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The New Bankruptcy Law

Some Chapter 13 Filers Will Have to Live on Less

Under the old rules, people who filed under Chapter 13 had to devote all of their disposable income -- what they had left after paying their actual living expenses -- to their repayment plan. The new law adds a wrinkle to this equation: Although Chapter 13 filers still have to hand over all of their disposable income, they have to calculate their disposable income using allowed expense amounts dictated by the IRS -- not their actual expenses -- if their income is higher than the median in their state. And these allowed expense amounts must be subtracted not from the filer's actual earnings each month, but from the filer's average income during the six months before filing.

Other Changes

There are other changes that can affect bankruptcy filers negatively, including how property is valued (at replacement cost instead of auction value) -- this means more debtors are at risk of having their property taken and sold by the trustee -- and how long a filer must live in a state to use that state's exemption laws (this can make a big difference in the amount of property a bankruptcy filer gets to hold on to). These changes and others are explained in The New Bankruptcy: Will It Work for You?, by Attorney Stephen Elias (Nolo).

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