the 2005 amendments to the bankruptcy code, individuals must satisfy a means test in order to qualify for Chapter 7. The purpose of the new bankruptcy law is to force more individuals into Chapter 13 bankruptcy. Congress believed that the stricter law would prevent dishonest individuals from gaming the system by erasing all of their unsecured debts and allowing them to become debt-free. There are many honest people who suffer from unavoidable financial difficulties, and these individuals should still be able to benefit from Chapter 7 bankruptcy.In accordance with the current bankruptcy code, all debtors must now pass the means test. The means test is initially determined by the individual's current monthly income, with the quantity determined by the state's median income. This was added to the eligibility requirements in order to require debtors who may have the ability to repay some of their unsecured debts to transition to chapter 13 bankruptcy. This will require the debtor to repay a portion of the unsecured debt over a period of three to five years. The means test was designed to scrutinize any debtor whose income exceeds the state's median income. If the debtor earns more than the state's median income after necessary expenses and has disposable income of more than $150, the court will presume that the debtor is ineligible for Chapter 7 and should be forced into Chapter 13 bankruptcy.Prior to the changes in the law, some debtors filing for bankruptcy would migrate to another state to take advantage of its exemption laws. Since the amendment to the law, a debtor is no longer permitted to do so. When a debtor files for bankruptcy, they must reside in their new state for six months before being able to utilize its exemption laws. If a person must transfer for work or other reasons, they can still file in the state to which they relocated, but they must use exemption laws from their previous state of residence. This prevents individuals from registering for bankruptcy in the state with the most advantageous exemption laws given their financial situation.Credit counseling was added to the law in 2005, constituting another alteration. All individuals petitioning for bankruptcy must complete a pre-bankruptcy credit counseling course, which must be submitted to the court when the petition is filed. In addition, prior to discharge, a post-341 meeting financial management course must be completed and submitted. If neither of these courses is completed, the bankruptcy will be dismissed with no discharge. The new laws have significantly increased the amount of labor required for a successful bankruptcy filing. When contemplating bankruptcy, it is advisable to meet with a local bankruptcy attorney for an initial consultation to discuss your financial situation.
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"Chapter 7 is significantly more difficult to file since 2005." was written by Mary under the Finance / Wealth category. It has been read 126 times and generated 1 comments. The article was created on and updated on 03 June 2023.
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