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Summary: Consumer Bankruptcy can be defined as the legal process thorough which individuals who end up in financial trouble are able to work out their debts and pay them under the protection of the bankruptcy court. Learn about the consumer bankruptcy process and types of bankruptcy in this introduction.
Chapter 7 Bankruptcy -- This is the most commonly used form of consumer bankruptcy protection. Known in the United States as "liquidation bankruptcy," it provides for a fresh start for people in debt by liquidating their non-exempt assets to pay creditors and discharging the remaining eligible debt.
Chapter13 Bankruptcy -- This form of consumer bankruptcy protection in the United States allows debtors to keep most of their property, and it restructures their debt into a no- or low-interest payment plan.
Personal Bankruptcy Filing Process -- This is a legal process by which consumers ask the United States Bankruptcy Court to allow them to seek protection under the United States Bankruptcy Code. (See here for more information on filing bankruptcy.)
New Bankruptcy Law -- The Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law by President George W. Bush on April 5, 2005, bringing significant changes to the United States Bankruptcy Code. The changes made by the BAPCPA attempt to make it increasingly difficult for consumers to discharge debt under Chapter 7 of the bankruptcy code.
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 makes consumer credit counseling a prerequisite for any individual filing bankruptcy, whether it's Chapter 7 or Chapter 13.
This requirement holds true whether you file bankruptcy in California, New York bankruptcy, or anywhere else in the U.S.
In addition, individuals considering a bankruptcy filing are required to first undergo a means test to determine whether they qualify for a Chapter 7 bankruptcy. This involves examining the income levels of the filer, to see if they could be pushed into a Chapter 13 bankruptcy filing instead. The previous six months of income is examined -- less than the median income for that state/territory qualifies for Chapter 7, greater than median income qualifies for Chapter 13.
Unlike with credit counseling, the effect of the means test does depend on where you live. (The median income for a San Diego bankruptcy will be different than that of a Las Vegas bankruptcy, since California and Nevada have differing median income levels.)
When considering filing a consumer bankruptcy, remember that the specifics of bankruptcy law can vary from state to state. It is important, then, to choose a lawyer from the state in which you plan to file. A Texas bankruptcy attorney, for example, would be familiar with the specific bankruptcy filing procedures, the rules for exemptions, and the means test thresholds as they apply in Texas. Further, there could be differences between bankruptcy courts within the same state, indicating that it would be a good idea to get a local bankruptcy attorney familiar with your city's bankruptcy court -- i.e., get a Fort Worth bankruptcy lawyer if you're filing in Fort Worth vs. a Dallas bankruptcy lawyer if you're filing in Dallas.
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Last edited by Rudy Rival on Mar 27, 2009 4:45 pm -0500.
Bankruptcy in Texas