Sacramento Bankruptcy Attorney Discusses 2005 Bankruptcy Law Revisions
Sacramento Bankruptcy Attorney Discusses 2005 Bankruptcy Law Revisions
On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect. This legislation was the biggest reform to the bankruptcy laws since 1978. The legislation was enacted after years of lobbying efforts by banks and lending institutions and was intended to prevent abuses of the bankruptcy laws. The changes to Chapter 7 were extensive.
The most noteworthy change brought by the 2005 BAPCPA occurred within 11 U.S.C. § 707(b). The amendments effectively subject more debtors who make above a certain income, as calculated by the Code, above the debtor’s state’s median income to an income based test. This test is referred to as the “means test.” The means test provide for a finding of abuse if the debtor’s income is higher than a specified portion of their debts. If a presumption of abuse is found under the means tests, it may only be rebutted in the case of “special circumstances.” Debtors whose income is below the state’s median income are not subject to the means test. Notably, the Code calculated income may be higher or lower than the debtor’s actual income at the time of filing for bankruptcy. This has led some commentators to refer to the bankruptcy code’s “current monthly income” as “presumed income.” If the debtor’s debts are not primarily consumer debt, then the means test is inapplicable.
Another major change to the law enacted by BAPCPA deals with eligibility. §109(h) provides that a debtor will no longer be eligible to file under either chapter 7 or chapter 13 unless within 180 days prior to filing the debtor receives an individual or group briefing from a nonprofit budge and credit counseling agency approved by the United States trustee or bankruptcy administrator. The new legislation also requires that all individual debtors in either chapter 7 or chapter 13 complete an instructional course concerning personal financial management. If a chapter 7 debtor does not complete the course, this constitutes grounds for denial of discharge.
If you have questions regarding bankruptcy and credit issues, please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at www.sagarialaw.com. Our team of Bankruptcy Attorneys can assist you with all aspects of your case. We have bankruptcy attorneys in San Mateo, Monterey, Fremont, Salinas, Sacramento and San Jose.
