|
Broad sweeping changes were included in the 2005 reform Act.
Because of new restrictions for qualification, many people are no
longer entitled to file Chapter 7. Further, because of income
restrictions, Chapter 13 repayment plans were extended, so that most
above average income earners, when paying less than 100% of all debts,
must file a 5 year plan. The divining point is the annual median income
for the state in which the debtor resides. If a debtor earns more
than their state median income, new strict qualification rules apply.
While a case is pending under Chapter 13, all disposable income
must be contributed to the trustee, who in turn, redistributes
payments to creditors after deducting a fee. The definition of
disposable income also changed dramatically. In the past, judges
determined a reasonable amount for living expenses. Now, after the
implantation of new federal bankruptcy laws, all debtors are permitted
only expenses according to a schedule of national reasonable expenses,
and historical costs for housing and car payments. The Code also
creates a few exceptions that may also adjust the calculation of
disposable income.
|
