Can I still file for bankruptcy under the new law?
With the deadline for the major provisions of the Bankruptcy Abuse and Consumer Protection Act quickly approaching, a lot of my clients and potential clients are panicking because they think that if they can’t beat the deadline, that relief won’t be available. This is not true.
The most recent estimate from the Director of the American Bankruptcy Institute (ABI) is that only 2-3% of all debtors would not have the same relief available to them under the new legislation as under current legislation. This means that 97% of everyone who is considering bankruptcy relief now will still qualify after the new law goes into effect in October!
It is true that some of the rules that are changing are going to effect everybody. But, those rules are just putting up obstacles, not eliminating relief. Bankruptcy after October 17 is still going to be a very powerful tool to get out of debt for 97-98% of people who could use that tool now. Even for the 2-3% of people that might have to file under a different provision of the law than they would have before October 17, 2005, bankruptcy is still going to be a more attractive option to get them out of debt than any other reasonable option.
Keep in mind that the intent of the legislation is to force people who have “means” to repay their debt into a repayment plan under Chapter 13. For the 2-3% that may have been able to file for Chapter 7 under current rules that would be forced into a Chapter 13 plan under the new rules, they are still getting relief from their debt. Chapter 13 merely requires the debtor to pay what the debtor can afford. It doesn’t require the debtor to sell property or pay every penny of the debt owed.
It is true that everyone will have to get credit counseling before they are eligible to file, but in my experience many people have already discussed that option with credit counseling agencies anyway. The people who haven’t, can easily go online or make a phone call and run through a 30 minute conversation to obtain the needed Certification. It is also true that the new law requires debtors to attend a financial management course after filing. Of course, the US Trustee must approve some providers before the requirement goes into effect and my latest review of the US Trustee’s website does not list any approved providers. Some jurisdictions have already been conducting these “courses” for a few years.
It is also true that generally debtors will have to provide more documentation to their attorneys, but the documents should be things that are easily obtainable and in many jurisdictions across the country have been required for several years already. Plus, a good attorney can help you through these obstacles and make compliance easy for you!
The message for today is not to panic, bankruptcy is not going away. The rules of the game are changing, but it isn’t anything that should be overly burdensome or odious. Even if you are sure you can’t get anything done before October 17, don’t give up! Relief is still available under the new legislation. The worst thing you could do is to not try to seek bankruptcy options if you are having financial problems. Bankruptcy will remain, after October 17, a powerful and accessible tool to get you out of debt!
