Changes From Bankruptcy Reform

The Bankruptcy Reform Act took effect in 2005. Even though these bankruptcy laws were passed years ago, there are still some misconceptions out there about the bankruptcy process. The information on this page details some of the changes that resulted.

Chapter 7 bankruptcy is a type of consumer debt that can alleviate overwhelming amounts of debt. This is the type of bankruptcy that most people think of when bankruptcy comes to mind. Most, but not all, individuals who apply for Chapter 7 bankruptcy still qualify.

Do you have questions about Chapter 7 bankruptcy? Discuss your situation with a Chicago, Illinois, bankruptcy attorney. Please call (312) 338-1808 to schedule a free phone consultation.

The Means Test

Individuals who wish to file Chapter 7 bankruptcy must first pass a “means test” to determine eligibility. A means test is a complicated way of determining whether an individual has enough income, beyond what is needed to survive, to pay off a portion of debt.

Essentially, if you make enough money, you may not qualify for Chapter 7 bankruptcy. If you earn more than the U.S. median income, you will probably not pass the means test, which means you may not be able to file a Chapter 7 bankruptcy. Instead, you will have to file for a Chapter 13 bankruptcy in which you are put on a strict debt repayment plan.

Mandatory Credit Counseling

Most people filing for bankruptcy must now obtain credit counseling from an approved credit counseling agency. We can help you locate a credible credit counseling agency.

Time Between Discharges

A Chapter 7 debtor cannot discharge debts if a prior discharge was received within eight years of the new filing. Under old bankruptcy laws, the debtor only had to wait six years before filing a new bankruptcy case.

Duration of Chapter 13 Repayment Plans

If the Chapter 13 debtor’s income is greater than the state median income, the proposed repayment plan must be for five years.

Tax Returns Mandatory

The debtor must provide a copy of his or her latest tax return or a transcript at least seven days before the meeting of creditors or the case “shall” be dismissed. The same tax information must also be provided to any creditor who requests it. All tax returns must be filed for a plan to be confirmed in Chapter 13 bankruptcy. The debtor must file all returns from four years prior to the Chapter 13 filing.

Contact a Lawyer to Find out how We can Help

O’Grady Law Office, P.C., can help you through the maze of bankruptcy laws and find a solution that best suits your personal situation. We strongly advise you to seek bankruptcy advice as soon as possible to determine the best course of action for your particular circumstances.

Call (312) 338-1808 or fill out our intake form for a free initial phone consultation. We have offices in Chicago and Rolling Meadows.

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