You Need To Know The Bankruptcy Law Before Filing

The new bankruptcy law is even harsher that the old one, which was established in 1978. It tightens the requirements of those who are filing for bankruptcy and for the attorneys that are helping them.

Major Changes In The New Bankruptcy Law

Under the new bankruptcy law, several major changes were initiated.

First of all there is now a “Means Test” that is used so that you can show that you are not abusing the use of bankruptcy. Herein your monthly income is considered, minus certain expenses that are allowed. If you come out above the “median income” you will have to file for Chapter 13 bankruptcy.

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Secondly, the IRS sets up strict guidelines for what they call “allowable expenses.” Herein you will be allowed $200 per month for food and $800 per month for housing.

Third, it is important to understand that there are both state and federal bankruptcy laws. You will find that some state laws are more lenient than others. However, you cannot shop around for the best deal. Instead you will have to be a resident in the state wherein you are filing for bankruptcy for a minimum of two years.

Fourth, you will have to attend a mandatory credit-counseling course that has to be approved by the IRS within 180 days of your filing for bankruptcy. This is not a free course. Instead it will cost you approximately $75.

Fifth, under the new bankruptcy law there is now more paperwork that you will have to do so that you can prove that bankruptcy is necessary. Some of the things that you are going to have to provide the IRS with include: a list of all unsecured and secured creditors; proof that you have taken the credit counseling course; a detailed list of your expenses and your monthly income; liabilities and assets; your most recent tax return; your photo ID and pay stubs.

Sixth, there are now hefty legal fees that you will have to pay thanks to this new bankruptcy law. This is because you will have to have a bankruptcy attorney “certify” that your figures are accurate. Otherwise, both you and your lawyer may face sanctions. As such, bankruptcy lawyers now have to do more investigating and fact checking than ever before in order to ensure that your information is correct.

How To Interpret The New Bankruptcy Law

While there is nothing saying that you have to retain a lawyer, it is a wise decision to do so. This may actually save you a lot of time as well since if you forget to file certain documents your case can be dismissed making you have to start all over again. You do not want to go through this in an attempt to save yourself some money since it will only come back to haunt you in the end. Therefore, it really is in your best interest to have an experienced bankruptcy attorney interpret the new bankruptcy law for you.