With the new bankruptcy law in effect as of October 17, 2005, there is a lot of confusion with regard to the new "means test" requirement. The means test will be used by the courts to determine eligibility for Chapter 7 or Chapter 13 bankruptcy. The purpose of this article is to explain in plain language how the means test works, so that consumers can get a better idea of how they will be affected under the new rules.
When most people think of bankruptcy, they think in terms of Chapter 7, where the unsecured debts are normally discharged in full. Bankruptcy of any variety is a difficult ordeal at best, but at least with Chapter 7, a debtor can wipe out the debts in full and get a fresh start. Chapter 13, however, is another story, since the debtor must pay back a significant portion of the debt over a 3-5 year period, with 5 years being the standard under the new law.
Prior to the advent of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," the most common reason for someone to file under Chapter 13 was to avoid the loss of equity in their home or other property. And while equity protection will continue to be a big reason for people to choose Chapter 13 over Chapter 7, the new rules will force many people to file under Chapter 13 even if they have NO equity. That's because the means test will take into account the debtor's income level.
To apply the means test, the courts will look at the debtor's average income for the 6 months prior to filing and compare it to the median income for that state. For example, the median annual income for a single wage-earner in California is $42,012. If the income is below the median, then Chapter 7 remains open as an option. If the income exceeds the median, the remaining parts of the means test will be applied.
This is where it gets a little bit trickier. The next step in the calculation takes income less living expenses (excluding payments on the debts included in the bankruptcy), and multiplies that figure times 60. This represents the amount of income available over a 5-year period for repayment of the debt obligations.
If the income available for debt repayment over that 5-year period is $10,000 or more, then Chapter 13 will be required. In other words, anyone earning above the state median, and with at least $166.67 per month of available income, will automatically be denied Chapter 7. So for example, if the court determines that you have $200 per month income above living expenses, $200 times 60 is $12,000. Since $12,000 is above $10,000, you're stuck with Chapter 13.
What happens if you are above the median income but do NOT have at least $166.67 per month to pay toward your debts? Then the final part of the means test is applied. If the available income is less than $100 per month, then Chapter 7 again becomes an option. If the available income is between $100 and $166.66, then it is measured against the debt as a percentage, with 25% being the benchmark.
In other words, let's say your income is above the median, your debt is $50,000, and you only have $125 of available monthly income. We take $125 times 60 months (5 years), which equals $7,500 total. Since $7,500 is less than 25% of your $50,000 debt, Chapter 7 is still a possible option for you. If your debt was only $25,000, then your $7,500 of available income would exceed 25% of your debt and you would be required to file under Chapter 13.
To sum up, first figure out whether you are above or below the median income for your state (median income figures are available at http://www.new-bankruptcy-law-info.com). Be sure to account for your spouse's income if you are a two-income family. Next, deduct your average monthly living expenses from your monthly income and multiply by 60. If the result is above $10,000, you're stuck with Chapter 13. If the result is below $6,000, you may still be able to file Chapter 7. If the result is between $6,000 and $10,000, compare it to 25% of your debt. Above 25%, you're looking at Chapter 13 for sure.
Now, in these examples, I have ignored a very important aspect of the new bankruptcy law. As stated above, the amount of monthly income available toward debt repayment is determined by subtracting living expenses from income. However, the figures used by the court for living expenses are NOT your actual documented living expenses, but rather the schedules used by the IRS in the collection of taxes. A big problem here for most consumers is that their household budgets will not reflect the harsh reality of the IRS approved numbers. So even if you think you are "safe," and will be able to file Chapter 7 because you don't have $100 per month to spare, the court may rule otherwise and still force you into Chapter 13. Some of your actual expenses may be disallowed. What remains to be seen is how the courts will handle cases where the cost of mortgages or home rentals are inflated well above the government schedules. Will debtors be expected to move into cheaper housing to meet the court's required schedule for living expenses? No one has any answers to these questions yet. It will be up to the courts to interpret the new law in practice as cases proceed through the system.
