Friday, April 15, 2005

Bankruptcy Reform Signed Into Law

Earlier this week, President Bush signed into law the most extensive revisions made in U.S. bankruptcy laws in the last 25 years after 8 years of lobbying efforts by banks and credit card companies. Most of the important changes will take place in 6 months. The American Bankruptcy Institute estimates that 30,000 to 210,000 people per year will be affected by this legislation. Many bankruptcy attorneys are anticipating a rush to the courthouse as debtors seek to avoid the consequences of the new law.

The new law sets up an income-based test for measuring a debtor's ability to repay debts. Those with insufficient assets or income could still file a Chapter 7 bankruptcy, which, if approved by a judge, erases debts entirely after certain assets are forfeited. Those with income above the state's median income who can pay at least $6,000 over five years - $100 a month - would be forced into Chapter 13, where a judge would then order a repayment plan. The legislation also requires people in bankruptcy to pay for credit counseling.

The homestead exemption will now be capped at $100,000.00 if the home was acquired during the two year period preceding the filing of the bankruptcy. In essence, bankruptcy filers with incomes above their state’s median income and who have the ability to repay $100 a month over five years — a total of $6,000 — would have to file under Chapter 13.

The bill shields retirement benefits up to $1 million, but it also states that child support, alimony, student loans and most tax obligations cannot be wiped out by bankruptcy.

New personal bankruptcy filings edged down from 1,613,097 in the year ending June 30, 2003, to 1,599,986 in the year ending last June 30, breaking an upward trend of recent years. Under the current system, a federal bankruptcy judge determines whether individuals must repay some or all of their debt.

We a bankruptcy and debt relief agency. We help people file for bankruptcy.

About the Author
Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection. e a bankruptcy and debt relief agency. We help people file for bankruptcy.

No comments: