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New Bankruptcy Law Tightens Eligibility for Filing - Not Every Possible Debtor is Affected

by Jonathan Ginsberg

Much has been published about the 2005 bankruptcy reform act, and most of the stories have explained how the rules are changing to make it more difficult and expensive to file.

While the new bankruptcy law has added filing requirements for all debtors in the form of pre-filing credit counseling and post-filing budget counseling, many of the new provisions in the law actually impact only a small number of potential filers.

The complicated and feared “means test,” for example, only applies if your household income exceeds the “median income” for a similarly sized family in your State.  If your household income falls below the median income number, you are eligible to file Chapter 7, the means test does not apply and you probably would notice little difference in the bankruptcy process from the old law.

In Georgia, for example, the median income for a family of four is $58,060.  If your household income falls below this number, the new law will have little effect on you.

Family size does not mean working family size.  Each child or elderly relative who lives with you counts.

Unfortunately, the math required to calculate a means test is complicated and the days when a hardworking individual could figure out how to file without the help of a lawyer are probably over.  Most lawyers will use a “means test” computer program that will do the math quickly.

For well over 70% of individuals who file for bankruptcy, there should be nothing to fear.  If you cannot pay your bills and you see no realistic possibility that you will ever be able to pay off your debt, personal bankruptcy remains a reasonable and realistic option.

Jonathan Ginsberg is a bankruptcy and Social Security disability lawyer in Atlanta, Georgia.

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