I used to make great money but now the company I work for cut bonuses, overtime and my regular hours. I am unable to pay my credit cards, some which I have had for years and never missed a payment and the creditors are calling me. I know I owe the money but just cannot pay right now. Which Chapter is right for me?

Meet the new face of bankruptcy. This nation’s worst downturn in 70 years pushed more formerly affluent people into bankruptcy than in previous recessions. Overall, personal bankruptcy filings were up 36.5 percent in the first half of 2009 from the same time a year ago, and experts predict the number of filings will keep rising even as the economy recovers. We are finding more and more of our clients had annual income of $60,000 or more, were careful with their money and through no fault of their own are simply unable to make their payments. Leslie Linfield, executive director of the Institute for financial Literacy, calls it "a middle-class recession"

Our blogger needs to find out what remedies are available through bankruptcy. The remedies of Chapter 7 and Chapter 13 are different. First, what type of Bankruptcy does our blogger qualify for? If our blogger qualifies for a Chapter 7, but needs the remedies of a Chapter 13, then our bloggers’ Chapter 13 can be for as few as three (3) years or as long as (5) years, depending on the debts our blogger must pay (in a Chapter 13, priority and secured debts must be paid, the unsecured creditors receive a percentage payment on the amount they are owed) and how much "disposable income" our blogger has. We know our blogger has tax debt. This must be paid in full through a Chapter 13 plan and is a determining factor in the minimum amount the Chapter 13 monthly plan payment will be.

The changes in the Bankruptcy Code added a three (3) part test to determine if our blogger qualifies for a Chapter 7 (liquidating) Bankruptcy or Chapter 13 (repayment plan) Bankruptcy. The first and second parts of the test are based on our bloggers last six months of income from all sources, multiplied by two, to determine our bloggers "annual income". The third part of the test is based on our bloggers current income and expenses.

Part One compares our bloggers "annual income" and household size with the local standards of "median income level" for the same size household. If our bloggers annual income exceeds the "median level income", then our blogger qualifies for a Chapter 13.

Part Two subtracts our bloggers secured monthly payments (i.e. monthly mortgage or auto payment), allowable necessary expenses (IRS standards based on household size), and mandatory tax and insurance deductions from our bloggers monthly income ("annual income" divided by the number of months in a year). If there is no "disposable income" remaining after these expenses are deducted, then our blogger qualifies for a Chapter 7 and can also elect a three (3) year Chapter 13.

The third and last part of the test looks to our bloggers current monthly income and expenses. After subtracting expenses from income, if there is "disposable income" which when multiplied by 60 would pay 25% of our bloggers total unsecured debt, our blogger qualifies for a Chapter 13.

Sounds complicated? The changes in the Bankruptcy Code made it more difficult for the honest debtor to seek relief, but not impossible.

Call the attorneys at the Stone Haven Law Group today to learn more about whether bankruptcy is right for you and which Chapter may apply.

10 Thinks Bankruptcy Court Won’t Tell You, Smart money Magazine by Elizabeth O’Brien, Published September 30, 2009.