|
THE 'NEW' BANKRUPTCY LAW OF 2005
The "new" bankruptcy law went into effect on October 17, 2005. Despite what you may hear, bankruptcy is definitely
not gone, but it has changed. The paperwork is more cumbersome for most people and there are more requirements
to file. It is harder to fill out the paperwork, and if you don't get it right there are harsher consequences. All
kinds of bankruptcy are still available, but there are new tests to measure which types may be the appropriate type.
A special bankruptcy approved credit counseling course is now required before your case is filed, but you don't need to take
the course before you talk to an attorney. As an attorney who concentrates on bankruptcy law, I will discuss
your options to help you decide if bankruptcy is right for you and if so, how to proceed.
The President signed the the 2005 Bankruptcy Act on
April 20th, 2005 and it went into full effect for cases filed on or after October 17, 2005.
The important thing to remember is that much of the "old" bankruptcy laws are
still there, but the "new" law made some of the most significant changes in many years, and added some requirements. Unfortunately,
the law is poorly written and many of the changes are difficult to understand. This means that no one knows exactly what
will take place under the new law and it changes all the time. Like bankruptcy attorneys across the country,I am trying to
make sense of this legislation. Over the years, judges across the country will make decisions interpreting the new portions
of the Bankruptcy Code. Once the local judges issue opinions, the higher courts may adopt those rulings, or issue their own
interpretations. The higher the court, the more certain attorneys are that the interpretation will be the one to follow.
This process takes years, and in the meantime bankruptcy attorneys everywhere are doing their best to keep up with the most
recent court rulings.
Please read further on this page for information about this law.
The New Law
The first thing to know is that Bankruptcy is still available to help
protect people in financial need, even though it has gone through a major change.
For eight years, the credit card industry pushed for new bankruptcy laws, and thanks to their
intense lobbying efforts and high political contributions, they succeeded. The changes make it harder
for consumers to file bankruptcy and have eliminated some of the benefits of prior law.
The Bill is called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
... who wouldn't support that? We all want to stop abuse and protect consumers, don't we? So do the Senators
and Representatives who have taken the word of the credit card companies who pushed this law and whose high paid lobbyists
worked so hard to pass it. Just reading the title makes it sound like something we should all
support.
The problem with this new law is that it won't stop fraud and it doesn't
protect consumers. I think it should be called the Bankruptcy Prevention and Fraud on Consumers Bill
because makes it harder for lower and middle class workers who are already being beaten down by high interest rates, high
housing costs, job losses, divorce and/or medical bills. In my opinion, this is a tool of lenders trying
to squeeze more money out of already strapped families and individuals.
The Bankruptcy Reform Act of 2005 include provisions which will make it harder
for most people to file bankruptcy. It involves more paperwork for everyone, and many of the changes just don't make
a lot of sense.
Attorneys are required to provide additional disclosures, including disclosures that must
be given to you at the start of any assistance to you. You may find that attorneys won't talk to you on the phone
anymore, even to answer simple questions because of the required disclosures. You may be asked to come in to receive
those notices before the attorney will answer any of your questions. But a consultation should provide you with
the answers you need about YOUR situation, and to see if bankruptcy will help you, so meeting with an attorney to find out
what your rights are is often a very good idea anyway.
Our Senators and Congressman didn't listen to the people who know the system best - bankruptcy
judges, law professors, and lawyers who represent both sides (debtors and creditors). Many people opposed the new
law as being harsh, unbalanced and overreaching. It will punish the majority of people who are honest
and in financial trouble, for alleged bankruptcy abuse by a small minority.
The law is hard on consumers and provide additional hurdles to jump. Attorneys are learning to apply the law and make sure that clients are getting the best treatment possible under
the new laws.
Even though the law was passed in order to have more people to file Chapter 13 cases to
repay some of their debts, it makes Chapter 13 harder. Provisions in the current Chapter 13 laws have
been changes so it is not as beneficial as before, but there are still many benefits to filing. Chapter 7 is subject
to stricter guidelines and more paperwork, but many people are still eligible for Chapter 7 under the new law.
Most bankruptcy lawyers are honest and care about their clients, and help them file
correct and accurate documents. If documents are filed incorrectly, the new law makes it more difficult to fix problems
due to incorrectly filed or dismissed cases, if you are able to fix them at all. Most attorneys only recommend bankruptcy
if it is a good option, and they work hard to do the job right. This makes the whole system work better as well
as protecting good honest people.
Now, more than ever, you need an experienced attorney to guide you through the bankruptcy
process.
Credit Counseling Requirement
People who want to file for bankruptcy must complete a Bankruptcy
Court Approved Credit Counseling Course (not just any credit counselor) before being allowed to file (except
in very rare emergency situations). Programs are approved by the local bankruptcy court system. You must go through
an approved program, not just any credit counseling company, before filing your case and within the
180 days prior to filing. This course doesn't take very long, usually two hours or less, and courses are available from approved
companies on the Internet 24/7, by phone or in person. A second course must be completed after filing in order to receive
a discharge of debts. Companies are advertising hoping to pick up some fees from potential bankruptcy debtors,
but if you are thinking about filing for bankruptcy, you can see an attorney first. The bankruptcy lawyer will guide you
to the proper course.
While you do have to complete the course and receive a certificate of completion before
you can file a bankruptcy case, you don't want a credit counselor giving you legal advice - and any good one won't. All good
bankruptcy attorneys can and will discuss whether or not bankruptcy is right for you, or not, and give you information about
the required credit counseling programs. A second financial education course is required in order to receive a bankruptcy
discharge, but that is taken after filing and your attorney will give you information about the course and how to take it.
Your attorney will make sure that you complete any required counseling courses through
an approved course provider. You may be able to complete the program from your attorney's office or your home, over the Internet,
by phone or in person. The bankruptcy courses are different from what credit counselors traditionally did, because
it is an educational course. Most people contact credit counselors to set up a "debt management program." Debt management
programs (or DMP) are repayment plans where the company takes money from you, and supposedly helps negotiate your debts to
lower amounts or interest rates. The bankruptcy courses are educational programs to advise you about financial issues,
budgeting, etc. but you do not have to pay into a debt management program before filing for bankruptcy. (For more information
about Credit Counseling and the differences between traditional and bankruptcy counseling, please see my answers under FAQs.)
New Client Contact
Form (Click Here)
For more information go to
(The Bankruptcy Law Network).
************
For more information go to
(The National Association of Consumer Bankruptcy Attorneys).
For more information go to
(American Bankruptcy Institute).
|
