Chapters 7 And 13 Bankruptcy Laws
By Nathan Dawson
Some laws to filing chapter 7 or 13 are common knowledge, such as the requirement for all filers to undergo debt or credit counseling to help better educate them on their spending habits. There is also the law stating that debtors with higher incomes will have to repay a portion of their debt prior to being allowed to file for chapter 13 bankruptcy. However, there have been laws recently taken into effect that are little known and need to be observed.

Chapter 7 Restrictions
The most common form of just got a little more exclusive. Under the old rules people could decide which chapter of was best for them- most choosing chapter 7. However, those with higher incomes must now be aware that they may not qualify to file for chapter 7 and will be forced to file under chapter 13. The gauge they use to decipher “high income families” is to compare your current monthly income with that of the median monthly income of a family of similar size in your state. Another factor to account for is how you current monthly income will be calculated. It is not what you are currently making at the time when you file for but rather an average of your income from the six months prior to making your claim. This poses a big problem for those who are filing after recently losing a job.

Restrictions on Lawyers
Among the new laws lawyers much personally vouch for the accuracy of the information provided. Thus, time spend on each case will increase, in turn driving up your lawyer bill.

Can You Live On Less?
Under the old rules, those who filed for chapter 13 did have to devote all disposable income to a payment plan. The new laws make this a little more challenging. In addition to handing over all disposable income, chapter 13 filers will have to calculate that amount from an expense amount allowed by the IRS- meaning they get to dictate what your living costs should be. Keeping in mind under chapter 13 you are still required to calculate disposable income according to an average of what you had made over the last six months.

Value Your Property at Replacement Cost
In the past heirlooms and other property that a debtor might want to keep were expected to be of little value- deeming them exempt. However, new laws force you to value all property at retail value taking into consideration



age and condition- a requirement that, in most cases, will inflate the cost of your property leaving you at risk of losing it.

Don’t Count on State Exemptions
The new rules entail that a filer live in a sate for at least two years in order to gain from a state’s exemption laws otherwise they can only claim those exemptions of the previous state in which they lived. The same goes for homestead exemptions only this requires over 40 months of residency.