The federal bankruptcy laws are complex, and an experienced advocate can help you navigate them efficiently. If you are contemplating filing for bankruptcy, contact a lawyer.
Basic Information About Chapter 7 Bankruptcy
A well-educated client is almost always a happy client. For that reason, The Shaw Group, P.C., located in Novi, Michigan, provides the following general information about Chapter 7 bankruptcy.
Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, is a form of bankruptcy that erases all eligible debt. Not everyone can qualify for Chapter 7 bankruptcy. An experienced bankruptcy lawyer can help you figure out whether you are eligible to file a Chapter 7 bankruptcy petition.
Each person's situation is unique, which is why we encourage you to contact our office to schedule a private consultation with bankruptcy attorney Edward Shaw.
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The Shaw Group, P.C., is a southeastern Michigan law firm with a well-established bankruptcy practice. For more than 20 years, attorney Edward Shaw has provided smart and reasonably priced legal services to families in financial trouble who need legal help. To make an appointment, call toll free
The Shaw Group, P.C., has four offices for our clients' convenience. We meet with clients to discuss bankruptcy petitions and other debt relief options in Ann Arbor, Novi, Livonia and Plymouth. Contact us today to schedule an appointment.
Bankruptcy Abuse Prevention and Consumer Protection Act
On April 20, 2005, President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which instituted substantial changes to the Bankruptcy Code. Most provisions of BAPCPA became effective in October 2005. BAPCPA's provisions make it more difficult to file for Chapter 7 and impose many additional requirements on debtors in an effort to exclude debtors who can pay their creditors from Chapter 7. Under the amendments to Section 707(b), a bankruptcy case should be dismissed if the debtor is found to be "abusing" Chapter 7 relief. Prior to the BAPCPA, the word "substantially" was included immediately before "abuse" in the test. If you are considering filing for Chapter 7 bankruptcy and have questions about whether you will qualify, talk to a bankruptcy lawyer at The Shaw Group in Novi, Michigan.
Chapter 7 Means Test
One of the most significant aspects of the new bankruptcy laws is the means test for individuals with primarily consumer debts who wish to file for Chapter 7. Under §108(8) of the Bankruptcy Code, a consumer debt is "primarily for a personal, family, or household purpose." If the debtor is above the threshold established by the means test, his or her Chapter 7 petition may be dismissed, or the case could be converted to a filing under Chapters 11 or 13, if the debtor consents.
If the debtor's current monthly income is less than the state median, the debtor automatically qualifies for Chapter 7. If the debtor's current monthly income is more than the state median income, the means test will be applied to determine if filing for Chapter 7 is presumptively abusive. This step is a bit tricky. If the debtor's projected disposable income, which is monthly income minus certain allowable expenses, over the next five years is less than $6,000 ($100/month), you are eligible to file under Chapter 7. However, if the debtor's current monthly income minus the allowable expenses and multiplied by 60 (the number of months for the next five years) is more than the lesser of (1) 25% of the debtor's non-priority unsecured claims in the case or $6,000, whichever is greater; or (2) $10,000, the court will presume that abuse exists. 11 U.S.C. §707(b)(2)(A)(i). If this is the case, the debtor will not be allowed to file for Chapter 7 unless he or she can show special circumstances.
Other Requirements for the Debtor
BAPCPA includes a number of additional requirements for a debtor seeking to file under Chapter 7. Individual debtors are now required to obtain an individual or group briefing from an approved nonprofit budget and credit counseling agency within 180 days of filing for bankruptcy. 11 U.S.C. §109(h). This briefing must, at a minimum, outline opportunities for available credit counseling and assist the debtor in performing a budget analysis. Another critical requirement is that prior to receiving a discharge, a Chapter 7 debtor must complete a personal financial management course. 11 U.S.C. §§ 111, 727(a)(11). Section 521(e) requires that debtors filing under either Chapter 7 or 13 provide a copy of their most recent tax return to the trustee before the meeting of creditors. The debtor must also provide a copy to any creditor that requests one. Finally, Federal Rule of Bankruptcy Procedure 9011 requires that before a debtor submits documents to the court or a trustee, the debtor and his or her attorney must make a "reasonable inquiry to verify that the information contained in such document is (1) well grounded in fact, and (2) warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law."
Duties of the Trustee
There are also new, increased duties for the trustee. Under Sections 704(a)(10) and (c)(10), the trustee must advise a domestic support creditor in writing of the existence of and right to use support enforcement and collection agencies. The trustee must also provide notice of such claims to those agencies. If the debtor was serving as an administrator of an employee benefit plan at the time of filing, the trustee must perform the duties of an administrator. 11 U.S.C. §704(a)(11). If a debtor is a health care business, the trustee must use "all reasonable and best efforts" to transfer that business's patients to another such business in the same physical area that provides substantially similar services with a reasonable quality of care. 11 U.S.C. §704(a)(12). Finally, a trustee in a Chapter 7 case must ensure that the final reports are uniform.
Conclusion
Although BAPCPA has made it more difficult for individuals with consumer debt to file for Chapter 7 bankruptcy, it is still possible, and the majority of debtors still qualify for Chapter 7 relief. An experienced bankruptcy attorney at The Shaw Group in Novi, Michigan can determine whether you qualify for Chapter 7 and help you navigate the requirements for filing.
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