Changes in Chapter 7 and Chapter 13 Bankruptcy Law

Do I Qualify Under New Bankruptcy Laws?

On October 17, 2005, major changes in federal bankruptcy law took effect. Most of the impact will be felt by consumers seeking debt protection under Chapter 7 and Chapter 13. At Ammerman & Goldberg "Bankruptcy" Law Office, our attorneys continue to provide experienced legal guidance to clients in Washington, D.C., Maryland and throughout Virginia.

Here is a discussion of some of the changes in Chapter 7 and Chapter 13 bankruptcy law:

Eligibility for Chapter 7 Bankruptcy Cases

Those who want to file for Chapter 7 bankruptcy but have an above-average income and could afford to pay a little each month, according to the IRS.

Traditionally, bankruptcy's fresh start has been available to almost everybody. The new law, however, prohibits some people from filing for Chapter 7 bankruptcy altogether — those whose incomes are above the state median (quite low in some states) and who can pay as little as $100 per month to creditors. Whether or not a debtor can afford to pay $100 or more a month will be determined not by the person's actual income and expenses, but by IRS rules that state what "reasonable" expenses are.

People denied a Chapter 7 bankruptcy may have the ability to file for Chapter 13 bankruptcy which mandates a three- to five-year repayment plan.

Chapter 13 Bankruptcy Payment Plans

In Chapter 13 bankruptcy, debtors must offer a repayment plan, basing their payments on their income and expenses.

Additional Requirements

The new law requires people to get credit counseling from a nonprofit agency before filing for bankruptcy. We assist our clients in obtaining this counseling. In addition, debtors have to complete a course on personal financial management before completing either Chapter 7 or Chapter 13 bankruptcy.

Anyone who is contemplating filing bankruptcy must file income tax for each year they were employed.

Retention of Automobiles in Bankruptcy

A debtor may obtain a cram-down on an automobile loan, which means that if they own the car for the last 2 and 1/2 years they would only pay the fair market value of the car, rather than the loan balance. This approach is available only in the context of a Chapter 13 case.

If you have questions regarding consumer bankruptcy protection or changes in Chapter 7 and Chapter 13 debt relief laws, please call 202-559-1428 for a free telephone consultation or contact our lawyers by filling out our online form.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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