Less than a week before the National Guard and Reservists Debt Relief Act of 2008 was set to expire, the president signed into law a 4 year extension of the act. This law exempts qualifying Armed Forces reserve component and National Guard members (who, after September 11, 2001, are called to active duty or to perform a homeland defense activity for at least 90 days, and remain eligible for an exemption during the 540-day period following such active duty or homeland defense activity service) from the application of the means-test presumption of abuse under chapter 7 (Liquidation) of the Bankruptcy Code. In other words, those who qualify, and who would have been forced into a Chapter 13 payment plan because their income was too high, will be able to obtain relief under Chapter 7. The deadline will now be extended into December of 2015. This could be a great help to the families of the many men and women in the Janesville area who are serving in the National Guard and Reserves.
New Means Test Income Limits Are a Mixed Bag
For individuals filing for bankruptcy, the news is good. For multiple member households, not so good. In order to file for a Chapter 7 bankruptcy, a debtor must have income over the past 6 months that is lower than the median family income for his state. If the debtor’s income is higher than that, the debtor will not be allowed to file under Chapter 7, and most debtors will then be required to file under Chapter 13. Chapter 13 requires that the debtor submit a plan to repay some or all of his debts over 3 to 5 years. For many debtors, Chapter 7 is preferable because it usually results in most or all of the debts being discharged in about 4 months. The official Median Income levels are published by the U.S. Trustee’s Office of the Department of Justice. The most recent changes went into effect on Nov. 1, 2011, and the new numbers are higher for individuals and lower for multiple member households. This will make it easier for individuals to qualify for a Chapter 7 bankruptcy but more difficult for multiple member households. For an individual, the cutoff is $41,880 in annual income. For a family of 4, it is $76,117. The irony is that the current economic slump results in a greater need for bankruptcy relief for families. But, that same economic slump lowered the median income, thereby making it harder to obtain relief. If you think that you do not qualify for a Chapter 7 under the Means Test, you should still consult a bankruptcy attorney. There are exceptions to the Means Test. For example, if most of your debt is related to a failed business venture, then the Means Test restrictions will not apply to you. For a full evaluation of your situation, call us, or fill out our online bankruptcy evaluation form.
Bankruptcy Counseling For Those With Advanced Degrees Increasing
The percentage of debtors with advanced degrees obtaining pre-bankruptcy financial counseling has increased from 4.9% in 2006 to 6.7% in 2010. Also, those earning over $50,000 had the greatest increase compared to those at other income levels. This according to a study by the Institute for Financial Literacy and reported by the National Association of Consumer Bankruptcy Attorneys. The question is, “Why?” The Institute’s executive director thinks that falling home values and white collar job losses are contributing factors. Information we have received also points to the fact that people with high incomes tend to live in areas with a high cost of living. As a result, when high income earners lose their jobs, their higher expenses cause finances to spin out of control more quickly than it might for lower income earners.
Bankruptcy Filing Fees to Increase on Nov. 1
Filing fees that are paid to the Bankruptcy Court at the time of filing a Bankruptcy Petition are going up by $7 for all chapters as of November 1, 2011. That means that the fee for a Chapter 7 case will go up from $299 to $306, and the filing fee for a Chapter 13 case will go up from $274 to $281. Plan accordingly.
Can I Keep My Vehicle in Bankruptcy?
Can you file for bankruptcy and still keep your vehicle? Maybe. There are a few ways to go about this. One way is by “reaffirmation.” If you have a car loan, you can complete an official reaffirmation form, along with the creditor. The form provides the amount you owe and the terms of repayment. In effect, a new loan is created and you get to keep your vehicle as long as you stay current. Not only that, but you may be able to negotiate more favorable terms in the new reaffirmed loan! This could include lowering the amount owed, lowering your monthly payment, or lowering the interest rate. Call Rolsma Law Firm for more information on ways that you can keep your vehicle while benefiting from the debt relief you can obtain through bankruptcy.
