If you declared bankruptcy in the past, you may be in for a few surprises if you file again. All bankruptcies filed since 2005 must abide by some big changes, and it might help you to know about them ahead of time. Read on to learn more about changes brought about by the bankruptcy code revisions and be prepared when you get ready to file.
Understanding the Bankruptcy Abuse Protection and Consumer Protection Act of 2005 (BAPCA)
This first major retooling of some very old bankruptcy codes means that filers must take some additional steps both before they file and during the bankruptcy process. The BAPCA sought to protect not consumers, as the name might suggest, but creditors. Some of the changes mean that filers who previously filed without a problem could encounter issues satisfying the new requirements. The changes affect several major areas of the bankruptcy process.
Previous to 2005, there were no limitations on a filer's income. Regardless of how much money you had coming in, you were free to file. Unfortunately, that meant people who perhaps could have afforded to pay their debts without having to file bankruptcy were taking advantage of the law and filing anyway. Now, if your income exceeds the median income in your state of residence, you may be barred from filing. Your income is measured and evaluated through something called the means test and is part of your bankruptcy paperwork. If you find that your income is too high but the numbers are fairly close, speak to your bankruptcy attorney. Not all of your income is used, and there are several other ways to qualify for filing depending on your exact financial situation.
The BAPCA took income verification a step further by requiring that filers show proof of tax filing. If you have not yet filed your return for your most recent tax year, you must do so before you can file for bankruptcy.
In an effort to stop people from filing for bankruptcy over and over, educational courses are now required. One class has to be taken before you file and the other after you file. The first class is more of an evaluation of your budget to determine whether or not you really cannot afford to pay your bills. The other class focuses on learning about budgeting, savings, and using credit.
Before the changes, if you were in danger of being evicted, you might have a temporary reprieve. Now, landlords can kick tenants out for any reason as long as they abide by the landlord-tenant laws of the state of residence.
In most cases, the above changes should not prevent filers who have good cause from filing for bankruptcy. Speak to a bankruptcy lawyer from a firm like O'Connor Mikita & Davidson LLC to learn more.