The new bankruptcy law will change the steps people take in filing for bankruptcy.  The three major changes that will affect the most people are the ticket in, the means test, and the ticket out. 

Ticket In - Credit Counseling

The "ticket in" is simple a credit counseling session that the person wishing to file bankruptcy must attend.  You must attend this credit counseling session six months prior to applying for bankruptcy.  Also, the credit counseling session must be done by a non-profit agency that has been approved by the United States Trustees office. 

Means Test

Currently, the bankruptcy court determines whether or not you can qualify for chapter 7 bankruptcy.  Under the new law, your income will be tested by a two-part "means test."  The first test is a formula that exempts certain expenses (rent, food, etc.) to determine if you can afford to pay 25 percent of your unsecured debt, such as credit card bills.  Next, your income will be compared to your state's average income.

The court will not allow you to file chapter 7 bankruptcy if your income is above average for your state and you are able to pay 25 percent of your unsecured debt.  However, under the new bankruptcy law, the court may allow you to file under chapter 13.

If your income falls below your state's average but you are able to pay 25 percent of your unsecured debt, you may be able to file chapter 7, but the bankruptcy court will still have the authority to require you to file chapter 13 instead if the court believes you would be abusing the system by filing under chapter 7.

The new bill also allows for special accomodations for active-duty military service members, for low-income veterans of the military, and those with serious medical conditions in the consideration of the new means test.

Ticket Out - Debtor Education

The "ticket out" for the new bankruptcy law is attending some type of debtor education class from an approved provider.  This class is commonly called the Debtor Education Class. You must complete the class  before your bankruptcy can be finalized. The United States Trustees Office decides which education providers are officially approved for the Ticket Out Education.

Also, under the new law, the court will apply living standards derived by the IRS to determine what is reasonable to pay for food, rent, and other expenses to determine how much you have available to pay on your debts.