New Bankruptcy Law
Five Essential Things to Know
by: Charlie Essmeier
Last April, Congress passed the Bankruptcy Abuse and
Consumer Protection Act, the most sweeping reform of our
nations bankruptcy laws in more than twenty-five
years. Proponents of the bill argue that most consumers
who file for bankruptcy do so simply because they do not
wish to pay their bills. That is an arguable point, as
studies show that most bankruptcy filers have suffered
illness, injury or job loss. Regardless of the reasons,
Congress has made the changes, and millions of Americans
will be affected when the new law takes effect on October
Here is a short list of the changes and how consumers
will be affected.
# Goodbye, Chapter 7 Until now,
most consumers have been permitted to file under Chapter
7 of the Federal bankruptcy code. Chapter 7 permits the
court to wipe away most consumer debt, allowing the
debtor to make a fresh start. The new law establishes a
means test. Anyone with income that exceeds
the median income for his or her state will have to file
under the stricter Chapter 13 instead, which requires a
repayment schedule of up to five years.
# Attorney problems The more
complicated Chapter 13 filings will make it necessary for
filers to hire an attorney. Most attorneys who practice
bankruptcy law are already reporting dramatically
increased business; some are even turning clients away.
If you need an attorney, hire one now, as they are soon
going to be very busy
# More attorney problems - The law also
leaves lawyers legally responsible for the accuracy of
the information filed on their clients behalf. This
has led most lawyers to increase their fees. Some,
including those who do bankruptcy work on a pro bono, or
free, basis, have decided to forego bankruptcy work
altogether. In short, it will soon be more difficult and
more expensive to hire an attorney.
# Mandatory credit counseling
Congress has required that debtors obtain credit
counseling from an approved agency within six months of
filing for bankruptcy. As of now, this requirement is
largely undefined, with rules, regulations, and
qualifications for counselors still up in the air.
# Expect to may more bills Some
obligations, such as student loans or taxes, must be paid
in full even after a bankruptcy filing. The new law
lengthens the list of debts that cannot be forgiven.
The new legislation, rightly or wrongly, makes it more
difficult, more time consuming and more expensive for a
debtor to file for bankruptcy. Consumers who are
considering doing so should act now, as the regulations
will soon become stricter. Bankruptcy should always be a
last resort option, but if you cannot avoid it, you
should act quickly.
About The Author
© Copyright 2005 by Retro Marketing. Charles Essmeier is
the owner of Retro Marketing, a firm devoted to
informational Websites, including
http://www.End-Your-Debt.com, a site devoted to debt
consolidation and credit counseling.