Means Test - New Bankruptcy Reform Act

With the new bankruptcy laws in effect, debtors will have to first pass a two-part means test before filing for Chapter 7 bankruptcy.

First, a quick definition of Means Test:

Means = Money, property, or other wealth (source: Dictionary.com)

Your Income Vs. Your State's Median Income

In the first part of the means test, your monthly income multiplied by 12 is compared to your state's median annual income. Your state's median income would be below your state's highest incomes and above your state's lowest incomes.

Here is a list of state median incomes, organized by family sizes.

If your income falls at or below your state's monthly median income, then your Chapter 7 bankruptcy filing will likely be successful.

On the other hand, if your monthly income does not fall below your state's median income, then your income will then be factored into a formula. Your formula results will determine your ability to file for Chapter 7.

Means Test Formula

Under the Means Test, any creditor, trustee or judge will look at your monthly income, minus certain living expenses like food and rent. Your Chapter 7 bankruptcy will likely be successful if you are unable to pay at least $6,000 over the next five years ($100 per month). However, if you can pay at least $10,000 over five years ($166.67 per month or more) your Chapter 7 will likely be denied.

If you could afford more than $6,000 but less than $10,000 over five years, then a mathematical calculation determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you can't afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 in either of these cases.

Conclusion

You should be aware that the new bankruptcy law lets the government decide what is best for you. The updates take away discretion from the Judges to judge cases based on individual circumstances. It is doubtful that the courts can make exceptions for results.

If you are in debt and would like to learn about your legal options, give us a call at 888.743.5787 or fill out our free legal evaluation form.

http://www.legalhelpers.com/legal_helpers/brc_articles_means_test.html

Credit Counseling and Debtor Education Courses - Bankruptcy Reform Act

Under the old bankruptcy law, you could file for bankruptcy at any time. Now, before you will be able to file for either Chapter 7 or Chapter 13 bankruptcy, you will have to participate in a credit counseling session within 6 months of the filing. After successfully filing for bankruptcy, you will also have to pay for and attend a debtor education class in order to relieve your debts.

Pre-Bankruptcy Credit Counseling

During your credit counseling session, a certified credit counselor will help you explore your options. Your credit counselor will be a qualified financial advisor who will help you decide if bankruptcy is the right choice for you. In addition, he or she is required by law to offer you impartial advice. This means that he or she cannot lead you to make a specific financial decision.

Your session may be in the form of a simple phone call to a credit counseling agency. You may even be able to send a credit counseling agency your information through the internet. You will probably spend about one hour discussing your situation with the credit counselor. When you have completed your pre-bankruptcy credit counseling, you will receive a certificate. You will then be eligible to file a Chapter 7 or Chapter 13 bankruptcy.

Post-Bankruptcy Debtor Education Course

In order to relieve your debts, you will be required to attend a debtor education course. The purpose of this course is to teach you how to better manage your finances after your bankruptcy. It will take more time to complete than your credit counseling session and may last from 1 to 3 hours.

You will probably be required to pay for your debtor education course. This means that filing for bankruptcy will cost you more money. However, some US Trustees may offer debtor education courses at their own offices. This will make attending the class cheaper and more convenient for you.

Conclusion

The required credit counseling session and debtor education courses make filing for bankruptcy more time consuming. The debtor education course also makes filing for bankruptcy more expensive. If you are thinking about filing bankruptcy, you should do so now.

http://www.legalhelpers.com/legal_helpers/brc_articles_debtor_education.html

Update on New Bankruptcy Law Changes

Over the course of the past 7 years powerful credit card companies and financial institutions have successfully lobbied Congress to make changes to current legislation. Congress had been close to passing a new bankruptcy law in each of the last two years, only to be held up by the controversial Schumer Amendment. The Schumer Amendment, sponsored by Senator Charles Schumer D-NY, would deny a discharge for government fines imposed on those arrested for abortion clinic violence.

In late January 2004, the U.S. House of Representatives voted to combine a non-controversial Senate passed bill (S. 1920) providing bankruptcy protection to family farmers under Chapter 12 of the U.S. Bankruptcy Code, first with H.R. 975, the bankruptcy abuse reform bill that has passed in the House in 2003 without the Schumer amendment, and then in 2002 with the Schumer Amendment.

Though the Schumer Amendment was also absent on the bankruptcy law, political pressure on Democrats to pass the bankruptcy law to assist farmers may have been too great.

On April 20th, 2005 the new bankruptcy reform act was signed into law by President Bush. This law went into effect on October 17th, 2005.

The new bankruptcy law requires more from debtors, including pre-filing consultations with an approved consumer credit counseling service in an attempt to force consumers to pay their debts outside of bankruptcy. Additionally, in order to file bankruptcy, a debtor needs certification from that credit counseling agency.

An income-based "means-test" determines which debtors may have the ability to pay back some of their debts. Those who do not pass the means test would be forced into a Chapter 13.

In addition, the reform act requires the following: more documentation from the debtor; repeated filings will be discouraged; the waiting period between Chapter 7 filings has been extended from 6 to 8 years; and a debtor's final discharge is now subject to completing a course in financial management.

http://www.legalhelpers.com/legal_helpers/brc_articles_changesupdate.html

How do I choose a bankruptcy attorney?