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The government says that India's new bankruptcy laws will put an end to the 'Mallyas' - billionaire fugitives wanted for loan fraud or default - of corporate India. We examine the truth vs hype of these claims.
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Details of new bankruptcy law revealed
(6 Sep 2016) LEAD IN:
Details of a new bankruptcy law in the UAE have been revealed.
The law will make it easier for money-losing businesses to restructure in a country that criminalises unpaid debts.
The high rises of UAE and Dubai's financial district - visible evidence of the wealth of this Arab nation.
But what about the failed businesses, the ones which lose money?
The UAE authorities have revealed more details of what they say is the first bankruptcy law of its kind in the Arab world.
The draft law, expected to come into effect in the first months of 2017, will make it easier for businesses to restructure in a country that criminalises unpaid debts.
Giving organisations the opportunity to either unwind or restructure will enable companies that would otherwise have gone out of business to remain active in the economy.
This is seen as important for economic growth within the market and for the attractiveness of the UAE as an investment destination internationally.
Emilio Pera, head of financial services at KPMG, says it could help SMEs (small and medium-sized enterprises) flourish.
It's very important to ensure that there's continuity within that business because it's quite often at that starting phase where the lack of capital results in the demise of those entities.
The UAE's finance minister, Obaid Al Tayer, announces details of the law at a press conference in Dubai.
He says the law will provide companies with different ways to avoid bankruptcy and liquidation of funds, and the possibility to get new loans under different terms.
There will, however, be penalties for those who bypass the law, which include a five year prison sentence and fines that could reach up to a million dirhams (272,000 US dollars).
By setting that bar higher it will definitely be something that other countries will have to consider when looking at their competitiveness in that market, says Pera.
The law however only applies to companies and not individuals. People who are facing financial hardships will have to wait at least a year, as Al Tayer says they are working on an insolvency law expected to be revealed in 2017.
In 2008, thousands of Dubai residents fled the country during the financial crisis. Individuals who had lost their jobs and were left unable to repay their debts felt they had no choice but to flee rather than face the possibility of jail time.
Although Dubai's construction sector is booming since the crash in 2008, a few abandoned cars still litter the streets of the country, while unfinished construction sites are an eyesore among the flashy skyscrapers lining the Emirate's skyline.
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Strategy for Survival: Using the New Bankruptcy Law to Save Your Business
Brought to you by the Louisville Small Business Development Center and The Kentuckiana Hispanic Business Council, Inc
Featured speaker: Jim Irving, Office Managing Partner of Dentons Bingham Greenbaum's Louisville.
Due to COVID-19 operating restrictions, many industries are facing what can only be called an “Extinction Event.” There are daily reports of many well-known businesses filing for bankruptcy protection and economists predict that the nation may lose as much as 60% of its independent restaurants.
Small business owners are wondering how they are going to survive as they face reduced capacity, possible additional shutdowns and a hesitant customer. While many businesses have worked hard to access government financial assistance, rent abatement and loan deferrals, these strategies may not be enough over a long recovery.
However, small business owners should know their options. Brand new changes to the bankruptcy code through the CARES Act make bankruptcy not simply an act last resort but a powerful strategy for survival and continued ownership.
What Will Be Covered:
• Types of debt and negotiating with creditors
• Force Majeure Clauses in Leases and Agreements
• Chapter 7 vs Chapter 11
• Subchapter V overview
• Subchapter V strategies for business continuity
Some Ideas on The New Bankruptcy Law: Changes to Chapter 7 and 13 You Should Know
Visit to learn more about chapter 7 bankruptcy and how it can benefit you and your Family.
Business offering that service will assist you through submitting forms, but they are restricted from using legal advice. Court workers and judges are likewise forbidden from using legal suggestions. The bright side is there are free legal services offered through the American Bar Association and Legal Provider Corporation. Hiring an insolvency lawyer can be pricey.
