New Bankruptcy Law - Is Filing For Bankruptcy Still a Good Option Under the New Rule?


Currently, there are many people who are considering bankruptcy but are worried that it is no longer the best option available, because of the amendments in the bankruptcy law. Depending on how extreme your financial situation is right now, bankruptcy may still be the only legal option left for you to clean up your slate and start all over.

The New Bankruptcy Law was passed by Congress in 2005, which made it more complex to assure that those who file for bankruptcy are really eligible because they have no means to pay off their debts anymore. This bill was passed due to the relentless lobbying of credit card companies who complain of excessive credit defaults of consumers. Although it is more stringent now than before, the new bankruptcy law still grants bankruptcy to those who are deserving of it.

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One of the changes that stand out is the requirement of a "means test". This test is simply a gauge to convince the court that you really do not have the means to pay for your debts. It considers your income and compares it against the median income of your state. If your income falls below the median, then you are considered eligible for bankruptcy. However, if you are earning more than the median income in your state, then you need to convince the court some more that you qualify for bankruptcy by presenting documents to prove such.

You need to present all your financial statements, declare your income properly and detail your monthly living expenses. The process is quite tedious and this is the reason why you shouldn't go through the filing process by yourself, but instead, hire a competent bankruptcy lawyer who can assist you. A bankruptcy lawyer can keep you updated with the recent court rulings that effect more changes on the bankruptcy law.

With all the provisions meant to filter the deserving from those who are trying to abuse the law, the bankruptcy law may be too stringent for those who are considering bankruptcy. However, if you really are in dire financial straights and bankruptcy is the only recourse left for you, the court will most likely consider you eligible. If it does not think you are that desperate and that you are still capable of paying off your debts, it may grant you a Chapter 13, instead of Chapter 7 (full pardon on your debts). Chapter 13 requires you to pay your obligations within a period of 3-5 years. That should still be a relief, although it may not be what you are really aiming for.

Read more on bankruptcy to keep yourself informed of the updates and trends on the topic. Keeping yourself informed will help you a lot on deciding if this is really the right move for you.


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