Bankruptcy Reform

Changes in American Bankruptcy Law

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act which placed many more restrictions on consumers filing for bankruptcy.

• Credit Counseling: Before you file for Chapter 7 or Chapter 13 bankruptcy, you have to have credit counseling by a nonprofit agency that is approved by the government. The mandatory credit counseling is meant to cut down on bankruptcy filings by providing people with alternatives to bankruptcy.
• Chapter 7 Means Testing: If you are looking to discharge your consumer debts and keep your home, filing for Chapter 7 bankruptcy is the easiest way to do this. After the bankruptcy reform, however, filing for Chapter 7 is now much more difficult. You have a submit a means test if you make more than the average household in your state, and if you have a certain amount of income "left over" after deductions are calculated, you will not be allowed to file for Chapter 7 and will instead have to file for Chapter 13.
• Higher Fees: The average cost of filing for bankruptcy is now estimated to be between $1,400 and $2,500. People who make 150% below the federal poverty level do not have to pay all of the fees.
• Disaster Victims: Victims of natural disasters such as Hurricane Katrina will not be subject to the means test regardless of their income; this is up to judicial discretion, however, and is not codified into law.
• Chapter 13 Repayment: Chapter 13 bankruptcy does not eliminate all debts, but instead reorganizes them so that they are easier to pay off. If you make more than the average income for your state, you now have a repayment plan that is 5 years long. If you make less than the average income, you may have a repayment plan of either 3 years or 5 years.  
• Eviction: When you file for bankruptcy, an automatic stay is placed on your residence, meaning that you cannot be evicted. However, if the eviction process begins before you file, you can still be evicted.
• Attorney Liability: Under the New Bankruptcy Law, the attorney who helps you file for bankruptcy is legally responsible for ensuring that all of the information you provide is correct. This means that it takes longer and costs more to file for bankruptcy.

If you have any questions about bankruptcy reform or filing for bankruptcy, contact a South Texas Bankruptcy Attorney at the Malaise Law Firm.