Chapter 7 Still Lives - "traditional bankruptcy"
What most people refer to as "traditional bankruptcy" is Chapter 7, which involves a fresh start based on liquidation of non-exempt assets and a Discharge. Chapter 7 is still available. The new thing about it after October 17 is that some of the tests and limits have been tightened up so that people who make more money than a certain average in their home state will have to enter Chapter 13 and make some kind of payment plans for their debt.
In Louisiana most clients will still qualify for Chapter 7 because most are below the Median, which changes regularly and is based on the Census Bureau's periodic reports. Earlier in 2009, the median income for a single wage earner in Louisiana was $36,945; for a family of two, $46,741; for three, $52,628; and for four, $66,634. For each additional member of your household in excess of four add $6,900. If the median income is more than your annualized monthly income (average monthly income for the previous three months multiplied by 12), you qualify for Chapter 7 in Louisiana. NOTE THAT THESE AMOUNTS CHANGE AND THERE IS MORE CALCULATION TO DO, INCLUDING DEDUCTIONS ALLOWED: USE THIS FOR A GENERAL IDEA ONLY AS THERE ARE THINGS WE CAN DO WITH THESE NUMBERS TO QUALIFY IN MANY CASES BY DEDUCTING TAXES, HOUSE NOTES AND OTHER PAYMENTS!!!
While the law always required the Court to prevent "abuse" in filing Chapter 7, the test under the old law was left much to the Court. Congress changed the law and now there is an arbitrary number for income and for personal expenses. You will be stuck with what the law says is reasonable in terms of expenses, with some concern for special health problems, but tighter limits on spending in particular home budget categories.
The lawyers get hammered too, in that the law imposes responsibility and costs on the lawyer in cases where the client files Chapter 7 but should have filed Chapter 13. This is called "abusive filing" and instead of leaving that on the client, the Congress imposes penalties on the lawyer, meaning lawyers have to charge more money for this work, and will have to get extensive, detailed information from clients before filing.
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