New Bankruptcy Laws: Bankruptcy Law Reform - New Bankruptcy Code.
Mar. 11 '05 - Senate Passes Bill | Apr. 14 '05 - Congress Passes Bill | Apr. 20 '05 - The President signs the Bill.
Text of the Bill | When New Laws Take Effect
Are you eligible to file Chapter 7?
1st. Stage of the Bankruptcy Means Test: Check to see if the monthly average of your last 6 months gross income is below the median income for your state. If it is you can file Chapter 7: State Median Incomes
2nd. Stage of the Bankruptcy Means Test: If your income is slightly higher than your state's median income you may still be able to file Chapter 7. Your bankruptcy lawyer will be able to make this calculation and also advise on allowable expenses that can be used in the calculation. |
Two extra hoops to jump through
- A person filing Chapter 7 bankruptcy will have to take an approved Credit Counseling Course within the 6 months before he or she files. Your bankruptcy lawyer can set this up for you or you can find a list of approved credit counselors here. In some cases the course can be taken over the Internet.
- An approved Financial Management Course will have to be completed before you can be discharged. Your bankruptcy lawyer can set this up for you or you can find a list of approved credit counselors here.
Filing Procedures under the New Bankruptcy Code
(Effective October 17, 2005)
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Major
Intent of Bankruptcy Reform:
The major intent of bankruptcy reform is to require people, who
can afford to make some payments towards their debt, to make these
payments, while still affording them the right to have the rest of
their debt erased. These people must file Chapter 13.
Status
of the Bills:
The Senate passed the Bill on March 11, 2005 and the Congress on April 14, 2005.
When will this be Law:
The bill was signed into law by the president on April 20, 2005.
Sections 308, 322 and 330, all concerning the homestead exemption, take effect immediately.
This is law now: The exemption is limited to $125,000 if the property was acquired within the previous 1215 day (3.3 years). The cap is not applicable to any interest transferred from a debtor's previous principal residence (which was acquired prior to the beginning of such 1215-day period)
The
rest of the provisions of the law will come into effect 180 days after the Bill is signed or on October 17, 2005.
Major
Changes:
Means Test:
This will identify debtors who have the financial capacity to pay some
money to their creditors. The test will work as follows:
TEST # 1:
Is the family earning above the median
income for their state?
You can check to see if your income is above the median income for your state. State Median Incomes
If the answer is "No" Chapter 7 can
be filed!
TEST # 2:
If the answer
is "Yes" to TEST # 1 ,
do you have excess monthly income of more than $166.66/month to pay $10,000
of debt over 5 years?
If the answer
is "No" you must answer another question, if "Yes" Chapter 7 cannot be filed but Chapter 13 may be filed!
TEST # 3:
If the answer is "No" to TEST
# 2 do you have excess income of greater than $100/month to pay over the next 60 months
at least 25% of your unsecured debt?
If the answer is "No" you can file Chapter 7, if "Yes" chapter 7 cannot be filed but Chapter 13 may be filed!
Proof of Income:
Debtors filing
Chapter 7 or Chapter 13 bankruptcy, must provide to the trustee, at
least seven days prior to the 341
meeting, a copy of a tax return or transcript of a tax return, for
the period for which the return was most recently due.
State Exemptions:
You cannot use the exemptions in your state of residence unless you
have lived there at least 2 years.
Homesteads:
This goes into effect as soon as the bill is signed by the president! The exemption is limited to $125,000 if the property was acquired within the previous 1215 day (3.3 years). The cap is not applicable to any interest transferred from a debtor's previous principal residence (which was acquired prior to the beginning of such 1215-day period)
Counseling:
You must have finished counseling within the last 6 months before you
can file.
Child Support and Alimony:
These debts would go from a priority of 7th to 1st.
Tithing:
Up to 15% of your income can be given to charity. This is seen by some
as a loophole allowing people who may be just over the thresh hold of
having to file Chapter 13 to drop down low enough to file Chapter 7.
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