Changes to Personal Bankruptcy

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), passed by the U.S. Congress in 2005, made significant changes in who may file for personal bankruptcy. Many individuals who previously qualified for a Chapter 7 bankruptcy under previous bankruptcy codes no longer qualify. Now a new set of rules apply to individuals who file for personal bankruptcy The purpose of the BAPCPA is to eliminate abusive bankruptcy filing by those trying to commit fraud and to offer more protection to creditors.

The introduction of the Means Test determines whether an individual may file for Chapter 7 or Chapter 13 Bankruptcy. Failure to qualify under the Means Test disqualifies higher income families planning to file Chapter 7 Bankruptcy. The new law requires more debt to be paid back unless individuals fall below the median income of their state. Those with primarily consumer debts qualify for relief under a Chapter 7 bankruptcy. It also extends the waiting period of filing between bankruptcies to eight years. Individuals who do not qualify for Chapter 7 may file for a Chapter 13 bankruptcy, and those persons with more income than the median state income must continue paying debt under Chapter 13 for five years. All individuals must undergo six months of mandatory credit counseling through approved counseling agencies prior to filing a bankruptcy petition and must receive classes in financial management from approved agencies before discharges if debts are granted for both Chapter 7 and Chapter 13 bankruptcies. Persons filing must also must provide more extensive documentation and pay higher fees to file.

At Bailey & Galyen, our Texas bankruptcy attorneys will be glad to answer your questions regarding changes in personal bankruptcy. We will explain how the new bankruptcy law applies to you and assist you in evaluating the options most suited to your financial circumstances.