Congress made changes to the Bankruptcy Code in 2005 to address concerns regarding perceived abuse of the bankruptcy process by individuals. Referred to as the Bankruptcy Abuse Prevention and Consumer Protection Act, these changes have made it more difficult to qualify for personal bankruptcy. Now, you must satisfy certain criteria and complete credit counseling before you are eligible to file for personal bankruptcy.
Chapter 7 Vs. Chapter 13
Federal law determines whether you qualify for Chapter 7 or 13 bankruptcy. Chapter 7 bankruptcy is a liquidation proceeding that may involve selling your assets to repay your creditors. In contrast, Chapter 13 bankruptcy creates a three- to five-year repayment plan that allows you to repay all, or a significant portion, of your debt over the term of the plan. You may prefer to file for Chapter 7 bankruptcy because it generally takes only three to four months from the date of filing to complete, giving you a fresh financial start quickly.
To file for Chapter 7 bankruptcy, you must satisfy the means test. First, your monthly income is compared to the median income for your state. If you make more than the median income in your state, the court will calculate your disposable income. Disposable income is any income you have remaining each month after deducting reasonable expenses to maintain your livelihood. As of 2013, if your disposable income is more than $11,725 or 25 percent of your non-priority unsecured debt -- credit card debt is a prime example -- you may be ineligible to file for Chapter 7 bankruptcy and your case will likely be converted to a Chapter 13 bankruptcy.
You must now complete a credit counseling course prior to filing for bankruptcy. The course explains alternatives to filing for bankruptcy. Upon completion, you will receive a certificate that must be filed with the court. The credit counseling course must be completed within 180 days before filing for bankruptcy. United States Trustee Offices provide a list of approved counseling agencies. If you fail to complete this requirement, your bankruptcy case may be dismissed.
Refiling After Discharge
If you receive a bankruptcy discharge at the end of your case, it means that all debts included as part of the bankruptcy are no longer legally enforceable. If you wish to file for bankruptcy again after receiving a bankruptcy discharge, the amount of time you must wait to file will vary depending on which type of bankruptcy you wish to file and what form of bankruptcy you filed before. For example, if you receive a Chapter 7 discharge and would like to file for Chapter 7 bankruptcy again, you must wait eight years to file. In contrast, if you receive a Chapter 13 discharge, you only must wait two years before filing for Chapter 13 again. The time is measured from the filing of the first bankruptcy to the filing of the subsequent case.
Refiling After Dismissal
In addition to the waiting period after you receive a bankruptcy discharge, you must also wait to file a subsequent bankruptcy case if you withdrew your bankruptcy case before its completion. For example, if you filed for Chapter 13 bankruptcy, but later decided you no longer wanted to pursue the bankruptcy, you must wait 180 days to file for Chapter 13 bankruptcy again. The 180-day waiting period begins on the day you file the dismissal request.