Chapter 7 Laws

Changes in Chapter 7 laws still allow easy qualification for most people

The advent of new Chapter 7 laws commenced a fresh era in U.S. legislative policy. These new laws are premised upon the assumption that individuals must pay all legal debts up to the limit of their ability. While this proposition is hardly new or controversial, the limit of an individual's ability to repay remains highly speculative and divided both Congress and the Senate along party lines. In essence, this disagreement centered upon the definition of "disposable monthly income" remaining after the deduction of allowable living expenses.

The intent and application of the bankruptcy reform bill

The formal intent of the Bankruptcy Abuse Prevention Act was to curtail unnecessary Chapter 7 cases which creditors view as a windfall for average wage earners. Rather than allowing any individual to file, above average wage earners are required by law to participate in repayment plans, up to the maximum ability defined by law, for a period of 5 years. In practice however, few debtors file recklessly but rather as the result of unexpected life emergencies (i.e. separation, divorce, personal injuries, and insurmountable medical expenses following catastrophic illness). In these circumstances, anyone who historically earned an above average income may be forced into Chapter 13 for 5 years and limited to a statutory living allowance provided by law under court supervision.

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