Board
Certified Consumer Bankruptcy Specialist
American Board of Bankruptcy Certification
The process of bankruptcy allows citizens of the United States that are
burdened with excessive debts to get relief from those debts and get a FRESH
START financially.
Through debt relief a debtor (the person that owes the money) can get several
forms of relief:
- most suits are stayed
- most lawsuits that the debtor is involved in are stopped
- most collection efforts are stopped
- most garnishments stop
- most all efforts to collect on debts are stopped*
- excess debts are discharged
- immediate effect, in most cases
These are general ideas of what a debt relief bankruptcy can do for you.
CHANGES IN THE LAW,
EFFECTIVE OCTOBER 17, 2005
Means Testing
A means test has been designed to force those debtors who have the
ability to pay some of their debts into Chapter 13 as opposed to liquidating
their debt under Chapter 7 and wiping the slate clean. The Act eliminates the
presumption that, without a finding of substantial abuse, a debtor is entitled
to relief under Chapter 7. Instead, a debtor's Chapter 7 case will be dismissed
or, with the debtor's consent, converted to a Chapter 13 upon a finding of
abuse. The Act lowers the "substantial abuse" standard for dismissal or
conversion to one of simple abuse. Whether abuse is presumed depends on the
outcome of the means test. This test is complicated, but in a nutshell, once
the debtor's current monthly income (CMI) is determined and reduced by all of
the allowances, actual monthly expenses, and secured and priority claimed
deductions, the number resulting from those calculations is multiplied by 60
months. Abuse is presumed if that number is not the lesser of 25% of the
debtor's non-priority unsecured claims or $6,000.00, whichever is greater, or
$10,000.00. The debtor will be required to show the calculations to determine
whether a presumption of abuse arises. (Sec. 707 (b)(2)(C)). The presumption
of abuse may only be rebutted with detailed documentation of "special
circumstances" requiring additional expenses or adjustment of current monthly
total income for which there is no reasonable alternative. (Sec. 707(b)(2)(B)(ii)).
The United States Trustee must review all materials filed by Chapter 7
debtors, and not later that ten days after the meeting of creditors, file a
statement as to whether the presumption of abuse is triggered. If the debtor
has income in excess of the of the median income, the United States Trustee must
either file a motion to dismiss or convert the case or file a statement setting
forth the reasons why the motion is not appropriate, within 30 days of the
filing of the notice.
New Provisions
1. Effective October 17, 2005, no individual may be a debtor under Title
11 unless, within 180 days prior to filing the petition, the debtor has received
an individual or group briefing from an approved non-profit entity that outlines
the opportunities for credit counseling and assists the debtor in performing a
personal budget analysis. Counseling can be individual, group, telephone or
even possibly over the internet.
2. Debtors must file a certificate from the budget and credit counseling
agency that describes the services provided to the debtor and the debtor must
file a copy of the debt repayment plan, if a repayment plan was created prior to
filing. The debtor may file a sworn statement that states the exigent
circumstances that prevented the filing of the certificate. (Sec. 109(h)(l).
However the debtor would need to attend counseling within 30 days after filing
the petition.
3. Debtors must file a statement showing any anticipated increase in
income or expenditures anticipated within the year after filing. (Sec.
521(a)(1)(B)(iv)).
4. Debtor must deliver to the trustee a copy of the debtor's latest tax
return or a transcript prior to the meeting of the creditors or the debtors case
"shall" be dismissed. (Sec. 521 (e)(2)(A) ).
5. Debtor must provide a copy of the tax return or transcript to any
creditor that requests a copy at the same time the debtor provides such to the
trustee. (Sec. 521 (e) (2) (A) (ii) )
6. Debtor is under a continuing duty to provide tax returns during the
case, from commencement to termination; the case may be dismissed or converted
for failure to comply.
7. Debtors must choose their intent to surrender, reaffirm or redeem a
debt secured by property of the estate within 30 days after the first date set
for the meeting of creditors.
8. In the case of personal property secured by purchase money security
interest, within 45 days after the first meeting of creditors, debtors must
reaffirm, redeem, or surrender the property. Failure to do so will result in an
automatic lifting of the stay without creditor motion. (Sec. 521 (a)(6)).
9. A debtor can be denied a discharge if the debtor fails to complete an
educational course concerning personal financial management, (Sec. 727(a)(11))
unless the court determines that the debtor is unable to complete this
requirement because of incapacity, disability, or active military service in a
combat zone.
Non-Dischargeable Debts Expanded
1. Debts for money, credit, etc. , obtained through fraud or false
statement in writing.
2. Debts incurred within 90 days of filing that aggregate at least
$500.00 for luxury goods or services and cash advanced aggregating more than
$750.00 within 70 days. (Sec. 523(a)(2)).
3. The exception to discharge for student loans is expanded to encompass
all student loans, as defined by the IRC Sec. 221(e)(1).
4. If an individual is drunk or impaired due to drugs or any substance,
and causes death or personal injury by operating a motor vehicle, vessel or
aircraft, then debts relating to that incident are non-dischargeable. (Sec.
523(a)(9)).
5. Domestic support obligations are non-dischargeable. Sec. 523(a)(5)
and 523(a)(15)).
