The purpose of bankruptcy is to give financially overwhelmed individuals a fresh start and the chance to repair their credit. Many types of consumer debts can be discharged (canceled) in bankruptcy, including personal loans, medical bills, past due utility charges and, quite commonly, credit card accounts. In fact, much of the debt in Chapter 7 bankruptcy cases across the nation stems from credit cards. However, debtors contemplating bankruptcy should be aware that some credit card debt may not be dischargeable.
In 2005 Congress enacted a major bankruptcy reform law that, among other things, made discharging consumer debt in bankruptcy more difficult. The federal Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) places restrictions on filing for Chapter 7 that are designed to curb abuses of the process. The law creates a presumption that certain borrowing is fraudulent and thus not eligible for discharge. This includes the following:
- Taking cash advances totaling more than $750 within 90 days of filing bankruptcy
- Charging more than $500 worth of luxury goods within 90 days of filing bankruptcy
BAPCPA also established the requirement that debtors seeking bankruptcy protection under Chapter 7 must pass a “means test” that evaluates their ability to repay a portion of their debts. The means test compares the debtor’s income to the median income in their state of residence and then factors in the debtor’s monthly living expenses. If the debtor fails the means test, they cannot proceed with Chapter 7. However, they may be able to pursue a Chapter 13, in which some of their debts are repaid over an extended period of time.
BAPCPA further requires that as a condition of eligibility for Chapter 7, debtors must complete an accredited debt counseling program within six months before filing.
Bankruptcy laws are complicated and strictly enforced. Anyone who is suffering under the weight of crushing debt should seek counsel of a qualified bankruptcy lawyer as soon as possible.
With six offices in the Atlanta, Marietta and Athens areas of Georgia, Jeff Field & Associates is one of the premier bankruptcy and debt relief law firms in the region. Our lawyers have the knowledge, skills and experience to guide debtors through the Chapter 7 process. If you are feeling crushed by debt and wish to learn about your options for relief, feel free to contact us online or call 404-381-1278 for an initial consultation.