All Franklin bankruptcy lawyers must understand the Bankruptcy Abuse and Consumer Act of 2005, commonly referred to as the New Bankruptcy Law. In general, this law makes it harder for people to file for bankruptcy.
Furthermore, the bill was designed to make it more difficult for people to file for chapter 7 personal bankruptcy so that instead they would file for chapter 13 personal bankruptcy.
Under chapter 7, which involves liquidation, must debts are forgiven or discharged. Chapter 13 involves a repayment plan that lasts from three to five years and, using that, debts are only forgiven or discharged after a portion of them have been repaid.
Should an individual have a monthly income that’s higher than the average for that state, they are ineligible for chapter 7 and must take the means test for chapter 13. The means test helps determine the amount of disposable income and helps reorganize the individual’s debts into a repayment plan.
Before, individuals of all types of incomes could file for chapter 7, though many mistakenly believed that this type of bankruptcy meant they’d lose all of their personal property. That only rarely happens, especially with the help of Franklin bankruptcy lawyers.
Additionally, an individual can switch over from chapter 7 or chapter 13 to the other at any time so long as they had not already switched over before.
The New Bankruptcy Laws affected a few other areas of bankruptcy as well. Previously, a debtor has to wait six years after a previous chapter 7 personal bankruptcy filing to file for another one. The new law extended this waiting period to eight years.
An important aspect of the new law also states that all debtors must receive credit counseling before filing for personal bankruptcy. Such a course helps them determine whether or not they actually need to file for bankruptcy, and what kind they should file.