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The Changes Brought By The New Bankruptcy Laws
By
Saurabh K Jain
The new
bankruptcy laws have come into effect from
October, 2005. If you are planning to file a
court petition for bankruptcy, but you are
not aware of the changes brought by the new
laws, you may have to face a lot of
difficulties during the bankruptcy
declaration proceedings in the court. What
is more, the unawareness of the new laws may
also make it difficult for you to defend
your bankruptcy claim. This article intends
to give you a brief insight into all the
latest changes that these new laws have
brought.
Personal Bankruptcy
The major changes that the new bankruptcy
laws have brought are mostly regarding the
personal bankruptcy under chapter 7 and 13.
Before the introduction of these laws, it
was optional for the debtors to file for
bankruptcy either in chapter 7 or chapter
13. However, now, it has become mandatory
for them to go through certain tests, in
order to determine which type of bankruptcy
they are eligible for.
Means Test
In this regard, the first test that the
debtor has to pass before filing bankruptcy
is a Means Test. As per this test, the
debtor's total income from all the sources
is evaluated. Then, the evaluation of the
debtor's essential expenses is done. These
essential expenses are the expenses that the
debtor cannot live without, such as food,
cloth, home etc. Now, the amount of the
essential expenses is deducted from the
gross income, in order to evaluate the net
income that is left with the debtor. As per
the new bankruptcy laws, if this net income
is greater than the median income of the
state, the debtor is eligible for filing for
bankruptcy under chapter 13, as per which
the debtor will be allowed to continue with
their business operations along with making
the repayments for their debts, based on the
suggested repayment plan by the bankruptcy
court.
Credit Counseling
The new bankruptcy laws have also made it
mandatory for the debtors to go through a
credit counseling process, at least six
months prior to filing the court petition
for bankruptcy. The debtor must avail the
credit counseling services from a
government-approved agency. The main
objective for adding this step is to
evaluate the actual financial situation of
the debtor. The credit-counseling agency
will look into the financial details of the
debtor and try to help them run their
business in a profitable way. It is only if
the credit counseling agency declares that
the debtor is not in a situation to run
their business in a profitable way, the
debtor can file for chapter 7 bankruptcy.
The new bankruptcy laws have changed the way
people used to go ahead for bankruptcy
claim. The new laws have affected both the
personal and business bankruptcy. Now, that
the new laws have introduced, it is no more
optional for the debtors to go either for
the chapter 13 or chapter 7 bankruptcy. It
is mandatory for the debtors to pass the
Means test and go through a credit
counseling service before filing bankruptcy.
Conclusion
Are you one
of the many that suffer from insurmountable
debt and wonder if bankruptcy is an option?
Give us a call at (203) 924-6700 or
contact us.
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