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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
The new law establishes a more strict criteria for Chapter 7 filing. A debt can typically be discharged in a Chapter 7 bankruptcy if it is unsecured, meaning that there is no collateral backing it up. This includes debts such as credit card debt, medical bills and most personal loans. A Chapter 13 bankruptcy case involves a three to five year repayment plan. To qualify for Chapter 13, you must have a regular source of income, have enough disposable income, and your debts may not be too high.
The central feature of the new bankruptcy law is a “means test.” A means test stipulates that if your income is above a specified level, then you are not permitted to file bankruptcy under Chapter 7 and must use Chapter 13 instead. Chapter 13 requires that you enter into a repayment plan rather than simply liquidating your debts. In general, those with household income over the median income for their state are likely to be forced into Chapter 13 proceedings; however, this may not always be the case.
Makes The Means Test Complex :
- Living Costs
- Health Insurance
- Business Expense Needs
- Domestic Support Obligations
There are several allowable exemptions and deductions used in determining how much of a person’s income is available for paying unsecured non-priority debt (Chapter 13). While this makes the means test complex, it is an attempt to compensate for some basic required expenses such as basic living costs, health insurance, business expense needs, and domestic support obligations.
In addition to the means test described hereinabove, under the new bankruptcy law, every Debtor filing for protection under Chapter 7 or Chapter 13 of the US Bankruptcy Code must take a credit counseling and debtor education course. These courses are set up for you in my law office and may be taken online or over the phone. Each course takes approximately 45 minutes to complete.
When you’re filing a bankruptcy, it is critical to understand your legal rights. The Philadelphia, Pennsylvania bankruptcy law firm of Sadek & Cooper Law Offices personally meets with every client for the initial consultation to determine the appropriate course of action.
If you require assistance with personal or business bankruptcy filing and require the assistance of an experienced bankruptcy attorney in Allentown or Philadelphia, PA or within the surrounding counties of Montgomery, Bucks, Chester, Delaware Counties and Southern New Jersey. Please contact the bankruptcy attorneys of Sadek & Cooper Law Offices, LLC today at (215)-545-0008. We provide a FREE consultation with an experienced Allentown or Philadelphia debt relief and bankruptcy attorney.