Basics Of Claiming Bankruptcy

In 2005 a new law passed, known as The Bankruptcy Abuse Prevention and Consumer Protection Act, aimed at making sure that individuals claiming bankruptcy were, in fact, unable to pay off their debt. But what changes did this make to the process of filing for bankruptcy?

Taking Two Courses
When filing for chapter 7 bankruptcy, you will have to complete two courses. The first is a Credit Counseling course. The course you choose must be officially approved and you must complete within 6 months before filing. Secondly, you will also have to take an approved Financial Management course.

In some cases the courses can be taken online, which will be convenient and might save you a lot of time. If you have hired a bankruptcy attorney, he or she will be able to help set up the courses. If not, you will be able to find lists of approved courses online.

Means Test
As part of the new law, if you make more than the median income in your state, you will be subject to a means test. You will fail the means test if your average disposable income over the next 5 years exceeds $100. In such a case, you will not be able to be declared bankruptcy under chapter 7; however, the case might be converted to a chapter 13 case.

Information Required
When filing for chapter 7 bankruptcy, you will be required to include a few forms with pertinent information. These include:

A list of assets and liabilities, where the court will be able to see assets, creditors and what kind of debt the creditors are claiming.

You will have to fill a form with your current income and expenses. On the income side it should include the source of income, amount, and frequency. On the liabilities side, you must flesh out your exact list of monthly living expenses.

On a form referred to as a statement of financial affairs, you will be asked questions about your income the last three years, what debts you owe, and any additional, notable events, such as repossessions and foreclosures.

Finally, you will be required to list all executory contracts and unexpired leases, such as a lease on an apartment.

Making Sure Bankruptcy is the Last Resort
After the changes to the chapter 7 filing process, you will not be declared bankrupt unless it really is the last resort. Therefore, while you might find the process frustrating, it is a good thing. You should always explore all other options before claiming bankruptcy - you have many bankruptcy alternatives you should explore first.