Congress passed one of the most sweeping changes to bankruptcy law in 2005 — the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA). One of the most important consequences of the Act was to make it more difficult for consumers to file for bankruptcy. The Act created new steps and standards that debtors must meet in order to be able to file for bankruptcy. State law may have more generous provisions than federal bankruptcy law, so it is always wise to consult an experienced Morris County bankruptcy lawyer at Ast & Schmidt, PC regarding recent changes in bankruptcy law.
How BAPCA Changes Might Affect You
- Debtors are required to seek credit counseling before they are able to file for bankruptcy. The courts require verifiable proof of the counseling.
- The Act eliminates a Chapter 7 bankruptcy for many debtors. Chapter 7 is a liquidation bankruptcy. It eliminates consumer debt. Debtors are no longer eligible for Chapter 7 if they earn above their state’s median income level and have at least $100 a month to pay towards debt. This is the so-called ‘means test.’ Debtors under the state median income level are able to file for Chapter 7.
- Debtors unable to use Chapter 7 must file for a Chapter 13 bankruptcy then. Chapter 13 creates a strict repayment plan and does not generally allow debtors to keep valuable property that they acquired just prior to filing for bankruptcy.
- The Act imposes a waiting period for debtors who move between states. This is to discourage people from moving to states with more lax bankruptcy laws and then immediately filing for bankruptcy. A debtor must generally wait two years before he or she is able to file for bankruptcy in a new state. If the debtor files before then, he or she will face whichever state’s bankruptcy laws are more stringent.
- Consumers must make accurate assessments of the replacement costs of their goods. In the past, consumers could provide “lowball” estimates.
- The Act will bring increased lawyer fees along with it. It requires more paperwork and mandates that the lawyer vouch for the estimates provided by the debtor to the bankruptcy court. More work and more time mean more lawyer involvement and additional costs.
Despite the major changes that the BAPCA created for bankruptcy in the 2005, experienced attorneys can still provide you the guidance you need to get out of your debt and get back on the right financial path. Contact a Morris County bankruptcy attorney at Ast & Schmidt, PC for information regarding changes in the bankruptcy law.