Bankruptcy laws are Federal; therefore, the 2005 changes to bankruptcy code were effective all over the United States. These changes that were made at the Federal level impacted the laws in Georgia as well. These changes to bankruptcy law at the Federal level generated new Bankruptcy Laws in Georgia as well.
In addition to the Federal bankruptcy laws, the State of Georgia has elected to use its own exemptions. These exemptions were changed in 2013 creating a new set of laws relating to new bankruptcy laws in Georgia.
The article below discusses changes that were made in 2005 which were national changes and did not just affect bankruptcy related laws in Georgia.
New Changes to Bankruptcy law made in 2005
Major changes were made to the existing bankruptcy laws in October, 2005 and new bankruptcy laws were enacted. These changes were supposedly put in place in order to reduce the number of “abusive” bankruptcy filings. However, it is our position that most people don’t file a bankruptcy just because they got tired of paying their bills. No, most people file a bankruptcy because there has been a significant change in their lives: their hours have been reduced; they have been laid off, they have gotten divorced or suffered a medical catastrophe or there has been some other major change or reversal in their lives which has resulted in not being able to keep up with payments.
The changes to bankruptcy law does not mean you cannot still file a bankruptcy case. Bankruptcy is still available and still provides protection from your creditors. Bankruptcy will still stop garnishments, repossessions, foreclosures, lawsuits and collection attempts of any kind.
However, as a result of the new changes to the bankruptcy laws, it is now more complicated to file a Chapter 7 or Chapter 13 bankruptcy than it used to be.
One of the major changes to the bankruptcy laws was the implementation of a “means-test” to determine whether a person may file a Chapter 7 or liquidation bankruptcy. Before the laws were changed, any person with any amount of income could choose to file a Chapter 7 bankruptcy. Now, whether you can file a Chapter 7 bankruptcy is contingent, in large part, on the amount of income received in your household in the six-month period before the bankruptcy case is filed.
This means-test annualizes the income received in the six-month period before the bankruptcy case is filed and compares that annual amount to the median annual income for a similarly sized household in Georgia. (Different states have different median annual incomes for different household sizes.) If your household income is less than the median income for your household size, the means-test ends there. If your income is above the median annual income for your household size, a “presumption of abuse” arises with a Chapter 7 bankruptcy filing. The means-test then moves to the next step which is whether this presumption of abuse can be overcome by taking certain deductions provided under the IRS’ National, Regional and Local Deductions and any actual additional expenses incurred (for example, child support or alimony payments). If the presumption cannot be overcome, then a Chapter 7 bankruptcy is not available and if a bankruptcy is still to be filed, it will have to be one under Chapter 13.
Another major change to the bankruptcy laws is the requirement that a pre-filing credit counseling session be completed before a person is eligible to file either a Chapter 7 or Chapter 13 bankruptcy case. This session can be completed on-line or over the telephone, so it is not difficult to complete, but if a bankruptcy case is filed without the session being completed, the case is dismissed. Before October, 2005, there was no such requirement.
In addition to these two major changes to the bankruptcy laws, there have also been some other changes. If you would like to discuss the additional changes and how they might impact your bankruptcy filing, please feel free to schedule an appointment to speak with one of our experienced bankruptcy attorneys.
Remember, bankruptcy is still available to protect you and your family!