Bankruptcy rules and regulations have become increasingly strict and more rigid with the recent sweeping changes in the bankruptcy laws in recent years. It used to be that one could declare bankruptcy every year or so with no consequences but that is not the case any more. In fact, if your bankruptcy case is not presented to the federal judge in the right light, you may not even get approved to file for bankruptcy.
That's right, you now need to be approved to file. This is exactly why it is more important now than ever to not try to do it yourself. The complexities in the laws require the knowledge of someone like a good bankruptcy lawyer who work with this on a regular basis, because if not presented in the right light, you could be even more hosed than you are now.
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Chapter 7 and Chapter 13 bankruptcy rules have also become stricter. The rules differ from state to state, but the basic tenets are consistent. The standards now require credit counseling, stringent mathematical formulas to determine the form of bankruptcy that can be applied for, and stricter rules as to how money will be paid back. One of the bankruptcy rules is the requirement for credit counseling and it must be done with a state-approved credit counselor. This is to help the debtor determine if bankruptcy is the only answer, or if there may be a more effective means of eliminating personal debt. Proof of attendance will be required prior to filing for Chapter 7 or Chapter 13.
Any plan for repayment created by the counseling agency must be submitted to the court at the time of filing. Filing must be done in the debtor's state of residence. This is important because states can determine exemptions. Moving to another state to avail oneself of attractive exemptions is not acceptable. One has to have lived in the state of residence for two years prior to filing for bankruptcy.
The determination as to whether to file for Chapter 7 (elimination) or Chapter 13 (a repayment plan) is no longer up to the individual. Bankruptcy rules prevent individuals with too high an income from filing for Chapter 7. The determination of eligibility is based on a mathematical formula that compares the person's monthly household income to the median income for the average family of the same size. Those with a lesser income may file for Chapter 7.
Those making more than the median may then take the means test, which determines disposable income after subtracting allowable expenses. Those below the mean may still qualify. This is based on if there remains too little disposable income after the subtraction of other allowable expenses. The bankruptcy rules for Chapter 7 allow for the discharge or elimination of unsecured loans such as credit card debt. Items such as back child support and alimony will not be discharged, and student loans are unlikely to be exempt. Property from secured loans may or may not be exempt and could be seized and liquidated for the benefit of creditors.
Under Chapter 13, the bankruptcy rules allow for a plan of repayment for debts owed. Individuals with incomes above the median and the mean may be eligible for this, While some of the debt may be discharged, a repayment plan is filed that included a three to five year plan of monthly payment, including some or all of their unsecured debt. The repayment plan is based on disposable income after the subtraction of allowed expenses. Allowed expenses are not necessarily the actual cost of expenses and are often less. This means that after filing bankruptcy, the debtor will generally be getting by on less. The positive side of this is the debtor does not lose The debtor does not lose personal property under the plan.
The best way to figure out which bankruptcy rules you qualify for is to sit and talk with a bankruptcy attorney. They will know and understand all the rules and the loop holes. Make a list of questions and concerns you have and make sure they answer those questions. Remember this is your life and your credit. Make sure you are protected.
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