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2005 Laws When Filing Bankruptcy Under Chapter 7

Prior to 2005, Congress thought that it was too easy to file for bankruptcy. Apparently, it was abuse that spurred the passage of the new bankruptcy laws. Now, anyone considering filing bankruptcy under any of the various legal channels must attend an approved course that provides credit counseling, budget investigation, and financial management, and the course must be concluded within 180 days before filing his case with the Bankruptcy Court. There are no guidelines in the law for how much should be charged for tuition for this course, but there are free classes on the Internet, and some nonprofit organizations that are subsidized by major credit card companies are offering the course. For the attentive student, the course should give an improved vision of his or her financial status and goals, and the tools for avoiding getting into financial trouble again. This is significant, since the bankruptcy lawmakers were particularly concerned about was repeated bankruptcy filing of petitions by an individual. Under the new bankruptcy code abuse is probably not impossible, but very much less likely to happen. If there is a presumption of abuse by someone filing under Chapter 7 , which would wipe the slate clean, his case will automatically be changed to a Chapter 13 requiring a 3 to 5 year payment plan. The presumption of abuse depends upon the outcome of the means test now in place. Debtors who net more every month than their state’s median income would be subject to a means test. If the debtor has at least $170 in current monthly income after the allowed deductions, abuse is presumed no matter the amount of the debtor’s unsecured debt.

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