Effective October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, aka the “new bankruptcy law” became effective. The law imposes certain restrictions, when it comes to filing for bankruptcy. One of the new requirements mandates that bankruptcy filers pass a “means test”.
The “means test” is a calculation that determines whether a bankruptcy filer has enough disposable income to file under chapter 7 or chapter 13. Chapter 7 allows bankruptcy filers to walk away from their debts after giving up most of their secured assets. If you are fail the “means test,” chapter 13 may be an option. Chapter 13 requires filers to pay back their secured debt and as much of their unsecured debt as possible.
The “means test” will be triggered, if a filer’s monthly income is greater than their state of residence’s median household income after adjustments inflation and size of family. To determine if a bankruptcy filer passes the “means test” a filer’s attorney must do the following:
Tags: filing chapter 7 bankruptcy, new bankruptcy law, new bankruptcy law means test
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