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Last April, Congress passed the Bankruptcy Abuse and ConsumerProtection Act, the most sweeping reform of our nation’sbankruptcy laws in more than twenty-five years. Proponents ofthe bill argue that most consumers who file for bankruptcy do sosimply because they do not wish to pay their bills. That is anarguable point, as studies show that most bankruptcy filers havesuffered illness, injury or job loss. Regardless of the reasons,Congress has made the changes, and millions of Americans will beaffected when the new law takes effect on October 15.
Here is a short list of the changes and how consumerswill be affected.
Goodbye, Chapter 7 ‘ Until now,most consumers have been permitted to file under Chapter 7 ofthe Federal bankruptcy code. Chapter 7 permits the court to wipeaway most consumer debt, allowing the debtor to make a freshstart. The new law establishes a ‘means test.’ Anyone withincome that exceeds the median income for his or her state willhave to file under the stricter Chapter 13 instead, whichrequires a repayment schedule of up to fiveyears.
Attorney problems ‘ The more complicatedChapter 13 filings will make it necessary for filers to hire anattorney. Most attorneys who practice bankruptcy law are alreadyreporting dramatically increased business; some are even turningclients away. If you need an attorney, hire one now, as they aresoon going to be very busy
More attorneyproblems – The law also leaves lawyers legally responsible forthe 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. Inshort, it will soon be more difficult and more expensive to hirean attorney.
Mandatory credit counseling ‘Congress has required that debtors obtain credit counseling froman 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 theair.
Expect to may more bills ‘ Someobligations, such as student loans or taxes, must be paid infull even after a bankruptcy filing. The new law lengthens thelist of debts that cannot be forgiven.
The newlegislation, rightly or wrongly, makes it more difficult, moretime consuming and more expensive for a debtor to file forbankruptcy. Consumers who are considering doing so should actnow, as the regulations will soon become stricter. Bankruptcyshould always be a last resort option, but if you cannot avoidit, you should act quickly.
About the author:©Copyright 2005 by Retro Marketing. Charles Essmeier is theowner of Retro Marketing, a firm devoted to informationalWebsites, including End-Your-Debt.com, a site devoted to establishing credit
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