Bankruptcy Law Changes and Bankruptcy Alternatives
Despite stricter laws, economic conditions have led to a steady increase in bankruptcy filings over the past few years. And bankruptcy does not seem to carry the same social stigma that it did at one time. The fact remains that many individuals who filed bankruptcy at one point went on to become very successful businessmen, such as Donald Trump (or companies he owned), Henry Ford, and Walt Disney. Even so, most people today want to avoid filing bankruptcy if at all possible.
Bankruptcy Abuse Prevention and Protection Act
The 2005 bankruptcy law changes made it more difficult for people to file bankruptcy. First, it created extra paperwork documentation burdens for debtors. Perhaps even more well-known and discussed is the Act’s adoption of the “means test.” If your annual income is greater than the median income of residents in your state, a means test analysis must be completed to determine qualification for Chapter 7. The means test calculates your disposable income based on IRS (Internal Revenue Service) expense standards.
The Bankruptcy Abuse Prevention and Protection Act (BAPCPA) of 2005 (http://www.justice.gov/ust/eo/bapcpa/index.htm) introduced these restrictions and also requires that anyone filing for bankruptcy complete credit counseling through a government approved agency prior to filing. Finally, before the court approves your discharge, you must also complete a debtor education course and provide certification as proof.
These changes in the law provide incentive to exhaust other alternatives before resorting to bankruptcy.
Some alternatives to avoid bankruptcy include:
- Debt workouts
- Debt negotiation
- Deed in lieu of foreclosure
- Debt consolidation loans
- Credit counseling
- Credit card transfer
- Home refinance
If you are struggling with debt, an experienced bankruptcy lawyer can help you explore your options and decide whether bankruptcy is the best financial remedy. Many bankruptcy attorneys also handle debt negotiations if you pursue that alternative first.