What are the changes in the chapter seven bankruptcy laws?

Bankruptcy is certainly a significant financial step that should only be undertaken after careful consideration, but it can provide relief for those with few other options. It can affect your credit for years to come, but this shouldn’t matter much if your situation is bad enough.

But wait a minute. Isn’t bankruptcy defunct due to the recent changes in the bankruptcy code? Not at all. Congress did make some changes that make the process more involved, but there’s still a great chance that you’ll be eligible to file for bankruptcy if you make the decision.

The new law creates some additional obstacles, but they shouldn’t scare you away if you know what to look for.

Chapter seven bankruptcy, by the way, is designed to discharge (or eliminate) all of your debt. However, under the changes that were recently made, you have to prove that you’re not able to pay off your debts by taking something called the means test. This test looks at your current income and expenses to see if you really are in over your head.

If your income is below the median income for your state, then you won’t even have to worry about taking the means test. If your income is higher, you will have to go through a painstaking process with your lawyer at your side.

At the end of the day, you will most likely qualify for chapter seven. If you don’t, you can choose to file chapter 13 bankruptcy, which creates a repayment plan for the next few years instead of simply wiping out your debt.

There are some other changes such as obligatory credit counseling. As you might imagine, the purpose here is to prevent you from ending up in bankruptcy court a second time at some point in the future.

Keep in mind that there are lots of details and exceptions that you’ll have to work out with your lawyer, so don’t try to go through this process by yourself.

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