History

• Before the law changes in 2005 under then-President George W. Bush, most personal bankruptcy filers could choose between the type of bankruptcy—Chapter 7 or Chapter 13—that was best for them.
  
  

Effects

• Since Chapter 7 bankruptcy required virtually no repayment and Chapter 13 required repayment of many debts, most filers chose Chapter 7, according to Nolo, an organization whose mission is to help Americans understand legal rules and procedure. The changes made it more difficult for filers to qualify for Chapter 7 bankruptcy.
  
  

Means Test

• Filers wanting consideration for Chapter 7 bankruptcy must now pass a means test. This test takes the filer's income and family size and compares it to other households in the state.
  
  

Significance

• If the filer has an income that is less than or equal to the median income in their state, he may qualify for Chapter 7 according to Nolo. Since incomes vary by state, so will the amount required for Chapter 7 eligibility. If a filer does not qualify for Chapter 7, he will have to pay at least some of the debt under Chapter 13.
  
  

Considerations

• Under the new law, all bankruptcy filers must enter into a credit counseling course that is approved by the U.S. Trustee Program. The trustee's website is a source for suitable courses.