On
October 17, 2005, new bankruptcy law went into effect, changing the
process of filing for bankruptcy throughout the United States. This
new shift in law requires additional steps to be taken by the
attorney and the debtor but has been geared toward benefiting the
debtor. The following details explain the changes in the law and how
they will affect anyone considering bankruptcy.
Documentation
The
documentation required for filing for bankruptcy has been increased,
asking the debtor to provide additional information thoroughly
detailing all of their income and expenses. If expenses exceed the
IRS allowance, a ‘special circumstances’ document must be
submitted explaining the reasons for the extra expenses. A statement
of accuracy must also be submitted with the special circumstances
document. The additional documentation makes the task of filing take
more time but provides more accuracy to a debtor’s financial
dilemma. This could result in more debt relief.
Counseling
In
an attempt to decrease the number of people filing for bankruptcy,
the new law requires that debtors receive counseling from an approved
credit counseling agency within six months prior to filing for
bankruptcy. The purpose of the counseling is to ensure that people
are not making an uninformed decision to file for bankruptcy. It is
also the hope of the court that counseling will provide alternative
options for those who truly don’t need to file.
The
Means Test
Before
the new law, consultations with an attorney would allow the client to
choose what type of bankruptcy they felt suited them best. However,
the new law is framed to reduce the number of Chapter 7 filings by
only allowing people who fall under their median state income,
adjusted for family size and inflation, and people who meet rigorous
standards under the means test to file for it. The rest of the people
who don’t meet these standards must be evaluated by a series of
complex, mathematical formulas that change annually to match new
median incomes and expense standards. Clients who do not qualify
through the means test will be required to file for Chapter 13
bankruptcy. The new law also extended the Chapter 13 term from a
three- to five-year term, to a mandatory five-year term. Throughout
the mandatory five-year term, the client must be supervised and
represented before they can receive their discharge.
The
effects of the new law make the process of filing for bankruptcy more
complex, requiring attorneys to specialize in bankruptcy law. To
completely understand how the new bankruptcy laws in your state can
impact your debt and affect your life, speak with a local bankruptcy
lawyer.
If
you are thinking about filing a Louisiana bankruptcy, contact the
firm that focuses exclusively on bankruptcy law, Kirkpatrick Law.
Every day, the attorneys at Kirkpatrick and Associates help people
save their homes, their cars, and wipe out their debts from $5,000 to
$300,000. No other law firm is better qualified to bring you the
fastest debt relief, and do it right the first time. For a free
consultation, call 504-828-3311 or visit
kirkpatrickandassociates.com.