Bush Signs Bankruptcy Bill

President Bush signed the new bankruptcy bill on April 20, 2005. The provisions of the new law will take effect on or about October 20, 2005. Any bankruptcy cases filed before that date will be governed by the existing bankruptcy laws. Any case filed on or after that date will be subject to the new law. There are many changes, all to the detriment of petitioners, under the new law the highlights include:

These are just some of the most important changes, there are many most and some of the above noted changes have been simplified (excluding numerous exceptions and deadline dates). However, IT IS STRONGLY ADVISBLE FOR ANY PERSON CONSIDERING BANKRUPTCY THAT THEIR PETITION SHOULD BE FILED BEFORE THE NEW TAKES EFFECT. 

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1. New means test which eliminates debtors who earn more than the state median income from Chapter 7 forcing them to not file or file a repayment plan under chapter 13;

2. Requires debtors to pay for and particular in a debt counseling service PRIOR to filing any bankruptcy petition.

3. Requires debtors to file tax returns with the court within 45 days after filing.

4. Requires debtors to pay for and particular in consumer credit counseling prior to receiving a discharge. If debtors fail the course, they will be denied a discharge.

5. Places exceeding difficult requirements on attorneys who represent consumers, forcing those attorneys to either left the practice or charge increased fees.

6. Allows any creditor to challenge the debtor's valuation of property and living expenses, which if successful will force debtor to dismiss or convert his or her case to chapter 13.

7. Certain debts now dischargeable in a chapter 13 will not be dischargeable (reducing the effectiveness of a chapter 13 discharge)

8. Eliminates lien stripping in chapter 13 cases, which increases the cost of retaining collateral property, such as an automobile, in chapter 13 cases.

10. Caps the homestead exemption on a house at $125,000 nationwide. This adversely affects seniors who in California have a $150,000 homestead.

11. Requires attorneys to certify debtors can pay under a reaffirmation agreement, which basically eliminates them in represented cases.

12. New limitations on the automatic stay where debtors have previously filed a bankruptcy case. Eliminates the stay as to eviction cases.

13. Notice to creditors must be to only a certain address with the account number.

14. Requires debtors to file 5 year instead of 3 year plans in chapter 13.

15. Attorneys must "verify" all clients information, which will cause the cost of representation to increase dramatically.

16. Debtors must either reaffirm or redeem property within 30 days after filing or automatic stay is terminated. The "ride through" option with secured debt is eliminated.

17. Trustees can avoid transfers of debtor's property into trusts made 10 years before filing.

18. Nondischargeability of student loans is expanded to profit and non governmental entities.