A recent article indicates that the new bankruptcy law (well, it’s not so new anymore) may be confusing people about their rights. At least, that’s what many lawyers and judges around the country are using as a reason for the plummet in the number of bankruptcy cases filed since the new laws went into effect back in October 2005.
The aspect of the law that confuses most people is the means test, which is a detailed analysis of household gross income measured against the median income for a household of the same size; for people with household gross income above the median, the law provides for a list of standard deductions to determine whether Chapter 7 or Chapter 13 would best suit the situation.<’p>
The article does point out that “Even those pushed into repayment, [by the new means test] pay back what they can afford to pay, maybe 10 or 30 cents on the dollar, but not the full amount on unsecured debt.”<’p>
In my practice, I have seen only a small handful of individuals making $50,000 or less who do not qualify for Chapter 7. That does not mean, however, that these people have filed for Chapter 7. Rather, more and more people are deciding to file for Chapter 13 and pay only a tiny percentage of their debts back over a period of time. Why? Because the law makes it much easier to file Chapter 13, and gives a huge number of advantages to the smart consumer who chooses this course of action.<’p>
Under the new law, there are very few times when a Chapter 7 is better than a Chapter 13. Protection from creditors more quickly, the ability to pay all legal fees after the case is filed, fewer risks of having your case dismissed, and greater control over your destiny – these reasons and many more make Chapter 13 the bankruptcy of choice.
Technorati Tags: bankruptcy, chapter 7, chapter 13, means test
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