When the New Bankruptcy Law was passed in 2005, people just assumed that the process of declaring bankruptcy is more complex these days because of the more stringent filing process. In reality, Congress has good reasons to impose stricter laws on bankruptcy because people have been known to try and abuse the law by declaring bankruptcy even though they are still capable of paying off their debts. The new law aims to protect lenders from abuse of the bankruptcy law and to screen out properly those who deserve to be granted a Chapter 7 (full pardon on debts).
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The most notable change in the new bankruptcy law is the requirement of passing a "means test" to prove that you really are not capable to pay back your loans. The test considers your monthly income and compares it with the median income of people in your state. If your income falls below the median income, then there is a better chance that you will be granted a Chapter 7 or elimination of most of your debts.
If you do not qualify for full pardon, you may still file for Chapter 13 which allows you to get your debts restructured and paid off within a 3-5 year period. If the court sees that you are still able to pay off a minimum portion of your debts and still provide for your family's everyday needs, it may disqualify you from filing for Chapter 7. If this happens, try filing for Chapter 13 and come up with a payment plan that is manageable for you.
Another major change in the bankruptcy law is the requirement for financial counseling from a government accredited organization within 180 days prior to filing. This is to make sure that you will no longer fall into the same trap of financial disarray in the future. Although this may cause you some inconvenience at the start, it will provide you long term benefits because the training sessions will help you become more financially mature.
Filing for Chapter 7 bankruptcy may be more complex now than before, but if you can prove that you are qualified to avail of it, then the court will most likely grant it to you. The important thing is to hire a good bankruptcy lawyer who will guide you through the process of declaring bankruptcy and make sure that you fulfill the requirements of the law.
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