Understanding New Bankruptcy Bill Changes

Have you heard about the possible changes to existing bankruptcy law but aren't sure what they could mean for you? Here are the main points that you should be familiar with:

Under current law it is up to the court in which you file for bankruptcy to decide whether you qualify for Chapter 7 bankruptcy. If the new bill is enacted then your income will be subjected to a two-part means test. First it will be inserted into a formula that exempts specific expenses, like food and rent, to see if you can pay 25 percent of your "non-priority unsecured debt." Then your income will be compared to your state's median income.

If your income is above that of your state's median level and/or if you can pay 25 percent of your income then you automatically will not be allowed to file for Chapter 7 bankruptcy. However, if you pass the means test then you could qualify for Chapter 7 bankruptcy. However, it will not be an automatic decision, but will instead be up to the discretion of the judge who is overseeing your case.

As it is now the courts have great latitude in deciding what type of bankruptcy you are able to file for based on their own discretion.

If you'd like to discuss your options and rights before you file for bankruptcy, contact our firm to set up a time to meet with a Chicago bankruptcy attorney.