If the last time you looked at bankruptcy law was more than a few years ago
, you might want to make sure that you know about the changes Congress enacted with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Some of the most important recent changes in bankruptcy law include the following:
Stricter Chapter 7 Bankruptcy Filing Requirements: The new bankruptcy law imposed a "means test" to determine eligibility for filing Chapter 7 bankruptcy; applicants must show that their monthly income is lower than the median income in their state. If monthly income is higher than the median and the applicant can afford to pay $100 a month toward paying off debt (as determined by a formula considering income, debt, and expenses), he will have to file Chapter 13 bankruptcy instead, which involves a repayment plan as opposed to simple debt cancellation.
Filing Restrictions Related to Previous Bankruptcy Discharges: A debtor cannot file a Chapter 7 petition for bankruptcy if she has received a Chapter 7 discharge in the previous eight years (changed from six years); a debtor cannot file a Chapter 13 bankruptcy if he has received a Chapter 7 discharge within the last four years or a Chapter 13 discharge within the last two years.
Credit Counseling and Financial Management Program: Most bankruptcy applicants are now required to attend mandatory credit counseling, which was not required before; additionally, financial management education is required at the completion of bankruptcy proceedings as well. In both cases, the courses must be approved by the U.S. Trustee Program.
Automatic Stay Provisions: The automatic stay is used to prevent most actions against a debtor during bankruptcy proceedings, but now things like eviction procedures and divorce actions may continue through bankruptcy.
Child Support and Alimony Priority: Debt obligations for child support and alimony now take precedence over all other creditors.