The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was introduced to prevent the widespread abuse of insolvency laws. New eligibility criteria now apply, including passing a state-based means test. Certain debts cannot be written-off by filing for bankruptcy, such as car loans, student loans, taxes, alimony and government loans. They will be completely excluded so it is important to consult a qualified debt counselor to establish whether this is the right option.
How Filing for Bankruptcy Helps
The objective of filing for bankruptcy is to clear unsecured debt, such as credit card debt and medical bills. An unsecured debt is a form of borrowing that isn't backed by collateral. Chapter 7 bankruptcy allows someone to write-off debt, whereas chapter 13 bankruptcy is more concerned with the restructuring of personal debt in order to protect certain non-exempt assets.
