The New Bankruptcy Bill
On March 10, 2005, the U.S. Senate passed a new bankruptcy bill. This bill arose from complaints by lenders who believed that too many people with ability to repay a portion of their debt were able to entirely dismiss their debts.
This new bill measures a debtor's ability to repay his or her debts through an income-based test. The bill requires people in bankruptcy to pay for credit counseling and stiffens some legal requirements for debtors in the bankruptcy process.
About 70 percent of the people who file for bankruptcy now do so under Chapter 7, while the other 30 percent or so fall under Chapter 13.
Under this new income test, individuals with insufficient assets or income could still file a Chapter 7 bankruptcy. If this Chapter 7 bankruptcy is approved, all debts are erased after certain assets are forfeited. However, individuals whose income exceeds the state's median income, and are able to pay at least $6,000 over five years, will be forced into Chapter 13.
Compared with the current bankruptcy laws, approximately 3.5 to 20 percent of individuals who currently dissolve their debts in bankruptcy would be disqualified from doing so under the new law.
An experienced bankruptcy attorney understands these new laws and how they affect your bankruptcy filing. If you are considering filing for bankruptcy, contact a bankruptcy lawyer in your area to find out more about your filing.