BANKRUPTCY REFORM ACT 2005

CREATING "MEANS TESTING"

Eligibility to file under Chapter 7

Income will be subjected to a 2 part means test. It will exempt certain expenses such as rent and food.

SERIAL FILERS

Individuals and business may only file a Chapter 13 once every two years

Can only file a Chapter 7 bankruptcy once every eight years

Must wait at least three years after filing a Chapter 7 bankruptcy before filing a Chapter 13

CREDIT COUNSLING

You must meet with a credit counselor in the six months before applying for bankruptcy + attend a money management class

RETIREMENT FUNDS

Can be exempted by the debtor under either federal or state exemptions

SUPER DISHCHARGE

This is no longer permitted

INTERNATIONAL BANKRUPTCY

This act creates the Chapter 15 which deals with international bankruptcies.

BUSINESS RELATED ISSUES

Goods can now be returned within 45 days, rather than 20 days, by companies that have sold using credit.

Creditors can ask a debtor in bankruptcy for the return of inventory shipped

Lawyer liability

Lawyer will be fined if client's information is inaccurate

Tougher homestead exemptions

Some people may only exempt up to $125,000 if their home was bought less than 40 months before filing or if the filer has violated any security laws or been found guilty of certain criminal conduct

Determining what you can afford to pay

The court will apply living standards acquired from the IRS to determine how much you have available to pay your debts

If filing under Chapter 7 or 13, tax returns from previous years must be shown for proof

In 2004, over 1.1 million people filed for Chapter 7, accounting for roughly 72 percent of non-business bankruptcies

Since many people who file for Chapter 7 don't have any assets that can be liquified, credit card companies and other creditors sometimes get nothing

In a Chapter 13 bankruptcy, you're put on a repayment plan of up to five years. Any debts not addressed by the repayment plan do not have to be paid.

In 2004 there were 445,574 Chapter 13 filings.

Less people will be able to file under Chapter 7. They will have to file under Chapter 13

Support for the act mostly came from banks, credit card companies, and other creditors

Senator Chuck Grassley of Iowa

He was chairman of the Senate Finance Committee

Joe Biden, Chris Dodd, and Hillary Clinton helped pass this bill

Lawmakers who agree with the reform believe it will prevent people from abusing the bankruptcy laws

The bill was supported by President George W. Bush

Tom DeLay also favored the legislation

The 2005 bankruptcy bill was opposed by a wide variety of groups

Consumer advocates

Consumer advocates believe it is a gift for creditors

Legal scholars

Retired bankruptcy judges

Editorial pages of many national and regional newspapers

"The bill simply doesn't balance responsibility between families in debt trouble and the creditors whose practices have contributed to the rise in bankruptcies," said Travis Plunkett of the Consumer Federation of America

Increase in Bankruptcy Filings

Filing has become a trend instead of an embarrassment

Losses Associated with Bankruptcy Filings

More than $44 billion of debt was discharged in 1997

Potential Bankruptcy Abuse

Debtor's have been abusing the system

Debtors' Ability to Repay Debt

Some bankruptcy filers are able to repay a majority of their debts

All debts forgiven "A Fresh Start"

Put on a payment plan for up to 5 years

Is designed to make legal proceedings of international bankruptcies more predictable and fair for debtors and creditors