The majority of cases are not that complicated, stated Cathy McEwen, a U.S. Bankruptcy Court judge for Middle Florida. What is made complex is understanding what exemptions to take and what the expenses will be if you take them. There are complex legal issues. For Chapter 7, costs typically range $500 to $3,500, which need to be paid before you submit because lawyer's costs could certify as part of the debt released in an effective filing.
The real cost might differ from $500 to numerous thousand dollars. For Chapter 13, costs normally vary from $2,500 to $6,000, however you don't generally have to pay the entire fee up front, paying a few of it through your debt-repayment strategy. $245 filing charge $75 administrative charge $15 trustee additional charge * If you need to re-open a Chapter 7 filing, it's an extra $260.
If you need to convert from Chapter 13 to Chapter 7, the cost is $25. Working with a petition preparer generally cost about $200, though companies frequently try to offer you updated services that will significantly raise your bill. To be clear, the question is not just which kind of bankruptcy is proper to your circumstance.
It's a complex procedure, and you ought to consider speaking with a credit therapist to determine if there's another method. Nonprofit customer credit counseling organizations that can work out more favorable terms with lenders, and it's possible that a financial obligation management strategy, financial obligation combination loan or debt settlement might be a better solution.
Sometimes you require to stop a lender's action quickly. Declare insolvency can help. When you open a case, the court puts an automated stay in place that restricts most financial institutions from continuing collection actions versus you (exceptions exist). But, completing all the insolvency types isn't a quick process. If time is running short, you can utilize a quick online personal bankruptcy filing procedure referred to as an emergency situation personal bankruptcy filing (or skeleton filing), get the automated remain in place, and send the staying documents later on.
Bankruptcy 101: Bankruptcy Basics
What does it mean for you if an important customer or supplier files for bankruptcy? This webinar will provide you with an understanding of the issues presented by a bankruptcy filing in the context of a business relationship. The topics covered are the impact of the automatic stay, filing and litigating proofs of claim, the assumption and rejection of contracts, Chapter 11 plans of reorganization, litigating avoidance actions, and the effect of a bankruptcy discharge. After this webinar, you will have exposure to the most common issues facing companies in bankruptcy and how those issues effect your business.
Presenters: Cheryl Kelly, Brian Hockett
Disclaimer: The information provided herein is intended for general purposes only and is not intended to be legal advice. The ethical rules of some states require us to identify this as attorney advertising material. The choice of a lawyer is an important decision and should not be based solely upon advertisements. Past results obtained on behalf of current firm clients afford no guarantee of future results. Every case is different and must be judged on its own merits.
Has the new bankruptcy law been effective in resolving banks’ bad loan mess?
The Insolvency and Bankruptcy Code was enacted about two years ago, but many of its provisions have been criticised by bankers, investors and company promoters. On its part, the government has amended several provisions of the IBC to fine-tune the law and plug the loopholes. Has that been enough to reduce the pile of bad loans? And what more is required to be done? Top executives from private equity firms, advisory firms and law firms discussed the issues related to the IBC at the VCCircle Stressed Assets Investment Summit in Mumbai last week.
Watch the video for more.
Has the new bankruptcy law succeeded in tackling bad loans?
The Insolvency and Bankruptcy Code came into effect in late 2016. Since then, many creditors have used this law to drag debt defaulters to bankruptcy courts. While the law has helped tackle the problem of bad loans, some challenges remain. What are those roadblocks and what has been the success rate? Industry executives discussed these issues at the second edition of the News Corp VCCircle Stressed Assets Investment Summit 2019.
Watch the video.
New bankruptcy law to protect all
New bankruptcy law to protect all
A new bankruptcy and insolvency law that has been sent to State Council for consideration aims to boost Oman’s economy and to protect workers’ rights.
Saif Ali Shaikhan Al Amri, member of the Economic Committee at the State Council, said: “When a bankruptcy begins in earnest, the first step will be to gather all remaining assets before a judge and a bankruptcy manager, where rights such as salaries and pending payments are distributed as a primary step.”
“The step after that involves looking at accrued debts and the loans given. While not saying that the salaries are guaranteed, they are a right which will be given so long as the funds exist to do so,” he added.
