For most people of course, bankruptcy is very much a last resort, to be considered only after all other debt consolidation and debt reduction options have failed. Even so, the new bankruptcy laws passed in 2005 mean that filing for bankruptcy is now much more complicated, and for many people much more expensive that it had been before the new laws went into effect.

Just what has changed?

Perhaps the biggest change that was instituted in the world of bankruptcy laws is the introduction of a two part means test. The results of this means test are used to determine which of the two forms of bankruptcy the individual must use.

The first part of the means test uses a formula to find out if the individual can afford to pay at least 25% of the non-prioritized unsecured debt that is owed. This non-prioritized unsecured debt includes debt such as credit cards. The formula takes into account and exempts necessities like food and rent, but it can be fairly restrictive.

The other part of the new means test is to compare the income of the bankruptcy filer to the median income for his or her state. Those who are found able to pay back at least 25% of the unsecured debt they owe, and whose income exceeds the state median, will be required to file for bankruptcy under the more restrictive Chapter 13 law, and they will be ineligible for the more generous rules of a Chapter 7 filing.

What