Katz and Wulff Attorneys at Law
The “New” Bankruptcy Law
By now you may have heard rumors about a law that was passed in 2005 that changed the bankruptcy rules to make it more difficult, or impossible to file. These rumors are false. Here is the truth:
On October 17, 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act (also known simply as “BAPCPA”) became effective and changed many of the ways in which attorneys representing consumers in bankruptcy practice. For instance, the lawyer now has a separate obligation to ensure that the information contained in the papers filed with the bankruptcy court are complete, truthful and accurate. This means that it is no longer sufficient (if it ever was) to simply hand the client a questionaire. Instead the lawyer now performs the functions of an auditor. The lawyer may request documents such as credit reports, bank statements, statements from creditors, pay advices (paystubs) and tax returns. The lawyer may check public databases to insure that all vehicles and real estate that a debtor owns are disclosed. Lawyers are also subject to periodic audits from the U.S. Department of Justice to ensure that all information provided to the court is accurate and also to ensure that the lawyer performed his or her “due diligence” in researching the consumer’s financial condition.
So, all of this has made life a little more difficult for the lawyers. From your perspective however, not much has changed. There are two requirments that have been added to the old procedure, neither of which pose any substantial obstacle to you:
1. Credit Counseling. Before filing a bankruptcy case you must meet with a U.S. Department of Justice certified counselor to review your budget and your non-bankruptcy alternatives. This sounds like a big deal, but it’s really not. There are a dozen or more approved providers of this counseling service available in our district. We have audited all of them. We will refer you to the one that we believe represents “the path of least resistance”. You will “meet” with the counselor on-line or over the telephone. You will be asked about your income, expenses, property and debts. You will be given a short presentation either on the website or over the telephone. Upon completion the counselor will send your “Certificate of Completion” to our office by e-mail. Our office pays for this counseling and will advance the fee directly to the credit counseling provider on your behalf.
After filing you must complete the second part of the credit counseling requirement called the “financial management course”. Again, you will “meet” with the counselor that we refer you to on-line or by telephone. The program provides a short demonstration of good personal financial practices such as budgeting and the correct use of credit. Again, upon completion the counselor will send your “Certificate of Completion” to my office by e-mail. Again, our office pays for this counseling and will advance the fee directly to the credit counseling provider on your behalf.
2. The “Means Test”. The so-called “means test” is another way of doing what we have always had to do in bankruptcy, i.e. demonstrate for the bankruptcy court that you are unable to pay your debts as and when they come due by reason of “income insolvency”. This simply means that we must show that, in a given month, you have more going out in expenses than you have coming in in income. We do this by collecting your last six (6) months of pay stubs and comparing your projected annual gross income to the median gross income for your family size and state of residence based on recent census figures. If you are above the median income then you may have to take additional steps in order to show the court that you are entitled to bankruptcy relief. The thing to remember here is that we will will be there to assist you throughout the entire process. You need only provide us with your pay stubs and accurate information regarding your income and expenses. We do the rest.
