The decision to file for bankruptcy is a challenging one and so is the process. For those seeking bankruptcy relief, the initial bankruptcy laws of 1978 have been revised to tighten requirements. Educate yourself about the current bankruptcy provisions before filing and seek the assistance of an experienced bankruptcy attorney to guide you through the process. Attorney Harry C Kaufman offers excellent info on this.
Changes to Bankruptcy Laws Made
With the introduction of the latest bankruptcy rules, the landscape of filing for bankruptcy has been significantly changed.
One improvement made is what is now known as a “means test” and is used as a mechanism to ensure that the bankruptcy system is not manipulated. Your monthly income is measured by this test, minus some acceptable expenses. If the result is above the “median income” you would be forced to file for bankruptcy in Chapter 13.
The Internal Revenue Service (IRS) developed stringent rules on what they call “allowable expenses.” with the second change made. Those allowable expenses include some tight budgeting, which requires $200 for food a month and $800 for housing a month.
Third, it is necessary to educate yourself about the bankruptcy laws of your specific state prior to filing. The demands of some states are stricter than others. For at least two years, you must be a citizen of a state before you can file within that state.
The fourth amendment to the bankruptcy laws is that, within 180 days of your bankruptcy filing, you must attend a mandatory credit-counseling course approved by the IRS. For this course, you will have to pay approximately $75.
More paperwork is required to show that bankruptcy is necessary for you, the fifth change made. A list of unsecured and secured creditors, evidence that you have taken the credit counseling course, a full list of your expenses and monthly revenue, liabilities and properties, the current tax return, photo ID and pay stubs are some of the IRS specifications.
Finally, and perhaps one of the least favorable improvements is that the bankruptcy filing will now incur higher legal fees. You are supposed to be certified by a bankruptcy lawyer that your statistics are correct. This allows the lawyer to do a very detailed review of the application to ensure that the data is accurate. Otherwise, for any mistakes, both you and your attorney could face penalties.