01/01/2008
The "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" changes the requirements to filing bankruptcy. This sweeping revision of the bankruptcy code goes into effect on October 17, 2005. As a consequence, it will be much tougher for struggling consumers to fully discharge their obligations in a Chapter 7 bankruptcy. Instead, many individuals will be required to file under the Chapter 13 provision, where a percentage of the debt must be paid back, usually over a five-year period. The important factor in determining the qualification under Chapter 7 is by use of the "mean test." This means that the debtor has to have the average 6 months income of less than the guidelines to be "presumed" not fraudulent.