The New Bankruptcy Law
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With the new bankruptcy , How Is Your Auto Insurance Policy Price Determined law in effect as of October 17, 2005, there is a lot of confusion with regard to the new "means test" requirement. The means test will be used by the courts to determine eligibility for Chapter 7 or Chapter 13 bankruptcy. , Military Payday Loans Meets Expenses Through Cheaper Finance The purpose of this article is to explain in plain language how the means test works, so that consumers can get a better idea of how they will be affected under the new rules. When most people think of bankruptcy, , 7 Simple Steps To Financial Freedom And Wealth Building Step 1 they think in terms of Chapter 7, where the unsecured debts , Investment Capital Gains are normally discharged in full. Bankruptcy , When Best To Apply For A Car Loan of any variety is a difficult ordeal at best, but at least with Chapter 7, a debtor can wipe out the debts , Refinance Your Mortgage You Could Save Thousands Or More Dollars Over Time in full and get a fresh start. Chapter 13, however, is another story, since the debtor must pay , Credit Card Cheques Branded A Rip Off By Financial Protection Agencies back a significant portion of the debt , Online Credit Card Application The Easiest Way To A Customers Heart over a 3-5 year period, with 5 years being the standard under the new law. Prior to the advent of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," the most common reason for someone to file under Chapter 13 was to avoid the loss of equity in their home , Is There Really A Magic Formula For Investing or other property. , Lawsuit Loan Companies And while equity protection will continue to be a big reason for people to choose Chapter 13 over Chapter 7, the new rules will force many people to file under Chapter 13 even if they have NO equity. That's because the means test will take into account , Credit Card Cheques Branded A Rip Off By Financial Protection Agencies the debtor's income , Life Insurance Term Or Universal level. To apply the means test, the courts will look at the debtor's average income , Factoring Can Be An Ideal Solution For Start Up Andor Growingbusinesses for the 6 months prior to filing and compare it to the median income , Financial Planning And Equity Investment for that state. For example, the median annual income , Ways To Help You Invest for a single wage-earner in California is $42,012. If the income , Are You A Syndicated Columnist How To Make Your Newsletter Workwithout You is below the median, then Chapter 7 remains open as an option. If the income , Switching Credit Cards For A Better Deal exceeds the median, the remaining parts of the means test will be applied. This is where it gets a little bit trickier. The next step in the calculation takes income , Military Payday Loans Meets Expenses Through Cheaper Finance less living expenses , Personal Loans Financing No More Will The Needs Have To Starve For Fulfilment (excluding payments , Lawsuit Loan Companies on the debts , Ease Your Earning Earn Faster included in the bankruptcy), and multiplies that figure , Investment Capital Gains times 60. This represents the amount of income , Secured Personal Loans Because Money Matters available over a 5-year period for repayment of the debt , Military Payday Loans Meets Expenses Through Cheaper Finance obligations. If the income , What Is Credit Card And Debit Card Blocking available for debt , Are You A Syndicated Columnist How To Make Your Newsletter Workwithout You repayment over that 5-year period is $10,000 or more, then Chapter 13 will be required. In other words, anyone earning above the state median, and with at least $166.67 per month of available income, , Ease Your Earning Earn Faster will automatically be denied Chapter 7. So for example, if the court determines that you have $200 per month income , Factoring Can Be An Ideal Solution For Start Up Andor Growingbusinesses above living expenses, , A Payday Loan At The Right Time $200 times 60 is $12,000. Since $12,000 is above $10,000, you're stuck with Chapter 13. What happens if you are above the median income , Military Payday Loans Meets Expenses Through Cheaper Finance but do NOT have at least $166.67 per month to pay , Credit Score Basics And The New Credit Score System toward your debts? Then the final part of the means test is applied. If the available income , Business Loans In Uk is less than $100 per month, then Chapter 7 again becomes an option. If the available income , The Importance Of Car Insurance is between $100 and $166.66, then it is measured against the debt , Online Gambling Causing Credit Card as a percentage, with 25% being the benchmark. In other words, let's say your income , How Banks Can Help You Improve Your Personal Finance is above the median, your debt , How Is Your Auto Insurance Policy Price Determined is $50,000, and you only have $125 of available monthly income. , How Eating Bitumen Made Me A Better Stock Trader We take $125 times 60 months (5 years), which equals $7,500 total. Since $7,500 is less than 25% of your $50,000 debt, , How To Invest In Real Estate Chapter 7 is still a possible option for you. If your debt , The Best Day Of The Week For Payday Loans was only $25,000, then your $7,500 of available income , The Downward Spiral Of Credit would exceed 25% of your debt , Secured Personal Loans Because Money Matters and you would be required to file under Chapter 13. To sum up, first figure , Trading For A Living Part 2 out whether you are above or below the median income , Auto Insurance 101 for your state (median income , The Downward Spiral Of Credit figures are available at http://www.new-bankruptcy-law-info.com). Be sure to account , Feathering Your Retirement Nest for your spouse's income , How Banks Can Help You Improve Your Personal Finance if you are a two-income family. Next, deduct your average monthly living expenses , Investing In Precious Metals And Diamonds from your monthly income , Investing In Precious Metals And Diamonds and multiply by 60. If the result is above $10,000, you're stuck with Chapter 13. If the result is below $6,000, you may still be able to file Chapter 7. If the result is between $6,000 and $10,000, compare it to 25% of your debt. , Refinance Your Mortgage You Could Save Thousands Or More Dollars Over Time Above 25%, you're looking at Chapter 13 for sure. Now, in these examples, I have ignored a very important aspect of the new bankruptcy , Credit Score Basics And The New Credit Score System law. As stated above, the amount of monthly income , Financial Planning And Equity Investment available toward debt , Finding Low Interest Credit repayment is determined by subtracting living expenses , Refinance Your Mortgage You Could Save Thousands Or More Dollars Over Time from income. , What You Need To Know About Health Insurance However, the figures , Switching Credit Cards For A Better Deal used by the court for living expenses , Credit Score Basics And The New Credit Score System are NOT your actual documented living expenses, , Credit Score Basics And The New Credit Score System but rather the schedules used by the IRS in the collection of taxes. , Credit Card Cheques Branded A Rip Off By Financial Protection Agencies A big problem here for most consumers is that their household budgets , Finding Low Interest Credit will not reflect the harsh reality of the IRS approved numbers. So even if you think you are "safe," and will be able to file Chapter 7 because you don't have $100 per month to spare, the court may rule otherwise and still force you into Chapter 13. Some of your actual expenses , Investment Capital Gains may be disallowed. What remains to be seen is how the courts will handle cases where the cost , How To Spot A Good Debt Consolidation Company of mortgages , Medical Insurance Policy or home , What Is Credit Card And Debit Card Blocking rentals are inflated well above the government schedules. Will debtors be expected to move into cheaper housing to meet the court's required schedule for living expenses? No one has any answers to these questions yet. It will be up to the courts to interpret the new law in practice as cases proceed through the system. Article Source: http://www.articledashboard.com
Charles J. Phelan has been helping people become debt-free without bankruptcy , Consolidating Debt 5 Warning Signs Of A Shady Debtconsolidation Or Debt Management Company since 1997. A former executive in the debt , Credit Card Cheques Branded A Rip Off By Financial Protection Agencies settlement industry, he teaches the do-it-yourself method of debt , No Faxing Cash Advance Loans Understanding Late Fees Andinterest Rates negotiation. Audio-CD material plus expert personal coaching helps consumers achieve professional results at a fraction of the cost. , Banks And Money www.zipdebt.com |
  
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