Issa Said Sulaiman Al Kiyumi, Vice-Chair of the Legal Committee at the Council, told Times of Oman: “All countries care about corporate society and try to provide it with opportunities and protect it from crisis. The ongoing Bankruptcy Law Project is one of the important steps that some might look at negatively. However, the law has been designed in order to protect debt owners, those in debt, and other parties.”
Businessmen in Oman welcomed a dedicated law, citing the importance of making sure the rights of all parties are protected.
What makes the UAE's bankruptcy law stand out?
This is a huge step forward for the country, says MEED's Banking & Finance Reporter Philippa Wilkinson
Bankruptcy and Insolvency - It's Not As Bad As You Think.
Domenico Magisano, Commercial Litigation Partner at Lerners LLP, discusses generally what happens when a company is insolvent and how restructuring tools can be used to help companies emerge from insolvency stronger.
Is there a difference between Bankruptcy and Insolvency?
The media often speaks of Bankruptcy Protection, what does that mean?
What is the equivalent to Chapter 11 in Canada?
What happens if the creditors do not accept the proposal or plan of arrangement?
What is a receiver?
How is a receiver appointed?
What is the difference between a court appointed and a privately appointed receiver?
Are there other restructuring tools available to creditors and debtors?
For more information on this or any other bankruptcy or insolvency related questions, please contact Domenico at email@example.com
Bankruptcy Law. Chapter 7, Chapter 13. Rules, Regulations, Process. Stop Foreclosure
How to File Bankruptcy Law. Chapter 7, Chapter 13. Rules, Regulations, Process. Stop Foreclosure. Stop Collections
Bankruptcy law in India
Bad bankruptcy law is a major factor holding back a lot of developing economies, and that is true for India too.
Development Economics course:
Bankruptcy Law During COVID-19
Bankruptcy During COVID-19
If you have more questions give us a call at 619-440-5000
This educational video provides an overview of bankruptcy law. This video provides legal information and not legal advice. If you need legal advice, please contact an attorney.
To obtain more information or to contact the local legal aid program for help, see LawHelp.org.
Bankruptcy Law Changes: Overview of Consumer Bankruptcy Law - FindLaw
An Overview of the new Federal Consumer Bankruptcy Law from FindLaw.
Finance & Investment Tips : What Are the New Bankruptcy Laws?
The new bankruptcy finance laws are designed to protect banks and credit card companies, by allowing them to pursue any unpaid debts, for any amount of time, by garnishing wages or seizing assets. Discover how the new bankruptcy laws do not help the consumer with tips from a registered financial consultant in this free video on finance and investment.
Expert: Patrick Munro
Bio: Patrick Munro is a registered financial consultant (RFC) with outstanding sales volume of progressive financial products and solutions to the senior and boomer marketplace.
Filmmaker: Reel Media LLC
COVID 19 Changes to Bankruptcy Laws_William Buck
Bankruptcy laws have changed in response to COVID-19. What are the new laws? And how will they affect you and your business? Restructuring and Insolvency Manager, Michelle Viscardi outlines the key changes and what they mean for you.
All you need to know about the new bankruptcy code
The new bankruptcy code will provide a time-bound framework to resolve insolvency and help investors make a faster exit from bankrupt companies.
Discussing the ins and outs of bankruptcy law and the resources available for low-income individuals. View training materials here:
The following video documents a training session on Bankruptcy Law that took place on June 28, 2013 in Bloomington, Minnesota. The training was arranged by Call for Justice, LLC, a Twin Cities-based non-profit that works to connect low and moderate-income people with legal resources. Part of our work is to train United Way 2-1-1 on the various Twin Cities legal resources.
Ellen Krug, Executive Director of Call for Justice, LLC, coordinated the session and conducted the training. The training session was presented to Information and Referral Specialists and other employees of United Way 2-1-1.
The information contained in this video is not legal advice. Viewers seeking legal assistance should contact an attorney. If you are a Minnesota resident in need of legal assistance and unable to afford an attorney, you should call United Way 2-1-1 by dialing 2-1-1.
