I need a bankruptcy.  I heard about a new law that may change my rights. What is this law?

The new federal law is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It goes into effect October 17, 2005. This law makes many changes in bankruptcy law. Some of the changes are more important to people with low incomes. Other changes are more important to people with higher incomes.

I’m low-income. How does this new law change my rights in bankruptcy?

The biggest change in the law is the "means test." The means test will be used when a debtor’s monthly income is higher than the median income in the debtor’s state. The means test will identify debtors who are able to pay some money to their creditors. These people will not be able to file "Chapter 7" bankruptcy to discharge their debts. These people will have to file a five year "Chapter 13" plan to pay creditors back.

Are there any other changes that affect me?

Other changes to bankruptcy law that may affect the low-income are:

• Time Between Discharge: The length of time between bankruptcy discharges for Chapter 7 debtors has gone up from six to eight years.
• Counseling: All debtors must take an approved financial counseling course in the six months before filing bankruptcy.
• Tithing: Up to 15% of a debtor’s income can be given to charity.
• Child Support and Alimony: These debts raise in priority from seventh to first.
• Proof of Income: Chapter 7 and Chapter 13 debtors must give the Trustee, at least 7 days before the creditors’ meeting, a copy or transcript of their most recent tax returns.
• Scope of Discharge: Certain debts will be harder to discharge: debts for luxury goods of more than $500, made within 90 days before filing, and cash advances of $750 made within 70 days before filing.
• State Exemptions: Debtors can’t use Louisiana exemptions unless they have lived here at least two years before filing.
• Vehicles: Chapter 13 debtors can no longer strip down vehicle liens to the value of the vehicle.
• Evictions: Usually, debtors can get legal actions against them "stayed" (temporarily stopped). The new law changes that for landlords who are trying to evict tenants, so that:  (1)  When a landlord gets a judgment of possession before the bankruptcy filing, the eviction can continue; and (2) If the landlord can show "endangerment" of the property or "illegal use of controlled substances" on the property in the thirty days before the bankruptcy filing, the landlord can go ahead with the eviction.