13 Feb Bankruptcy Basics: What About the New Bankruptcy Law?
What About the New Bankruptcy Law?
On October 17, 2005, the newly adopted Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) took effect. This 500 page bill makes significant changes to the bankruptcy law. Among the many changes are:
- A Means Test, which applies a formula, based on your average income for the six months before you file for bankruptcy and IRS-determined expenses, to determine whether you will be eligible to file for Chapter 7. The means test applies only to the poor and middle class, and only to those with mostly non-business debt.
- A requirement that you obtain a certificate of credit counseling from an approved credit counselor no more than 180 days before your case is filed, and take a credit education course after your case is filed before you can receive a discharge.
- Requirements that consumer bankruptcy attorneys who represent the poor and middle class call themselves “Debt Relief Agencies,” and provide written Consultation Agreements and lengthy disclosure notices within three days after receiving a communication from someone who may become a client. You can read our Initial Consultation Agreement (for a free consultation) and these notices by clicking here.
- Certain types of debt that were dischargeable in Chapter 13 cases, such as unfiled taxes, intentional torts and fraud, and certain domestic support obligations, no longer can be discharged.
- Extensive document filing requirements (such as filing with the Court paystubs for the previous six months and tax returns or transcripts for the previous four years).
- Restrictions on repeat filers.
- Restrictions on your ability to “cram down” secured debt, so that you only have to pay the value of the item instead of the full balance.
- Requirements that domestic support obligations be kept current during a Chapter 13 case, and be current to receive a discharge.
Please be assured that bankruptcy relief is still available, both under Chapter 7 and Chapter 13. We have been active in analyzing and modeling the new law, and are fully prepared to help you steer your way through its many changes.
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