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The 108th Legislature passed the Abuse Prevention Bankruptcy Law 2005
which was signed by the President and became effective October 17th,
2005. According to this new bankruptcy law, the qualification
restrictions for Chapter 7 liquidation were narrowed significantly,
based on past income measurements. Total income, and income compared to
debts may both disqualify those who attempt to file Chapter 7.
Additionally, a third income based formula must be passed to qualify.
As a result, filing bankruptcy under Chapter 7 is no longer an option
for anyone who is currently employed and owes unsecured debts calculated
less than 15 times gross monthly income. As a result of this new bankruptcy
law, 2005 Chapter 7 filings abruptly spiked in the months leading up to
the effective date by over 325%.
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