It is very important to be aware of the new bankruptcy laws for both debtors and creditors, because the more educated they are, the more they will be able to protect their respective claims. The following are some of the primary changes made to the bankruptcy code by the new bankruptcy laws. These amendments are effective as of 17 October 2005. Attorney Harry C Kaufman has some nice tips on this.
Means Test The test
Now it is no longer a matter of choice to choose the form of bankruptcy. The bankruptcy court will require you to pass the Means Test if you are planning to file for bankruptcy and, based on the test results, the court will determine which form of bankruptcy is better fit for your particular bankruptcy case. If you know exactly what the Means Test is, you will analyze the findings yourself and make an educated decision. As per the Means Test, it is determined that after paying off the permissible day-to-day required expenditures, how much money will be left to you based on all the sources of revenue you have. If the money you have left is less than the state’s average monthly revenue, you are eligible for Chapter 7 bankruptcy. In the other hand, if the total is much higher than the state’s median monthly revenue, you will be asked by the court to apply for bankruptcy under Chapter 13. Therefore, it is necessary for you to apply the Means Test before filing the court petition for bankruptcy in order to take the correct decision to determine the form of bankruptcy for which you can file.
Allowances for expenses are set by the IRS
It is not you who can decide on your required day-to-day costs, but these are the IRS allowances. Therefore, you should bear in mind that the food allowance is about $200 a month, the housing allowance is about $800 a month, etc. when you are doing the Means Test yourself. Here, you should remember that even though your real food and housing costs are higher than the sum set, you will be permitted to subtract just that much from your monthly income.