Most people are aware that Congress made some changes recently to the bankruptcy law. What they don't realize, however, is that declaring personal bankruptcy is still a viable option for many Americans struggling to get out of debt. The process itself has become more tedious, but it is still a legitimate option.
The major change to the bankruptcy code has to do with something called the means test. If you are filing for chapter seven bankruptcy (the kind where you try to wipe out all of your debts completely), then you'll have to prove to the court that you really can't pay your bills. You have to show extensive proof of your income and expenses to show that you could not pay off your bills while maintaining a reasonable standard of living.
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If your income is greater than the median income for your state, then you'll have to take the means test. As we said before, this is a more tedious process and creates more work for both you and your lawyer. More work for your lawyer, by the way, will probably mean higher fees. Nevertheless, the bottom line is that most people who would have been eligible for bankruptcy previously will continue to be eligible under the new law.
In fact, if your income is below the median income for your state, you don't even have to worry about taking the means test. Because your income is lower than most, its pretty clear to the court of that you would struggle to pay off your debts.
I hope you understand that despite the bankruptcy law change, personal bankruptcy is still a real option that can help you get a financial fresh start. It's not something that you want to take lightly, and you should discuss your options thoroughly with a good lawyer. Still, it's good to know that you have the option despite the recent changes in the bankruptcy code.
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