An Overview of the Main Changes for Filers After the 2005 Bankruptcy Code Reforms Skip to main content

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An Overview of the Main Changes for Filers After the 2005 Bankruptcy Code Reforms


The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has made some people wary of even considering bankruptcy. This was undoubtedly the intention of the credit industry, who went to great lengths to make sure the "reform" passed. The passage of the law and subsequent misinformation from the credit industry lobby has led to a general perception that bankruptcy is now a difficult, if not impossible, undertaking. But for many people it may not be the legal changes that keep them from filing for bankruptcy--it may just be fear and misunderstanding.

Before you decide that the 2005 reforms make  bankruptcy impossible for you, you should get a handle on the major changes in the law that affect bankruptcy filings. But hey, before you do even that, remember that there's no need to play the guessing game; many bankruptcy attorneys, including the Law Offices of John T. Orcutt, offer a free initial consultation to help you better understand the new bankruptcy laws. Here are some of the main changes that are likely to affect your situation as an individual filer:

  • Bankruptcy filers are now required to receive credit counseling before filing. The role of the credit counselor is to help filers decide if they are eligible for Chapter 7 or Chapter 13 bankruptcy, and to educate the filer about credit decisions.
  • Filers who have income higher than the median income for their county of residence may be required to file a Chapter 13 bankruptcy, instead of Chapter 7. The intent of this provision is to force more middle to high income filers to repay some of their unsecured debt. However, in many cases, even if you are above median, you will still qualify for Chapter 7. Even if you don't qualify for a Chapter 7, chances are you are still eligible for a very reasonable Chapter 13 payment plan-- in some cases for as little as $99 per month. Talk to an experienced bankruptcy attorney to discuss your unique situation.
    • If you bought your car less than two and a half years ago, you will be required to pay the full payoff amount of the lien in a Chapter 13 bankruptcy. However, if your car was bought more than two and a half years ago, you will only be required to pay the fair market value of the vehicle. This can be very beneficial if the car is severely upside down, and can cut your car payment significantly.
    • In Chapter 7 bankruptcy, if you want to keep your car, your lender may require you to sign a reaffirmation agreement, the effect of which puts you back on the hook personally for the full amount of the loan. The requirements vary by jurisdiction, and courts are increasingly holding lenders to a very high standard for these agreements. The bottom line is, if surrendering your car is not an option, talk to your attorney about a Chapter 13. A Chapter 13 bankruptcy will allow you to keep your car, often on much better terms than you currently have with your lender.
    • Repeat filers may not immediately be entitled to the automatic stay. If this is your second or third filing in the past year, discuss with your attorney whether the automatic stay will go into effect automatically, or if there is some further action needed by your attorney. Court interpretations vary, so if this is a second or third filing, make sure your attorney knows the local judge's position on this important issue.
    • A Chapter 13 discharge can't be obtained within 2 years of the filing of a Chapter 13 case in which you have received a discharge, or within 4 years of a Chapter 7 discharge. If you have previously filed for Chapter 7 and received a discharge, you will not be eligible for another Chapter 7 discharge for 8 years
    • More paperwork. Naturally! Bureaucrats love it. You now have to provide more documents than in the past, but the end result is well worth the effort.
    • Past due support obligations, such as child support payments, get first priority over everything else. You must remain current on your ongoing support payments
    • Certain kinds of debts may be more difficult to discharge after completion of the Chapter 13 repayment plan; debts which are now impossible to discharge are trust fund taxes (such as employee withholding taxes, and excise taxes), debts from fraudulent activities, debts relating to a drunk driving accident, and criminal restitution.

These changes are not the only ones made by the law, which is why you definitely should consult with an experienced bankruptcy attorney before filing. As you can see, help is still available to those who need the protection of the bankruptcy laws.

If you're suffering with debt, don't even consider a debt consolidation scam. Bankruptcy offers real relief. Contact the Law Offices of John T. Orcutt to discuss your options. Call 1-888-234-4181 for a free initial debt consultations, or visit to fill out a free and confidential debt questionnaire.

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