Bankruptcy 101 2005

Bankruptcy 101, 2005 Costs

Increased fees and required credit counseling classes could make filing impossible for those who really need it, not the deadbeats that the law supposedly targets. Current attorney’s fees of $750 to $1,500 will double. In addition, consumer mandated credit counseling classes costing $50, will add $100 to bankruptcy costs for married couples. Add it all up and the costs for filing may exceed $3,100, which may push the costs beyond the means for many.

The Means Test

One of the first lessons in Bankruptcy 101 (2005) is on the "means test." Your attorney will be required to take a more hands-on approach and administer a “means test,” guaranteeing that your stated income and assets are accurate. The Means test is used to determine what Chapter an individual can file. Chapter 7 liquidates the debts of consumers, while Chapter 13 requires repayment plans to repay secured and unsecured debt.

Census data from the 2004 U.S. Census will be used to determine if a six months average of your medium family income adjusted for inflation falls above or below medium income data U.S. Trustee Program data. Whether you’ve recently lost your job, had your hours or salary downsized means nothing. The six months average still applies.

Mortgage, rent and car payments are excluded from the formula. As are past due taxes, child support, and $1,500 in private school tuition. Using the table, your attorney determines if you can still pay $100 or more a month to your unsecured creditors for up to five years.

If your income remains above your state’s median, you will be required to file Chapter 13 and make payments to your unsecured debt creditors for up to five years, unless a judge decides that your circumstances are extraordinary.

Bankruptcy 101 (2005) Residency Requirements

Debtor “jurisdiction shopping,”--locating a state with laws favoring consumers, moving and immediately filing bankruptcy in that state is no longer an option. You must now have resided in any state for two years prior to filing.

Tougher Property Appraisal

The old law allowed filers to make “garage sale” appraisals of their personal property. No longer. The new bankruptcy law requires these items, called collateral, to be assessed at a higher value but by whom isn’t clear. The net result is a higher assessment of your assets in bankruptcy court, which could mean you will be required to pay larger payments to your creditors.

Paperwork Requirements

• List of all secured and unsecured creditors
• Listing of assets and liabilities, income and expenses.
• Credit counseling certificate(s)
• Proof of job income including pay stubs for past 60 days.
• Monthly net income statement
• Tax returns for the most-recent tax year.
• Tax returns for several years prior to the filing, if these haven’t been filed
• Photo ID

Refiling Difficulties

While a successful bankruptcy filing effectively stops the collection activities of your creditors, refiling does not. Refilings are automatically treated as abusive and you’ll have to submit a request within 30 days to stop collections. But getting a stay isn’t easy. You must convince the court that your refiling was made in good faith and for a legitimate reason - say a document error. If not, the creditors are let loose and your possessions are again vulnerable.

“Chapter 20” Filings Time Delays

“Chapter 20” filings, refiling by consumers from Chapter 13 to Chapter 7 to hold onto secured property and then discharge debts now have a longer time period between filings, eight years from a Chapter 7 and two years between consecutive Chapter 13s.

New Bankruptcy Laws Benefits

Consumers have some power increases when negotiating with creditors. The courts can impose debt reductions up to 20 percent on uncooperative unsecured creditors who balk at consumer credit counseling agency payment plan negotiations.

401(k), 403(b) or an IRA retirement plans, college savings accounts for children are exempt.

Child support obligations will receive top priority. All past due child support payments must be paid before a Chapter 13 bankruptcy can be completed or discharged.