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There are a number of financial areas that we practice. Bankruptcy is one of our major financial areas. We will now discuss the financial laws of US related to bankruptcy. A new bankruptcy law, called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) has been introduced. With this new law, there have been some major changes with respect to “Ticket In”, “Means Test”, and the “Ticket Out”.
Ticket In: It means a credit counseling session that a person planning to file bankruptcy must attend six months prior to applying for the same. This session must be done by a non-profit agency that has been approved by the United States Trustees office.
Means Test: Under the new law, your income will be tested by a two-part "means test”. The first test exempts certain expenses (rent, food, etc.) to determine if you can afford to pay 25 percent of your unsecured debt, such as credit card bills. Next, your income will be compared to your state's average income. In case, your income comes out to be above this average, you will not be allowed to file Chapter 7 bankruptcy. The court may allow you to do so under Chapter 13.
If your income falls below your state's average but you are still able to pay 25 percent of your unsecured debt, you may be able to file chapter 7, but the bankruptcy court will still have the authority to require you to file chapter 13 instead if the court believes you may abuse the system by filing under chapter 7.
The new means test under the new law will allow for special accommodations for active-duty military service members, for low-income veterans of the military, and those with serious medical conditions.
Ticket Out: It refers to a financial education class, also known as the Debtor Education Class that you must attendbefore your bankruptcy can be finalized. The United States Trustees Office approves the class providers.
Other Changes under the New Law
- The new law will place more stringent restrictions on the homestead exemption.
- If some of the information about a client's case is found to be inaccurate, the bankruptcy attorney may be subject to various fees and fines.
- It will give utmost priority to a spouse's claim for child support among creditors' claims on the debtor in bankruptcy.
- It will allow Wall Street investment firms the right to work for a company before and after it files for bankruptcy.
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