Unfortunately, a great number of Americans find themselves unable to pay their bills each month. If you are in this situation, there are many possibilities which you should consider. Cutting back on your expenses and restructuring your budget is an important start, and sometimes getting a part time job to bring in additional income may also be necessary.

However, many times these steps are simply not enough. You may not be able to find a second job because of an illness or injury, or your debts may simply be too high for you to resolve without bankruptcy. If, after discussing your circumstances with a lawyer, you decide that bankruptcy is the best option for you, you should be aware of the recent changes in the chapter 7 bankruptcy laws. So what is chapter seven bankruptcy anyway?

First of all, you should know that chapter seven bankruptcy is the most common option because it is designed to completely wipe out your debts without any kind of repayment plan. This is the kind of bankruptcy that was targeted in the recent bankruptcy laws. The credit industry complained that far too many consumers were able to discharge their debt too easily.

Whether or not this was the case, Congress decided to pass the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This law established a test called the means test, which basically asks consumers to prove that they cannot afford their debts. Anyone who makes more than the median income in his state of residence will have to go through these more rigorous rules that are part of the means test.

Even so, most individuals will still qualify for chapter seven bankruptcy. If they don’t, they may be forced to file chapter 13 bankruptcy so as to establish a repayment plan for the next 3 to 5 years. By the way, you don’t have to worry about a means test if your income is lower than the median income for your state.

There also some other changes such as mandatory credit counseling classes as part of your bankruptcy case. The bottom line is that you will have to go through some hoops in order to prove that you really need bankruptcy, and you will have to take some financial management classes to help you avoid the same situation in the future.