In 2005 president George W. Bush worked with Congress to pass the Bankruptcy Abuse Prevention and Consumer Act of 2005 known as the BAPCPA. There are three main areas to the law that were put in place which directly changed and affected the way bankruptcy is handled from that point forward. In the past you simply filed and were for the most part approved and pushed through.
With the new law in place you now have 3 additional areas that you must go through before being qualified for bankruptcy. The Ticket In, Means Test, and Ticket Out Debtor Education sections have been added to the process. These are mandatory sections to the process which must be completed for total approval. As tedious as it sounds they aren’t that bad and in some cases are even helpful to you.
The Ticket In Section must be completed a minimum of 6 months or less before applying for bankruptcy. This is a program based on credit counseling and it must be done through a government approved non-profit agency that is licensed to perform the course. Areas covered would include budget planning, debt management, and they will help you evaluate your financial situation. Take advantage of the time to plan your future.
After completion you will then have to go through a Means Test that is performed by the bankruptcy court that will evaluate in part if you qualify for Chapter 7 Bankruptcy. Your income will be tested in two selected areas and from that they will determine the path you qualify for.
Your state’s income average will be the base that they use to make a decide if your income is below or above 25% of you state’s average income level. If your income is above 25% of your state’s average then you will not qualify for a Chapter 7 and a Chapter 13 will be your next option. Also, if you can pay 25% of your unsecured debt and your income is also below that average you will still be allowed to file Chapter 7. The government wants to make sure that you aren’t taking advantage of the process. Your personal hardship is also considered during the process.
The next portion of the new law that has to be completed is the Ticket Out Debtor Education section in which you have to complete another class. This must also come from an approved source as authorized by the government. The credit counseling for bankruptcy class is primarily a financial education class that is completed online. If you don’t have a computer of course it is offered via other means such as over the phone.
One major section initiating a big change is regarding taxes. Debtors are required to have proof of having filed taxes for the last year in order to qualify for bankruptcy. This needs to be proved by providing copies of your tax returns. The idea being to keep people from cheating the system obviously.
The last area the new laws cover is regarding protection from eviction. If you filed for bankruptcy in the past you are granted what’s known as a “automatic stay.” This would halt many legal actions against the debtor. Under the new law which has taken effect it as of 2005, it cannot halt evictions or delay them in many states.
It is always recommended that you consult with your local attorney to find out what the official laws are for your state. The good news is that consultations are typically always free so don’t hesitate to take advantage of that fact. Lawyers are standing by to answer your questions. However if your looking for further information on chapter 13 aspects check out this overview on chapter 13 bankruptcy rules.
