Recent changes to bankruptcy law may be making it harder for some people who are considering bankruptcy. A number of filers with higher incomes are no longer permitted to use Chapter 7 bankruptcy, but will instead have to repay at least some of their debt under Chapter 13. Everyone needs to get credit counseling before they can file a bankruptcy case. And, because the law imposes new requirements on lawyers, it is sometimes tougher to find an attorney to represent you in a bankruptcy case.
Under the old rules, most filers could choose the type of bankruptcy that seemed best for them. The new law prohibits some filers with higher incomes from using Chapter 7 bankruptcy.
Under the new rules, the first step in figuring out whether you can file for Chapter 7 bankruptcy is by measuring your current monthly income against the median income for a household of your size in your state. If your income is smaller than or equal to the median, you can file for Chapter 7 bankruptcy. Under the new rules, f it is more than the median, you must pass a “means test” in order to file for Chapter 7.
The means test is used to figure out whether you have enough disposable income, after subtracting certain allowed expenses and compulsory debt payments, to make payments on a Chapter 13 plan. If the income that’s left over after these calculations is below a certain amount, you can file for Chapter 7.
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