Understanding Bankruptcy Laws

Bankruptcy Attorney

When the Bankruptcy Abuse and Prevention Act went into effect in 2005 changed the way bankruptcies are handled. The new law was from heavily influence by major credit card companies and made it more difficult for consumers to wipe away their credit card and other debt.

Required Counseling

Before you can file for bankruptcy, you must now complete a court-approved credit counseling course. This course is intended to teach you other ways to pay back your debt that you may not have considered. Sometimes the credit counseling agency is paid commission on repayment plans and will not suggest bankruptcy. Be careful that you get all the correct information, including how bankruptcy can benefit you.

Means Test

In the past, high-income earners could file Chapter 7 bankruptcy and have their credit card and unsecured loans wiped away. Since the 2005 law, however, now filers are required to take a means test. Your monthly income is compared to your states monthly income median. After your expenses and allowances are factored in if it appears you have “extra” money you will not be allowed to file for Chapter 7 liquidation bankruptcy and instead file Chapter 13 bankruptcy and set up a repayment plan.

A Second Counseling Course

Before your bankruptcy can be completed, you must also take a Debtors Education course from a court-approved agency. The purpose of this course is to teach you how to make better financial decisions in the future.


Another new rule passed in 2005 was that you could not move to a state that has better exemptions. You must now live in the state you will be filing bankruptcy in for at least two years before filing bankruptcy.

If you have more questions about bankruptcy, talk to a Cincinnati bankruptcy attorney to find out how you can eliminate qualifying debt and get a fresh financial start.

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