What is Bankruptcy Reform?
Bankruptcy reform, which is accurately known as the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, but more commonly referred to as the Bankruptcy Reform Act was an act that was given a major facelift in 2005, and it has been the first major face lift that has been given to the bankruptcy protection act in decades. The Bankruptcy bill of 2005 was first drafted in the year 1997 and first introduced in the year 1998. The United States House of Representatives then approved a version of the bill which was titled the “Bankruptcy Reform Act of 1999” and in 2000, a slightly edited version of the bill was approved by the Senate.
After the reconciliation of the differences in the bills, a bill which was called the Bankruptcy Reform Act was then passed into law by the Congress in the year 2000. The changes made to the Bankruptcy Reform was enacted by the 109th United States Congress on April 14, 2005 and signed into law by the then President, President George W. Bush the 20th of April, 2005. The major idea behind the reforms made to this law is to make sure that the consumers are fully made to know and access any other available options before finally settling for the option of filing a bankruptcy claim in the event of the unavailability of other options. The truth is that with the new reforms put in place, the Act and laws are more stringent now than ever and some major steps have to be taken before a bankruptcy claim can be filed with the courts.
Provisions of the Bankruptcy Reform Act
• For any property acquired within the last three years, there is a nationwide cap of $125,000 on homestead exemptions (the amount of home equity you get to keep).
• Before filing for another bankruptcy claim, a period of 8 years must have elapsed.
• For debtors incurring and filing bankruptcy claims for multiple debts, the automatic stay has been weakened.
• To keep any item financed or purchased within two and a half years of filing, the full balance must be paid.
• You have to be a resident for a period of at least 720 days to be able to claim your state’s exemptions (the property you get to keep in a Chapter 7)
Requirements for filing a Bankruptcy claim
With the reforms made to the Bankruptcy Act, some major changes came along too. Now, to file a bankruptcy claim with the courts, you must first of all have received financial counseling classes from any financial counseling agency that has been approved by the U.S Trustees Office. This is where your Bankruptcy Reform Attorney in Los Angeles and San Fernando Valley California
I help my clients who want a shot at filing for bankruptcy, comprehensively answering all their questions about their eligibility, furnishing them with all the assistance needed with their paperwork, and representing them at all hearings. With this pre-filing counseling, an opportunity to professionally review your income, expenses, and debt obligations with a qualified and objective counselor is presented to you. What this counseling covers includes Methods by which the debts could be repaid, money management, and a brief summary of your rights and responsibilities as pertaining to the debt in question.
When this is done, you will be issued a certificate by the counseling agency indicating that you have successfully concluded the required approved counseling and education program. With this certificate, you can then decide to move ahead with filing the bankruptcy claim as the certificate would be a major requirement.
If you wish to move ahead with filing for a bankruptcy claim after concluding the pre-filing counseling program, then you will have to pass a “means test” which would then determine if you qualify to file a bankruptcy claim.
The Means Test
The Section 707(b)(2) of the Bankruptcy Reform Act makes use of a “means test” with the intent to ascertain if an individual debtor’s filing for Chapter 7 bankruptcy claim is assumed to be an abuse of the Bankruptcy Code which normally would then require an outright dismissal or conversion of the case to chapter 13 bankruptcy claim.An abuse of the Bankruptcy reform act can be assumed if and where the aggregate monthly income of the debtor over a period of 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% all non-priority unsecured debts held by the debtor, as long as that amount is within the range of $6,575. The only way the debtor can succeed in disproving the assumption of abuse is by a showing of special circumstances that justifies some additional expenses made or adjustments to the current monthly income.Such special circumstances could include child support payments, costs of taking care of an ill or disabled member(s) of the family, some school expenses made annually, and certain payments that have been made to secured creditors.
The main idea behind this test is to decipher if you as a debtor have enough money to pay back a portion at least of the debt you have incurred. You will most possibly be denied your petition to file a Chapter 7 bankruptcy claim if, you possess an income of $100 or more left after you are done with paying off your living expenses for six months before filing for bankruptcy.
A determination of whether you passed the test or not takes a whole lot more just an income minus expenses statistical calculation. After a careful and well thought out consideration of your real living expenses by the courts, they would also take a good look at the hypothetical expenses of the Internal Revenue Service’s as well. These proposed expenses, may just be possibly lower than what you truly spend.
Your petition for Chapter 7 is most likely to be granted if your combined household income is less than the median family income in your state (there is always a slight variation in this amount, but it is usually typically within the $50,000 range), but you will still need to pass the means test.
Once you have passed the mean test, your petition for Chapter 7 will be approved. In a situation where you fail the mean test, your application for Chapter 7 will be rejected or most likely changed to a Chapter 13 Bankruptcy claim. Your Bankruptcy Reform Attorney in Los Angeles and San Fernando Valley California
is able to handle all the necessary paperwork required for a successful filing for Chapter 7, and where impossible, could help in making sure it is converted to a Chapter 13 Bankruptcy claim.
need is a good Chapter 7 Attorney Los Angeles, Woodland Hills, Encino, Tarzana, Chatsworth and the entire San Fernando Valley.
We are a debt relief agency with the sole purpose of helping people file for bankruptcy relief under the Bankruptcy Code. Call a Los Angeles-area lawyer dedicated to helping people wrap up debts and get a fresh start. E-mail the Leventhal Law Group, P.C. or call 818-347-5800.