At various places in the video, there may be references to Zoey or Zoey Zalopa. This is a fictional character used for purposes of exemplifying referrals to various legal resources.
Bankruptcy Law 101 - How it Works - Vook
This is the How it Works video from the Bankruptcy Law 101: The TextVook. For more information on this or other titles from Vook, please visit wvook.com.
Bankruptcy Law (Intro)
This video is about Bankruptcy Law
Visit for all of The Legal and Regulatory Environment of Business by Jason Mance Gordon. The content includes:
Bankruptcy Law (Intro)
What is Bankruptcy?
What are the types of business bankruptcy?
Who are the participants in the bankruptcy process?
Key concepts behind the bankruptcy process?
What rules govern the bankruptcy process?
What the authority of the bankruptcy court?
What is the authority of the trustee (debtor in possession) in bankruptcy?
What assets of the debtor are included in the bankruptcy estate?
What is the automatic stay in bankruptcy?
What is a claim by creditors of the bankruptcy estate?
What is voluntary and involuntary bankruptcy?
Business Bankruptcy Process
What is the Chapter 7 bankruptcy process?
What is the Chapter 11 bankruptcy process?
Authority of the Debtor in Possession
Accept or reject contracts?
Stay of Proceeding?
Use of Business Assets?
Finalizing the Bankruptcy Process
What is the appointment of a Trustee or Examiner in business bankruptcies?
What is a Plan of Reorganization?
What is Cramdown of a reorganization plan?
To what extent does the bankruptcy process relieve a debtor's debts?
The Big Picture - The new Bankruptcy Law: Will it help tackle defaulters and NPAs?
Guests: Harish Salve, Senior Advocate, Supreme Court of India, Ajay Dua, Former Secretary, Ministry of Industries and Commerce, Govt of India, Prof.Arun Kumar, Centre for Economic Studies and Planning, JNU, Mukesh Mohan Gupta, Former Diorector, Dena bank and Sanjeev Gupta, Chairman, Banking and Financial services, PHD Chamber of Commerce and Industry.
Anchor: Girish Nikam
Air date: May 16, 2016
Bahrain's New Bankruptcy Law - Explained
#Bahrain's new #bankruptcy law, modelled after U.S. Chapter 11 insolvency codes and the first in the GCC to implement international provisions, aims to allow #startups the safety net to experiment and innovate. Favouring restructuring over liquidation, the law is yet another way Bahrain supports better business.
India Gets A New Bankruptcy Law
The Bankruptcy Law passed by the Rajya Sabha gave a big boost to the banking sector which now gets more ammunition to fight bad loans. Latha Venkatesh tells us what this means for the banking sector.
New Bankruptcy Law of Saudi Arabia:
New Bankruptcy Law of Saudi Arabia:
The Kingdom of Saudi Arabia, as a part of its National Transformation Plan (NTP) 2020 and Vision 2030 has introduced a new bankruptcy law. The new bankruptcy law primarily covers three main topics such as preventive settlement, financial restructuring, and procedures for liquidation. The new law also provides for the concept of debt ranking and penal implications. Since bankruptcy law aims at discharging debts and reorganizing the business, the implementation of the law will be a great advantage to the companies. Visit the STA website and read through our guide for information on the subject.
Bankruptcy law to take effect early next year - GN Headlines
Daily headlines from the UAE and around the world brought to you by Gulf News. Bankruptcy law to take effect early next year. Philippines' Duterte expresses regret over Obama slur. Serena Williams records 308th match win.Zayn Malik axes Dubai gig due to ongoing anxiety.
See more at:
Bankruptcy law overhaul to save small businesses on brink of COVID collapse | 7NEWS
Thousands of small businesses on the brink of collapse will be thrown a lifeline under new reforms to bankruptcy laws. The changes, to be unveiled by Treasurer Josh Frydenberg on Thursday, will cover around three-quarters of businesses subject to insolvencies today.
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