What Changed After 2005 Bankruptcy Law Reform?

On Oct. 17, 2005, sweeping changes in federal bankruptcy law went into effect. The bankruptcy attorneys at Ammerman & Goldberg "Bankruptcy" Law Office provide effective representation to people seeking debt relief under the new bankruptcy law. Our clients are located in Washington, D.C., Virginia and Maryland.

Checklist Of Key Changes In Bankruptcy Law

The following is a more detailed summary of the key changes regarding the new bankruptcy law:

  • Mandatory Credit Counseling

Before filing for bankruptcy, most applicants must undergo credit counseling in a government-approved program.

  • Eligibility For Chapter 7 Filing

Bankruptcy applicants who wish to file under Chapter 7 must meet certain eligibility requirements under a means test. Under the means test, if your current monthly income is less than the median income in your state, you can file for bankruptcy under Chapter 7. But if your current monthly income is above the median income in your state, and you can afford to pay $100 per month toward paying off your debt, you cannot file under Chapter 7 and must proceed under Chapter 13. Whether you can afford to pay $100 per month (or $6,000 over a five-year period) is based on a formula that includes your monthly income, your expenses and the total amount of your debt.

  • Tax Returns And Proof Of Income Required

Under the new bankruptcy law, people wishing to file bankruptcy under Chapter 7 or Chapter 13 must show proof of their income by providing federal tax returns from the last tax year and pay stubs for the preceding three months.

  • More Filings Under Chapter 13

As discussed above, if a bankruptcy applicant is ineligible for filing under Chapter 7 based on the means test, he or she must file under Chapter 13 instead. There are a number of major differences between Chapter 7 and Chapter 13 bankruptcy, but the main distinction is that under Chapter 13, the debtor enters into a repayment plan, which lasts between 36 and 60 months, in which he or she must pay a certain amount of money to creditors, based on an expenses-to-income formula.

  • "Automatic Stay" Protections For Filers

Under the prior Bankruptcy Code, people who filed for bankruptcy were entitled to certain immediate protections from creditors and others — including most debt collection and lawsuit actions. These protections are part of what is called the "automatic stay" effect of a bankruptcy filing, because many potential legal actions against the filer are stopped (known as "stayed" in legal terms). But under the new bankruptcy law, some of the protections have been eliminated.

  • New Priority For Unpaid Child Support

Bankruptcy laws provide a system of repayment priority for people and companies that are owed money (called "creditors"). Under the new bankruptcy law, among the changes in creditor priority is that people who are owed unpaid child support (i.e., the bankruptcy filer's family members) will take priority over any other creditors.

  • Mandatory Financial Management Education

After the conclusion of bankruptcy proceedings but before any debt can be discharged, bankruptcy debtors must participate in a government-approved financial management education program. The procedure and certified programs for financial management education are established by the U.S. Trustee's Office, a component of the U.S. Department of Justice, which is responsible for overseeing the administration of bankruptcy cases.

To learn more about your debt relief options, please call 202-559-1428 for a free telephone consultation or contact our lawyers by filling out our online form.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.