A sneak peek into the bankruptcy laws in the states of US

Filling bankruptcy can change your life. When your life is about to change for worse or for better, you must think well before you take such a step forward. There are a certain bankruptcy laws which are mandatory for everyone and should be completely pondered over before filling for it. There are certain rules and laws you have to abide by when you’ re ready to file for bankruptcy.

Requirements to be fulfilled prior filling for bankruptcy

When you have decided to file for bankruptcy, you have to fulfill certain requirements or else you won’ t be allowed to file for bankruptcy. There are some requirements to be fulfilled in both Chapter 7 and Chapter 13 bankruptcy, the commonest form of bankruptcies. Check out the requirements needed to be fulfilled:

• Means test: This is for both Chapter 7 and Chapter 13 bankruptcies. If you are filling for bankruptcy Chapter 7, you have to show that your monthly income is less or equal to median income for a household of your size in the state you reside. For Chapter 13 bankruptcy, you have to show that after deducting certain allowed expenses and debt payments, you must have a disposable income to spare. If your disposable income is not enough, you can file for Chapter 7 bankruptcy.

But there has been a bit of change in the bankruptcy procedure. According to the bankruptcy laws enacted in 2005, Chapter 13 bankruptcy fillers have to live more frugally than they’ d been living. The IRS has dictated certain allowed expenses to people and not their actual expenses. So, they have to hand over all of their disposable income in the bankruptcy repayment plan. According to the
bankruptcy laws, the lawyers have to scrutinize and check all the information that fillers provide them. So, this has given the lawyers a chance to charge more for their work.

• Counseling session: The bankruptcy laws of 2005 have made counseling sessions before filling bankruptcy compulsory. You have to go for free counseling sessions with approved organizations. They may charger a stipulated fees depending upon where you reside but if you cannot pay anything, you’ ve to talk to them before the session starts. At the end of the session, you’ ll receive a certificate as a proof.

• Debtor education: This has to be taken after filling for bankruptcy. This also like the counseling session must be provided by an approved provider of education. It can be provided in person, online or over the phone. The education provider can charge a fee but if you’ re not able to afford the fees, you can talk about it with your education provider. This session takes more time than the counseling session. In this you’re taught how you can manage money and develop a budget. You’ re also taught to use your credit wisely.

•Bankruptcy exemptions in different states: In different states of USA there are different bankruptcy laws regarding exemptions. You’ re entitled to take only the things that are exempted by the state. In Alabama, the things that are exempted are – real property or mobile homes up to $ 5000 and the property cannot be more than 160 acres, some pensions, some public benefits, etc. In New York, the things that are exempted by the state are – photographs, furniture, TV, wedding ring, business equipment, child support, alimony, etc.

Bankruptcy should be filled only under very dire situations. You have to fulfill the requirements to qualify for bankruptcy.

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