When considering filing a bankruptcy, you want to be advised by someone who is familiar and experienced with all of the "ins and outs" of bankruptcy law. Especially when you own a home or car or have other assets that you are trying to protect, you do not want your advice from an attorney who knows a little bit about a lot of different areas of law, but not a lot about bankruptcy. At Legal Helpers we spend almost all of our time on bankruptcy and getting people just like you out of debt. When you call a bankruptcy attorney for information regarding bankruptcy, ask him exactly how many bankruptcies he has done and see if his experience comes close to Legal Helpers. Educate yourself about your options, but be educated by someone who is qualified.

If you can find a law firm with the same level of experience as Legal Helpers, and one who prides himself on client service, as we do, let fees be your deciding factor.

Legal Helpers will provide you with a range of fair fees right over the phone. Our fees in simple cases start at ONLY $700. Beware of any attorney who refuses to give you a fee quote over the phone. Legal Helpers will quote you a fee right over the phone, before wasting any of your time.

Many attorneys charge fees of $2,000 or more for a straight-forward Chapter 7 bankruptcy. At Legal Helpers we do not believe that a consumer debtor should have to pay that much money to get a fresh start. We provide high quality legal representation, often at a fraction of the cost. Do not let anyone tell you that we could not possibly provide the same quality service at such low fees. We have thousands of clients to speak for our reputation of excellence. The fees we charge are commensurate with the work performed in your case, and since Legal Helpers has combined the highest levels of technology along with experienced bankruptcy attorneys, we are able to pass the cost savings on to you.

As for no money down firms, beware. Make them quote you the entire fee up front before you go into their office. Do not waste your time finding out that you will be paying them hundreds of dollars more than you would have by using Legal Helpers. They will try to convince you how important it is to have your case filed immediately. What they will not tell you, is that as soon as you retain Legal Helpers, for as little as $100 down, we will take all future calls from your creditors and the creditor harassment will stop. In most instances, taking a month or two to pay Legal Helpers the balance of your fee will not allow the creditors enough time to garnish your wages. When you speak to an attorney here, we will tell you if you are in any danger of losing anything by waiting. Please remember that if you need your case filed immediately Legal Helpers may be able to work with you. By waiting a short time until you can pay some or all of our fees, you will usually save hundreds of dollars and cost yourself nothing.

http://www.legalhelpers.com/legal_helpers/common_questions.html

Can I get rid of student loans or tax debts?

Any bankruptcy attorney must have a sophisticated understanding of bankruptcy law to deal with student loan and tax debts. Until October 1998, student loans were discharged through Chapter 7 bankruptcy if the first payment on the loan became due more than seven years prior to the date of filing. In October 1998, President Clinton signed a new law into effect that disqualified all student loans from discharge. Legal Helpers can still help you obtain relief from your student loan debts through the use of Chapter 13. Under Chapter 13, our attorneys can consolidate your student loan debt, along with any other outstanding bills, and arrange an interest free repayment plan, so that you do not have to suffer through the burden of garnishments, harassment and other collection efforts by student loan agencies. We may even be able to reduce the amount paid to the student loan agency during the course of your Chapter 13 so that your consolidation payment is as low as possible. If you would like to find out more about how Legal Helpers can ease the burden of student loan debts through the use of Chapter 13, call toll-free at 1-888-7-HELP-US to speak directly with a Legal Helpers attorney.

Tax debts are generally subject to discharge only if you file bankruptcy more than three years after you file a timely, truthful tax return. If your return is filed late, the taxes are generally discharged only if you file bankruptcy more than two years after filing a truthful tax return. Of course, these are general rules and you should speak with a Legal Helpers representative who will perform a detailed analysis of these issues.

http://www.legalhelpers.com/legal_helpers/common_questions.html

Can I get credit after filing bankruptcy?

Although bankruptcy may legally be reported to your credit report for up to 10 years, you can begin to reestablish your credit immediately. Remember that "credit" is your ability to borrow money. Lenders consider many factors while determining whether to loan you money, but most importantly, they consider your debt-to-income ratio. You are probably visiting this site because you already have more outstanding debt than you have the ability to pay. So, arguably, you do not have credit.

Filing eliminates most, if not all of your debts, therefore reducing your debt-to-income ratio, potentially improving your ability to borrow money in the future. Some financial institutions actively solicit business from people who have filed. Lenders are in business to make money by lending you money and charging you interest. Lenders know that once you have filed, you will not be able to file again for 6 years.

Many of our clients have purchased cars immediately upon receiving their discharge orders. Many lenders have programs that provide for post-bankruptcy borrows to obtain home financing within a year or two after a discharge. Many of our clients even receive solicitations for unsecured credit cards almost immediately upon receiving their discharge. Legal Helpers just wants to advise you to be careful not to get back into the credit card "trap".

CALL TOLL-FREE, 1-888-7-HELP-US TO SPEAK DIRECTLY WITH AN ATTORNEY OR LISTEN TO OUR FREE INFORMATIONAL HOTLINE. BY THE WAY, WE ARE OPEN FOR BUSINESS MONDAY THROUGH SATURDAY!

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