“Help! My Creditor Told Me I’m Not Eligible to File for Bankruptcy!”
By Bankruptcy Attorney on Jan 31, 2007 in General Bankruptcy Information
In one of the more disturbing developments to come out of the 2005 Bankruptcy amendments, people all across the country are telling their lawyers that creditors and bill collectors are making some outlandish assertions about the effect of those amendments. Among the reported “whoppers”:
- Congress eliminated bankruptcy for people;
- The bankruptcy laws were completely repealed;
- Anyone who owns a home isn’t eligible to file for bankruptcy;
- If you have credit card debt, you can’t file for bankruptcy;
- And so many more.
Eligibility requirements to file bankruptcy are, in fact, pretty broad. The mere fact of certain kinds of debts or property being held by the consumer filing for Chapter 7 or Chapter 13 relief won’t render the filing improper. (And bankruptcy was most certainly not repealed!)
There is, however, a new hurdle to entry into Chapter 7, or liquidation bankruptcy. It’s called “the means test,” and it analyzes the debtor’s “Current Monthly Income” (essentially, an average of the debtor’s income over the past six months, with certain deductions) for its potential ability to repay a portion of the debts at issue. However, people who “fail” the means test aren’t necessarily excluded from bankruptcy altogether - they could well be eligible to file for a Chapter 13, or reorganization bankruptcy.
The means test calculation is incredibly complex and time-sensitive. This is but one of the many reasons why it’s so crucial now, more than ever, to hire a competent bankruptcy attorney who’s familiar with the new laws before filing.
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