The new bankruptcy law, officially known as The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, is aimed at making it more difficult for debtors to file for bankruptcy under chapter 7. Prior to the new law, which took effect on October 17, 2005, potential filers could walk away from their debts after giving up most of their assets which in most cases were not substantial. The new bankruptcy law makes it tougher to walk away debt free. One of the most important provisions of the law, requires debtors to pass the means test. In summary, the test determines whether a bankruptcy filer has enough disposable income to repay their debts. A persons whose income exceeds that of their state of residences median income will probably not qualify, to file under chapter 7 but rather under chapter 13. Chapter 13 sets up a repayment schedule for debtors to repay their debts - thus debts are not forgiven but rather the filer has more time to pay them back. Another substantial change is that consumer credit counseling education is mandatory prior to filing for bankruptcy. The counseling education must be acquired through a government approved non-profit credit counseling agency. Lastly, shopping for a bankruptcy attorney may be more difficult. The new law holds a filers bankruptcy attorney responsible for ensuring that the filing is legitimate. In fact, the attorney has to sign the petition and verify that it is well grounded in fact. Also a bankruptcy attorney may not advise a filer on any matters that leads to the accrual of additional debts prior to filing for bankruptcy. Its a catch-22 since the act of filing for bankruptcy itself, will naturally lead a filer to incur more debt. |
