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Why the New Bankruptcy Laws Should Not Worry You

The Castle Law Office is a St. Louis bankruptcy law firm that helps people in Missouri and Illinois get safely through the bankruptcy process. Debt of any kind, be it medical bills, credit card debt or student loans, can be all consuming and crippling. The bankruptcy process can be a way for you to get your life back on track. If you have debt in your life that is unmanageable, you have options. Contact the Castle Law Office for a free financial and legal consultation today.

The new bankruptcy laws that were enacted in late 2005 caused a stir of righteous indignation from consumer advocacy groups, political organizations and politicians of every stripe, and talk radio hosts all over the country. Gallons of ink were spilled on the subject, and millions of watts of electricity carried opinions all over the world. The general consensus is that now, all of a sudden, declaring bankruptcy is an impossibility. It seems like all of a sudden we have placed millions of people in perpetual servitude to the credit card companies.

No one has really noticed that one group that is not complaining about the new bankruptcy laws are bankruptcy lawyers. That is because we have actually read the bankruptcy laws. And we can tell you that there are no real new difficulties involved in filing for bankruptcy. There are a few more steps to take, and a few requirements that have to be considered, but it is nothing to be overly concerned about. As a service, we here at the Castle Law Office have decided to brief you on what the new laws are and how they will change the bankruptcy process.

Restricted Eligibility for Chapter 7: Hopefully, if you have done your research, they you should know by now that Chapter 7 is a liquidation of debts and Chapter 13 is a repayment of debts. The new laws simply state that if you make over a certain median income per year, there are certain tests that you have to take in order to prove that you qualify for a Chapter 7 bankruptcy.

If your income is over the median income determined in your state, you must pass what is called the “means test.” If you fall on the correct side of the means test, you can still be eligible to file for Chapter 7. If you don’t qualify, you can still file for a Chapter 13 re-organization.

Required Counseling: If you are considering filing for Chapter 7 or Chapter 13, it is now required that you receive credit counseling from an approved agency. These credit counseling agencies essentially offer advice on how to get yourself out of debt, or to help you find a way out of debt without filing bankruptcy. Bear in mind that it is not necessary for you to follow the advice of these counseling services. It is only necessary that you attend the credit counseling sessions and listen to what they have to say. If the agency comes up with a payment plan, you will have to submit that plan as well as certification that you completed the counseling before you can officially file.

New Chapter 13 Rules: As we have stated before, under the rules of a Chapter 13 bankruptcy, the filer is allowed a certain amount of money per month to live on, and the rest of his or her earnings goes to the repayment of debt. This has not changed at all under the new bankruptcy laws. What is different is that filers have to calculate their disposable income using allowed expense amounts dictated by the IRS -- not their actual expenses -- if their income is higher than the median in their state. And these allowed expense amounts must be subtracted from the filer's average income during the six months before filing. What this means is that your monthly expenses will be determined according to a pre-determined formula as opposed to what you are actually spending.

All in all, this is nothing to panic over. Any bankruptcy is a difficult process to go through, and these rules won’t make the life of your bankruptcy any harder or easier. Besides, the purpose of a bankruptcy attorney is to get you the best possible terms. This could mean a Chapter 7 filing or a Chapter 11 filing. Once a real analysis of your financing has been completed, your attorney should have the best idea as to which way to go.

At the Castle Law Office, we have built our career on helping citizens of the St. Louis Area get through the bankruptcy process while keeping as much of their property and assets as possible. We realize that financial hardship can happen to anyone at anytime, and we know that a life lived under crushing debt is no life at all. If you or a loved one is considering filing for bankruptcy, contact the Castle Law Office for a free legal consultation today.

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