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For most people, bankruptcy is a last resort in dealing with their debt problems. However, some people take advantage of the system. This was part of the logic behind the most recent reform to the bankruptcy laws. The Bankruptcy Abuse Prevention and Consumer Protection Act was signed by President George W. Bush on April 20, 2005. The Act was the largest overhaul of the Bankruptcy Code since the federal law was enacted in 1978. Congress was trying to improve bankruptcy law and restore personal responsibility to bankruptcy. If you would like to understand the changes made by the Act, read this overview.

The Means Test

The means test is often considered the biggest change made by the 2005 Act, and it has made it harder for some people to file for Chapter 7 bankruptcy. The purpose of this test is to force debtors who have steady income—making them capable of repaying their debts—into Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. The means test takes a hard look at your monthly income to determine whether you have sufficient income to make substantial payments in a Chapter 13 repayment plan.

Credit Counseling and Financial Management Course

The 2005 Act added a requirement for credit education before you can discharge your debts through bankruptcy. Before filing for bankruptcy, you must complete credit counseling within 180 days prior to filing. After filing, you must complete a personal financial management course before your debt will be discharged. There are a few, limited circumstances when you will not have to complete these requirements.

Are you considering filing for bankruptcy? Bankruptcy laws are complex, and the help of a bankruptcy lawyer who practices in this field can be invaluable. The bankruptcy law firm of Cutler & Associates, Ltd. has seven offices in the Chicagoland area.