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Debtors, act now before changes in the Bankruptcy LawsOn April 20, 2005, President George W. Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Most of the provisions of the new law will not take effect for 180 days.
Under the current bankruptcy laws, most debtors qualified for a Chapter 7 bankruptcy, which allowed them to discharge most unsecured debt, without relinquishing any of their property, and without making any payments for the benefit of their creditors. Under the new bankruptcy laws, which go into effect October 17, 2005, many debtors will be ineligible for a Chapter 7 discharge, and will instead need to enter into a five year repayment plan for the benefit of their creditors under Chapter 13.
The new bankruptcy law includes numerous provisions which will make it more difficult for a debtor to qualify for and receive a bankruptcy discharge. Under the new law, debtors will have to pass a means test to be eligible for a Chapter 7 bankruptcy discharge. They will also have to receive approved mandatory credit counseling, at their expense, prior to filing bankruptcy (with certain exceptions for emergencies or where approved agencies are not adequate to provide the required counseling). The new law will limit debtor's ability to reduce the amount which they are required to pay on motor vehicle loans for vehicles purchased within 910 days of their filing. Debtors will be required to complete an approved education course in personal financial management in order to be eligible for a Chapter 13 discharge. The new law limits, and in some cases eliminates the debtor's protection under the "automatic stay" which protects debtor's from collection efforts during the time period in which their bankruptcy case is pending. The new law requires a debtor's Chapter 13 plan to be for five years if their income exceeds the state median income.
If you are currently considering bankruptcy, you should consider whether or not it would be in your best interest to file a bankruptcy petition before the majority of the provisions of the new bankruptcy laws go into effect.
If you are interested in discussing your options, please contact our office to schedule a free initial bankruptcy consultation. 717-757-4565
