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Law places limits on who can file for consumer bankruptcy

Like many other types of laws, American bankruptcy laws have evolved over time. As economic conditions change and the financial pressures put on individuals progress, the legislation that governs individuals' actions must also advance. In the last decade, citizens of New York and the rest of the country have witnessed some big changes in the world of consumer bankruptcy.

Many of those changes took shape after the passage of one particular law. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 came into effect under the Bush administration and updated many parts of the federal bankruptcy legislation. In particular, the new law put a major restriction on who could file for Chapter 7 bankruptcy.

Under the new legislation, some individuals who file for Chapter 7 bankruptcy have to satisfy a "means" test. Before the test is applied, however, an initial determination is made. If the filer's income is less than the median income of his or her state, they can file. If income exceeds that median amount, he or she is subjected to the means test.

The test evaluates a filer's earnings, expenditures and costs, determining if that person has at least $100 per month to put toward his or her debts. If the filer has that amount or more, then they are not eligible to file for Chapter 7 bankruptcy. The individual, however, is eligible to file for Chapter 13 bankruptcy.

Bankruptcy laws change and individuals who want to file should stay current on the requirements that could apply to them. One way to ensure that a filer is up to date on the relevant laws is to work with an attorney who handles personal bankruptcy matters. Big changes happened in the world of bankruptcy just a decade ago; it is impossible to know what the future will hold for the world of consumer bankruptcy legislation.

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