In general terms the Bankruptcy Reform Law impacts people in four ways.
- If your family's GROSS INCOME is over the median income for your state and household size, generally, you MUST file Chapter 13, you are not eligible to file Chapter 7. For those close to the median, you may not qualify to file a Chapter 7 and you may have too little income to file a Chapter 13. Your expenses are determined by IRS Standards, NOT YOUR ACTUAL expenses. If your income is greater than the allowed expenses from the IRS Guidelines - expect Trustees AND CREDITORS to object to a Chapter 7 even if your income is below the median.(Are you in the danger zone?)
- BEFORE you file, you will be required to attend credit counseling (it is offered by phone or internet) that explains the various types of bankruptcy and what the pros and cons of each is. This can not be offered by your attorney. AFTER filing, you will be required to attend a financial management course (also available by phone or internet). Initially these will be provided by the Credit Counseling Services...the same ones that get paid by the Credit Card Companies. You must complete the courses - and pay for them - before getting any bankruptcy discharge.
- Bankruptcy will no longer protect you if you are a tenant facing eviction. If you filed a bankruptcy in the previous 2 years, you will have little or no protection from foreclosure either (we call this a Chapter 20: file a Chapter 7 to eliminate unsecured debts and then file a Chapter 13 to deal with secured debts like homes...) Some personal belongs that used to be protected by bankruptcy exemptions have been limited (among other things): ONE TV, ONE VCR, ONE stereo and ONE computer; For adults: no bikes, no skis, no golf clubs, no guns and no riding lawnmowers. Although we have been able to protect ALL the personal belongs of our clients (with a single exception), the new law makes this process more cumbersome.
- Finally, in what one Senator called "the debtor bill of rights", attorneys that help consumers file bankruptcy are going to get hammered. Attorneys will have to VERIFY everything you tell them.
You will need:
- three(currently they are asking for 4) years of tax returns, not your copy, the transcript from the IRS;
- at least one year of bank statements, credit card statements, loan statements;
- at least 6 months of pay stubs (for all employers);
- a comprehensive list of personal property - furnishings;
- a year of utility bills;
If you miss anything, and if the attorney doesn't catch it in the review of your paperwork, the Trustee, the Court or ANY CREDITOR can object to your case and we will have to PROVE our figures and information. If we can not, WE will have to pay the costs of their attorney's objection. And, you may not get a discharge of some or all your debts. There is no limit to OUR liability. This means we are facing some stiff increases in costs, costs that are reflected in the fees that we charge.
In the past, attorneys (including myself) allowed Chapter 7 clients to pay part of their fees before filing and part after filing. You must pay all attorney fees before we file a bankruptcy. We do have payment plans.
The goal of the Credit Industry was to eliminate bankruptcy. This law is going to do it for the average consumer and family. Last year 2 million people filed bankruptcy, about 30% filed Chapter 13. In it's first full year, bankruptcy filings fell 65%. Many of the people that are facing financial hardships still need bankruptcy and STILL QUALIFY, but they are being told bankruptcy is no longer available. It is more expensive, more time consuming, and more work, but if you need help with your debts, YOU CAN STILL FILE.