It is imperative that both the debtors and creditors should be aware of the new bankruptcy laws so that they can save themselves from any unwanted future mishap. The U.S. Congress has made enormous changes that came into existence from October 2005.
There are some facts that are related to bankruptcy which are the main causes that bankruptcy law needed to be changed. Some of the facts are:
The filing of bankruptcy has just increased twice in the year 1995-2004 and the credit card companies were earning tripled profits. Approx. 80% of the people above the age of 60 had lost their job due to bankruptcy. Last but not the least, the filers of bankruptcy had the median income of $28,000.
Now let’s go through with the new changes in the bankruptcy law. If you are filing for bankruptcy, then the bankruptcy court can ask you to go through the Means Test first. On the basis of your result only, the court will conclude which bankruptcy will suit your case the most. As per the test, it will be assessed that how much money you are holding after paying off the necessary expenses. If your money is less than the median monthly income of the state, then you are qualified for the Chapter 7 bankruptcy. On the other hand, if your money is more than the median monthly income of the state, then court will ask you to file for Chapter 13 bankruptcy. The unfortunate part is that the day to day necessary expenses will be decided by the IRS instead of you. The court and IRS will allow you minimum allowable expense only.
These above bankruptcy laws will be a great help to you before filing bankruptcy so that you can estimate which chapter is best for you.
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