John Chase asked: Bankruptcy
The new bankruptcy legislation, which took effect on October 17, 2005, has made the process of filing for bankruptcy a more laborious task, for attorneys and debtors. Of course, that’s one side of the coin and the shift is undoubtedly geared towards benefiting the end customer; the debtor.
The documentation that is required when filing for bankruptcy has increased. For example, the debtor must provide additional information that details all income and expenses. In cases where the expenses exceed the IRS allowance, a special circumstances document must be submitted which reasons the necessity of the extra expense incurred. A statement of accuracy must also be submitted, along with these special circumstance documents.
The attorney’s job is further diversified, and a lot of responsibility for ensuring checks is put on the attorney. A signature of the attorney certifies that the petition has been reasonably inspected, and the proceeding is not an abuse of the bankruptcy process. The attorney also certifies that the proceeding is acceptable under current law or that it is a good faith argument for the extension/modification of current law. In case of a violation, the fees of the attorney and the debtor cost can be assessed and made payable to the trustee. This will possibly work as an incentive for trustees to file more motions, perhaps resulting in the need for additional insurance or an unknown increase in current rates.
In a bid to decrease the number of people filing bankruptcy, the new law requires that debtors receive counseling from an approved credit counseling agency within six months prior to filing the bankruptcy petition. This counseling would orient clients of other options that are available to them. Such a counseling session will ensure that people don’t take an uninformed decision to file for bankruptcy.
Here again, it will be the responsibility of the attorney to ensure that the client has attended a certified counseling program. But this is just as simple as a “have you” or “have you not” verification. In Senate hearings the credit counseling industry has been described as “a network of not-for-profit companies linked to for-profit conglomerates. … plagued with consumer complaints about excessive fees, pressure tactics, nonexistent counseling and education, promised results that never come about, ruined credit ratings, poor service, in many cases being left in worse debt than before they initiated their debt management plan.” The debtors’ job is not getting any easier, with counseling required even in such cases where repayment is impossible, or where a debtor faces an unfair debt.
Furthermore, while in the old law in consultation with attorneys debtors chose the type of bankruptcy that they felt suited them the most, in the new law that is not to be the case. The new law will also reduce the number of people who file for Chapter 7 bankruptcy by allowing only people who fall under the median state income, adjusted for family size and inflation, and people who meet the rigorous standards under the means test to file for it. A series of complex mathematical formulas have been put in place to evaluate the rest of people who don’t make this mark. These formulas won’t be fixed, and will be revised on an annual basis when the new median incomes are released. The new law utilizes income and expense standards devised by the IRS that vary by county. There are numerous exceptions and special circumstances to the standards that must be considered for each client.
Clients who do not qualify for the aforesaid means test will be required to file for Chapter 13 bankruptcy. Also, the new law has extended the term for Chapter 13 bankruptcy from the range of three to five years, to a mandatory five-year term. Chapter 13 Bankruptcy clients will now require supervision and representation for at least five years before they receive their discharge.
The effects of the new law are such that it would require attorneys to specialize in bankruptcy. These are complex rules, and a new level of commitment towards the protection of bankruptcy clients is mandated by it.
Yes, it would seem from here on lawyers would be harder to find, because of the kind of complications that have been introduced under the new law. The commitment of Bankruptcyhome.com is undeterred! After all, the basic tenet of bankruptcy filing remains unchanged. A change in the law does not imply a change in the basic principles that we work on. We specialize in bankruptcy litigation will continue to assist clients, even in the face of new bankruptcy legislation.
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