Last April, Congress passed the Bankruptcy Abuse and Consumer
Protection Act, the most sweeping reform of our nation's
bankruptcy laws in more than twenty-five years. Proponents of
the bill argue that most consumers who file for bankruptcy do so
simply because they do not wish to pay their bills. That is an
arguable point, as studies show that most bankruptcy filers have
suffered illness, injury or job loss. Regardless of the reasons,
Congress has made the changes, and millions of Americans will be
affected when the new law takes effect on October 15.
Here is a short list of the changes and how consumers
will be affected.
Goodbye, Chapter 7 ' Until now,
most consumers have been permitted to file under Chapter 7 of
the Federal bankruptcy code. Chapter 7 permits the court to wipe
away most consumer debt, allowing the debtor to make a fresh
start. The new law establishes a 'means test.' Anyone with
income that exceeds the median income for his or her state will
have to file under the stricter Chapter 13 instead, which
requires a repayment schedule of up to five
years.
Attorney problems ' The more complicated
Chapter 13 filings will make it necessary for filers to hire an
attorney. Most attorneys who practice bankruptcy law are already
reporting dramatically increased business; some are even turning
clients away. If you need an attorney, hire one now, as they are
soon going to be very busy
More attorney
problems - The law also leaves lawyers legally responsible for
the 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. In
short, it will soon be more difficult and more expensive to hire
an attorney.
Mandatory credit counseling '
Congress has required that debtors obtain credit counseling from
an 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 the
air.
Expect to may more bills ' Some
obligations, such as student loans or taxes, must be paid in
full even after a bankruptcy filing. The new law lengthens the
list of debts that cannot be forgiven.
The new
legislation, rightly or wrongly, makes it more difficult, more
time consuming and more expensive for a debtor to file for
bankruptcy. Consumers who are considering doing so should act
now, as the regulations will soon become stricter. Bankruptcy
should always be a last resort option, but if you cannot avoid
it, you should act quickly.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the
owner of Retro Marketing, a firm devoted to informational
Websites, including End-Your-Debt.com, a site devoted to establishing credit,
debt consolidation and credit counseling.
Author: Charles Essmeier