How The New Law Will Affect You

How the New Law Will Affect You
By Laura J. Margulies

Most of the provisions of the new bankruptcy law signed by President Bush on April 20, 2005 will go into effect on October 17, 2005. At that time consumers will need to jump through several more hoops to discharge their debts. This article deals with the new requirements imposed by the Bankruptcy Abuse and Prevention Act.

First, within 180 days before filing for bankruptcy an individual must receive credit counseling from an approved nonprofit credit counseling agency. A certificate of attendance with such agency is required to be filed with your bankruptcy case. If the credit counseling service developed a debt management plan, then that plan must be filed with your case.

You can qualify for Chapter 7 bankruptcy if your income is less than the median income for someone in your state. If your income is greater than the median income for someone in your state you will need to complete a means test calculation if you want to file for Chapter 7. If after deducting certain allowed expenses from your monthly income you have $166.66 or more left over then you must file a Chapter 13 case. The Chapter 13 plan must be for 60 months. If you do not automatically qualify for Chapter 7, but would nevertheless want to file a Chapter 7, you will need to justify to the court the special circumstances that justify your filing a Chapter 7 case.

The burden of accurately filing your petition is shared with your attorney. Your attorney will need to file a statement that indicates that he or she made a reasonable inquiry that the information contained in your case is well grounded in fact and has no knowledge that the information is incorrect. Your attorney may therefore require that you have your assets valued by an independent appraiser.

In addition to the Schedules, list of creditors and Statement of Financial Affairs that need to be filed today, there are several more documents that you will need to file with the court. Besides the certificate of attendance with a credit counseling agency discussed above, you need to file a copy of your paycheck stubs (or other evidence of income) that you received within 60 days of the date you file; a separate statement of monthly net income and any increase of income over expenses that you anticipate receiving after the filing; and a copy of your recent tax return. If you fail to provide these documents within 45 days after you file, your case will automatically be dismissed. Furthermore, all creditors must receive notice of your filing at the address designated by the creditor and the notice must state your full account number.

If you file a Chapter 13 case, you will not be able to reduce the amount of your automobile loan to the value of the vehicle unless you received the loan for the vehicle more than 910 days before you filed.

In order to receive your discharge after filing, you will need to complete a financial management course approved by the United States Trustee’s Office.

You may keep certain property after you file for bankruptcy. The type of property you may keep and the value of the property are governed by state law, if your state has opted out of the federal exemption statute. For example, in Florida and the District of Columbia there is a homestead exemption that allows you to keep your principal residence regardless of its value. Now, you may only claim the full homestead exemption if you owned the house and resided in that state for more than1215 days before you file. If you file before the 1215 days, your exemption is limited to $125,000.00. To claim other state exemptions, you will need to have resided in that state for two years before you file.

If you filed a Chapter 7 case and received a discharge, you may not file another Chapter 7 case for 8 years. You will need to wait 4 years after filing for Chapter 7 if you want to file a Chapter 13 case and receive a Chapter 13 discharge. If you file a bankruptcy case within 1 year of filing a previous case which was dismissed, the benefit of the automatic stay provision (this is the provision that stops all collection activity against you) will terminate 30 days after the second case is filed, unless you file a motion with the court to extend the stay and demonstrate to the court that the second filing was in good faith.