During the months leading up to the October 17, 2005, changes to the Bankruptcy Code, there was a lot of talk about how much more difficult it would be to get a fresh start under the new law, creating a sense of urgency to file "before it was too late." Now, after the changes, many think that they can no longer file a chapter 7.
However, despite this worry, and although there are many more disclosure requirements and paperwork in the filing process, the "fresh start" that many consumers are looking for is still available and should be sought out by those who need it.
The "bogeyman" of the new Code that has people thinking that relief is no longer available is the "Means Testing" that is now a required part of consumer bankruptcies. Under the old law, absent a specific need to file a chapter 13, a person could file a chapter 7 and get a fresh start.
"Means testing" was designed to force some people into a chapter 13 repayment plan that might previously have been able to discharge their debt outright. However, this only applies if your household income exceeds the median for New Jersey (based on 2000 census data adjusted yearly for inflation). If your income falls below that, you can still file a chapter 7.
Luckily, we all live in South Jersey, and the median income is elevated by averaging in the higher income of North Jerseyans. Thus the median incomes that apply are most often far above what a potentially bankrupt debtor earns.
Consumer Credit Counseling
Another change is that, before the new law, if you wanted to file bankruptcy, you did so. Now, no more than 180 days before you file, you must receive an individual or group "briefing" from one of many approved, nonprofit budget and credit counseling agencies.
Although this sounds onerous, it can often be done by telephone or online and can often be completed in a couple hours. Then after you file, and before a discharge of debt can be obtained, you must now complete "an instructional course concerning personal financial management." Again, many institutions offer this service, and it can be accomplished fairly easily.
Certain Debts Not Dischargeable
One unfortunate truth about the new Code is that, although most people can still get a "fresh start," some of the freshness has been lost. For example, those with student loans, even if they are not guaranteed by, or paid to, a government agency (i.e. a Guaranteed Student Loan), can no longer wipe them out.
Obligations under property settlement agreements or divorce decrees (other than alimony and support, now called "Domestic Support Obligations," which have always been non-dischargeable no matter what) can now no longer be wiped out in a chapter 7.
The bottom line here is that if your financial situation has you inundated in credit card debt and/or medical bills, as most consumer debtors are, you should seriously consider the filing of bankruptcy, and should consult with an attorney for a detailed analysis of your situation.
So What Do I Do?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you have more questions about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.
If you are looking for more information on how bankruptcy might help you with your divorce, then you should download my free book, Top Questions Divorcing Couples Ask About NJ Bankruptcy.