"Yes, people can be denied bankruptcy. That happens in the context of the new law. What's going to be more important is what they call 'means testing' and it is going to see if you have got a certain amount of income left over in the family budget to repay your unsecured creditors. If you do, then you either have to go on chapter XIII or you would be denied entirely," Wilkman says.
In the past, Wilkman says many people who filed for bankruptcy could have afforded to pay off some of their debts. These new bankruptcy laws allow creditors to get some of their money back from people.
"What we are thinking is that there have been too many people who have gotten a fresh start when they really could have repaid some of their debts. That's why this means testing is the biggest change in the new law, and that means you don't have to qualify for bankruptcy. Just like you get means tested for food stamps, Medicare and other social safety services, now they do means testing for bankruptcy, which is a part of the U.S. social safety net, just like all the other benefits are," Wilkman says.
There are some other big changes when it comes to bankruptcy. A person filing for bankruptcy has to be evaluated by a credit professional first, not a lawyer.
"Another big change is that you're going to see your credit counselor beforehand, and an agency like Springboard will do that. Yes, that's a big change. So you have to see a non-profit credit counselor to get your ticket punched, so to speak, before you file. They are supposed to lay out all your options and go over your household budget with you," Wilkman says.
A credit-counseling agency does charge a fee. These fees vary from state to state. After a credit counseling agency evaluates your situation and needs, they make a determination.
"Then, you get a loan certificate that you can take to your attorney and go through with the filing. Then, before it is done, you're going to have to also complete a financial management course. So the debtor education parts of the bill (the counseling agency) were in favor of that because it is just common sense to bring financial literacy into play with something like bankruptcy," Wilkman says.
So if you've thought about filing for bankruptcy, the laws have changed. You may or may not be able to file for bankruptcy. The decision lies in the hands of credit counseling agencies. They now decide what you can or cannot pay.
