The New Bankruptcy Act - What It Means To YOU

The New Bankruptcy Act In 2005 Congress passed the Bankruptcy Abuse and Consumer Protection Act.  While The Act does change some of the criteria and processes for filing bankruptcy, many people have the misconception that the new laws make it nearly impossible to qualify.   

This is simply not true.   

Although The Act was predominantly sponsored by the credit card industry, who undoubtedly has plenty of reasons to try and make it more difficult for potential filers, the basic principles of bankruptcy filing remain the same.   

One of the biggest changes made by The Act is that all debtors must now pass a ‘Means Test’ before qualifying to file for Chapter 7, or “liquidation” bankruptcy.  Debtors who are unable to pass the test can instead file a Chapter 13, known as a “reorganization” bankruptcy.   

When a Chapter 7 bankruptcy is filed, the bankruptcy court liquidates all assets in order to pay back creditors.  Under a Chapter 13, filing the debt is reorganized into an installment plan.  Another change included in the 2005 Act is the length of time between bankruptcy filings.  Before The Act, you could file a Chapter 7 every six years; however, it is now eight years.

While there are some changes, the case law and the practical application of The Act by the bankruptcy courts and trustees is virtually no different.   If you’re having financial difficulty don’t be put off by these changes - talk to a bankruptcy attorney first and see if you are a candidate for bankruptcy under the new law.

Stay tuned for more information!