CONSUMER BANKRUPTCY LAW CHANGES
In October 2005, the U.S. Bankruptcy Code was amended to require
that most individual debtors complete a special briefing from an
approved credit counseling agency before filing a bankruptcy case.
In most states, the United States trustee is responsible for
approving the providers that offer this special pre-bankruptcy
briefing, and in the six districts located in Alabama and North
Carolina, the bankruptcy administrator assigned to those districts
approves them. The United States trustee and the bankruptcy
administrators maintain a list of approved providers.
Here are important ways that the current Bankruptcy Code differs
from the old one:
* Prospective filers must finish credit counseling from an
approved course within 6 months prior to filing, and provide
documentation of the counseling, as well as any resulting re-payment
plans, to the bankruptcy court.
* All filers must pass a two-way “means test” to decide the
extent to which they can repay their debt. A judge must consider the
result of this test when determining whether a filer may pursue
Chapter 7 or must file under Chapter 13.
* In addition to the current requirements, debtors will also be
required to file with the bankruptcy court their federal tax
returns, and a host of additional documentation regarding payments
from employers and monthly income and expenses. If adequate
documentation is not submitted on time, the court must dismiss the
* An approved financial management course must be taken by filers
under either Chapter 7 or Chapter 13 prior to receiving a debt
* A filer must live in a state for at least 2 years and own the
homestead for at least 40 months in order to take advantage of the
state’s homestead exemption in bankruptcy. This closes a loophole
that could allow an abuser to quickly move to a state allowing a
high equity exemption, and to then file bankruptcy there.
* Child support and alimony debts will have highest re-payment
When I file for bankruptcy, will creditors and bill collectors
stop calling me all the time?
Yes. Once a creditor or bill collector becomes aware of a filing
for bankruptcy, it must immediately stop all collection efforts.
After you file the bankruptcy petition, the court mails a notice to
all the creditors listed in your bankruptcy schedules. This usually
takes a couple of weeks. Creditors will also stop calling if you
inform them that you filed the bankruptcy petition, and supply them
with the docket number for your case. In some cases, you or your
attorney should contact the creditor immediately upon filing the
bankruptcy petition, especially if a lawsuit is pending. If a
creditor continues to use collection tactics once informed of the
bankruptcy, they may be liable for court sanctions and attorney fees
for this conduct.
What should I do to prepare for filing bankruptcy?
* Consult with an experienced bankruptcy attorney. An attorney
from the Law Offices of Bruce F. Jobe can help you plan for the
bankruptcy, decide when to file a bankruptcy petition, or even avoid
filing for bankruptcy.
* If you have any credit cards, stop using them immediately.
* Do not transfer your assets to friends, family or business
associates to protect the assets from your creditors. The transfer
may be considered a fraudulent conveyance. If it is, you may lose
both the property and your right to a bankruptcy discharge.
* Do not destroy any business or financial records.
* Carefully choose the creditors you pay. Some creditors, such as
landlords, secured creditors, and some utilities should be paid
under most circumstances. If you pay a credit card debt that
eventually will be discharged, you may be throwing money away. Your
attorney should advise you on what debts should and should not be
paid while you prepare to file a bankruptcy petition.