Bankruptcy lawyers are fully aware of the changes that have happened to both chapter 7 and 13 federal bankruptcy law since 2005 code changes, but the average person using old information from the library to file may not be so lucky. The main difference to the law is that chapter 7 bankruptcy is now harder to file. States with personal income tax like Colorado make it harder to file without the help of a Denver bankruptcy attorney.
People with high incomes are now no longer eligible for to file for chapter 7 bankruptcy. Those with high incomes might have to file a hybrid that repays some debts with chapter 13. All applicants must now apply for credit counseling in addition to budget counseling like before. The new rules encourage those with high incomes to repay their debts instead of choosing liquidation through chapter 7.
Under the new laws, anyone with a median income above their state average must pass another hurdle before they can file for chapter 7. This hurdle is called the means test, where the court decides if you have enough disposable income after debts to make chapter 13 payments every month. You and your Denver bankruptcy lawyer will go over your income and see if there is enough left after subtracting expenses and debts. Most citizens choose chapter 7 if there is any possibility of not meeting these requirements.
A means test calculator is available from most bankruptcy lawyers. Let’s say you are a Denver HVAC company in serious debt but with enough income to meet secured payments without going under. In this case you would probably have to file for chapter 13 protection. Credit counseling agencies approved by the federal government can be found through your court appointed trustee, or at http://www.usdoj.gov/ust
The counseling is another step where the court tries to see if bankruptcy is really necessary in your case. Even if the current state of affairs is obviously impossible, counseling is still required… but you do not have to follow the plan they set in place. The agency’s plan will have to be submitted to the court however.
After bankruptcy is filed, you must attend another session on budgeting and finance management. This is the last step before the court wipes out approved debts.
The main effect of the changes is that attorney fees and time and effort involved in bankruptcy has increased. Some lawyers are switching from injury and motorcycle law to bankruptcy because of the increased workload. One more change to chapter 13 law is that expenses are calculated from IRS allowable expenses, instead of just total expenses.