New Personal Bankruptcy Chapter 7 Laws

Understanding new personal bankruptcy Chapter 7 laws before and after recent changes

Article 1, Section 8 of the United States Constitution authorizes Congress to establish uniform laws on personal bankruptcy throughout the states. This Constitutional power does guarantee all citizens the right to file or receive discharge. Congress determines who may file, if at all, and the relief granted, if any. Over time the law developed into complex array of statutory rights, qualifications and limits upon a defined individual who may file. Citizenship is not required.

Personal bankruptcy for individual filers

Relief is available regardless of the amount of debts owed. Insolvency is not required, yet only "individuals" are allowed to receive a discharge under Chapter 7. 11 U.S.C. 727(a)(1). Corporations, partnerships, joint ventures, cities and states are not individuals. To be a qualified for a personal bankruptcy discharge, individual debtors must also be a resident of the state for at least the past two years. The petition should be filed with the division serving the county of residence or where a business debtor has a principal place of business or principal assets. 28 U.S.C. 1408.

Who may file personal bankruptcy

The court can dismiss a chapter 7 case filed by any individual whose liabilities are primarily consumer debt. The test used by the court to determine if discharge of consumer debts is allowed turns on a finding of substantial abuse' as set forth in 11 U.S.C. 707(b). Also, debtors are restricted to one personal bankruptcy discharge every 6 years. If the date of a last discharge occurred within 6 years of filing a new petition, the new petition will be dismissed. A prior discharge in a Chapter 13 partial plan could also bar re-filing. Rules on re-filing after partial plans are highly technical and usually require a personal bankruptcy attorney for interpretation.

Dismissal of personal bankruptcy cases

Also, occasionally, timely cases are dismissed. Debtors must wait at least 180 days before re-filing. No one is allowed to file if, during the preceding 180 days, another petition was dismissed due to the debtor's willful failure to appear before the court, comply with court orders, or voluntarily dismissed another case when facing a motion to lift the automatic stay. 11 U.S.C. 109(g), 362(d) and (e). Employers can not discriminate against employees who file personal bankruptcy. 11 U.S.C. 525(b) provides that no private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor in personal bankruptcy, bankrupt under the Personal Bankruptcy Act, or associated with debtors in personal bankruptcy.

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