What You Need to Know About the
2005 Changes to the Bankruptcy Laws

As you may know, the nation’s bankruptcy laws changed dramatically in October, 2005 with the enactment of the Bankruptcy Abuse and Consumer Protection Act (BAPCPA) of 2005.  This new law was the result of over ten year’s and many millions of dollars of lobbying by the banking and credit card industry.  Needless to say there is very little in the way of “consumer protection” in this law!

Household Income Qualification

The purpose and intent of the BAPCPA laws was to make Chapter 7 more difficult to file and to push Chapter 13 debtors into 5 year repayment plans.   After studying this new law thoroughly for over two years and after filing hundreds of cases under the new bankruptcy laws, our experience has been as follows:

• the new law’s biggest impact has been on high income debtors - if your household income is between $75,000 - $100,000 bankruptcy can be a challenge.  In this income range, you make too much money for Chapter 7, but often not quite enough for Chapter 13.  You are still eligible to file Chapter 13 if your household income falls in this range, but we will need to be creative to make your case work.
   
• if your household income is below the median income for a your family size, the 2005 law will not change things much for you.  The income tables change every few months or so - here is the current table applicable to cases filed from October 15, 2007 through December 31, 2007:

Your monthly median income is calculated by looking at your monthly gross income for the six months prior to the month of filing.  For example, if you are filing in January, 2008, we would look at your household gross income for July, 2007 - December, 2007.

Unusual fluctuations in your income (a large Christmas bonus or an unexpected period of unemployment) can create issues or add options - thus, the sooner you call us to discuss your bankruptcy options the more flexibility we will have.

Restrictions on Repeat Filings

Another significant change to the bankruptcy law has to do with second or third filings within any 1 year period.  In the past, a second or third filing would not necessarily cause any problems.  Now, the automatic stay protection of bankruptcy may not apply with a repeat filing.

Sometimes a first case may fail because of circumstance beyond your control - such as the failure of an employer to withhold Chapter 13 payments or an unexpected interruption in your income.

Our firm can help you if you need a second or third filing, but we urge you not to wait until the very last minute.

Despite rumors and idle talk that you might hear about bankruptcy, please rest assured that Chapter 7 and Chapter 13 remain available to you in most circumstances.  The filing process has become more complicated and time consuming, which is why you should look to an experienced law firm like Clark & Washington to guide you through the personal bankruptcy process.

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