Due to the new bankruptcy act of 2005, all those who are filing for a
bankruptcy are required by law to attend credit counseling six months
prior to filing for bankruptcy. An instructional course in financial
management will then be required after bankruptcy has been filed. Also
under the 2005 Bankruptcy Act a means test will be applied to determine
which kind of bankruptcy the individual apply qualifies for.
Types of Bankruptcy
Maine has two different types of bankruptcy that individuals are able
to qualify for. Other types of bankruptcy are for businesses and
farming industries. The individual bankruptcy categories include
Chapter Thirteen bankruptcy and Chapter Seven bankruptcy.
Chapter Seven bankruptcy allows individuals to sell their property
through an assigned trustee and use the acquired funds to pay
creditors. Certain items of property will be excluded from being sold
and can often include motor vehicles, some forms of real estate, homes,
and other particular items. Chapter Seven bankruptcy allows creditors
to be eliminated within a three-month time line and will almost
automatically solve the problems of foreclosure. The trustee involved
with the case will be paid through commission of the property sold.
Chapter Thirteen bankruptcy is the other form of bankruptcy for
individuals. In this type of bankruptcy no property is to be sold,
instead a payment plan is created especially for the individual's
needs. This depends on how much debt is outstanding and the current
income capabilities. This payment plan will specify how much of the
income will be used to pay off the debts and will last usually as
little as three years and no more than five years.
Maine law requires that all the payments be made with the five-year
plan or consequences will follow. Both these types of bankruptcy can be
filed through a single individual or through a husband and a wife at
the same time in a joint filing.
The Means Test
The means test will not specify which type of bankruptcy meets an
individual's needs and will do so through calculations. The average
income for the six months before bankruptcy filing will be analyzed
along with Maine's median income. Chapter Seven bankruptcy can usually
be the outcome if a minimum of six thousand dollars can be paid in a
five-year span. This allows for the individuals to continue financial
balance after debts have been cleared through sale.
Chapter Thirteen bankruptcy will be the end result if the court
concludes that a minimum of ten thousand dollars can be acquired in a
five-year span. Because individuals will be able to have higher
finances, they are then deemed stable enough to pay their own debts.
When an individual falls between the six thousand and ten thousand
dollars mark for five years, the court will then calculate if Chapter
Seven bankruptcy is an adequate possibility. The court will consider if
twenty-five percent of the debt can be paid or not. If not then Chapter
Seven bankruptcy is possible. Outstand expenses can include on-going
medical bills and credit card bills.