6. Debts incurred to pay state and local taxes. Sec. 523(a)(14)).
7. Debts incurred to pay fines and penalties.
8. Debts from homeowner association, condominium and cooperative dues.
Sec. 527. Disclosures
`(a) A debt relief agency providing bankruptcy assistance to an assisted
person shall provide--
`(1) the written notice required under section 342(b)(1); and
`(2) to the extent not covered in the written notice described in
paragraph (1), and not later than 3 business days after the first
date on which a debt relief agency first offers to provide any
bankruptcy assistance services to an assisted person, a clear and
conspicuous written notice advising assisted persons that--
`(A) all information that the assisted person is required
to provide with a petition and thereafter during a case
under this title is required to be complete, accurate, and
truthful;
`(B) all assets and all liabilities are required to be
completely and accurately disclosed in the documents filed
to commence the case, and the replacement value of each
asset as defined in section 506 must be stated in those
documents where requested after reasonable inquiry to
establish such value;
`(C) current monthly income, the amounts specified in
section 707(b)(2), and, in a case under chapter 13 of this
title, disposable income (determined in accordance with
section 707(b)(2)), are required to be stated after
reasonable inquiry; and
`(D) information that an assisted person provides during
their case may be audited pursuant to this title, and that
failure to provide such information may result in dismissal
of the case under this title or other sanction, including a
criminal sanction.
`(b) A debt relief agency providing bankruptcy assistance to an assisted
person shall provide each assisted person at the same time as the notices
required under subsection (a)(1) the following statement, to the extent
applicable, or one substantially similar. The statement shall be clear and
conspicuous and shall be in a single document separate from other documents
or notices provided to the assisted person:
`IMPORTANT INFORMATION ABOUT BANKRUPTCY ASSISTANCE SERVICES FROM AN
ATTORNEY OR BANKRUPTCY PETITION PREPARER.
`If you decide to seek bankruptcy relief, you can represent yourself, you
can hire an attorney to represent you, or you can get help in some
localities from a bankruptcy petition preparer who is not an attorney. THE
LAW REQUIRES AN ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A
WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY PETITION
PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST. Ask to see the contract
before you hire anyone.
`The following information helps you understand what must be done in a
routine bankruptcy case to help you evaluate how much service you need.
Although bankruptcy can be complex, many cases are routine.
`Before filing a bankruptcy case, either you or your attorney should
analyze your eligibility for different forms of debt relief available under
the Bankruptcy Code and which form of relief is most likely to be beneficial
for you. Be sure you understand the relief you can obtain and its
limitations. To file a bankruptcy case, documents called a Petition,
Schedules and Statement of Financial Affairs, as well as in some cases a
Statement of Intention need to be prepared correctly and filed with the
bankruptcy court. You will have to pay a filing fee to the bankruptcy court.
Once your case starts, you will have to attend the required first meeting of
creditors where you may be questioned by a court official called a `trustee'
and by creditors.
`If you choose to file a chapter 7 case, you may be asked by a creditor
to reaffirm a debt. You may want help deciding whether to do so. A creditor
is not permitted to coerce you into reaffirming your debts.
`If you choose to file a chapter 13 case in which you repay your
creditors what you can afford over 3 to 5 years, you may also want help with
preparing your chapter 13 plan and with the confirmation hearing on your
plan which will be before a bankruptcy judge.
`If you select another type of relief under the Bankruptcy Code other
than chapter 7 or chapter 13, you will want to find out what should be done
from someone familiar with that type of relief.
`Your bankruptcy case may also involve litigation. You are generally
permitted to represent yourself in litigation in bankruptcy court, but only
attorneys, not bankruptcy petition preparers, can give you legal advice.'.
`(c) Except to the extent the debt relief agency provides the required
information itself after reasonably diligent inquiry of the assisted person
or others so as to obtain such information reasonably accurately for
inclusion on the petition, schedules or statement of financial affairs, a
debt relief agency providing bankruptcy assistance to an assisted person, to
the extent permitted by non-bankruptcy law, shall provide each assisted
person at the time required for the notice required under subsection (a)(1)
reasonably sufficient information (which shall be provided in a clear and
conspicuous writing) to the assisted person on how to provide all the
information the assisted person is required to provide under this title
pursuant to section 521, including--
`(1) how to value assets at replacement value, determine current
monthly income, the amounts specified in section 707(b)(2) and, in a
chapter 13 case, how to determine disposable income in accordance
with section 707(b)(2) and related calculations;
`(2) how to complete the list of creditors, including how to
determine what amount is owed and what address for the creditor
should be shown; and
`(3) how to determine what property is exempt and how to value
exempt property at replacement value as defined in section 506.
`(d) A debt relief agency shall maintain a copy of the notices required
under subsection (a) of this section for 2 years after the date on which the
notice is given the assisted person.'.
(b) CONFORMING AMENDMENT- The table of sections for chapter 5 of title
11, United States Code, as amended by section 227, is amended by inserting
after the item relating to section 526 the following:
`Sec. 528. Requirements for debt relief agencies
`(a) A debt relief agency shall--
`(1) not later than 5 business days after the first date on which
such agency provides any bankruptcy assistance services to an
assisted person, but prior to such assisted person's petition under
this title being filed, execute a written contract with such
assisted person that explains clearly and conspicuously--
`(A) the services such agency will provide to such
assisted person; and
`(B) the fees or charges for such services, and the terms
of payment;
`(2) provide the assisted person with a copy of the fully
executed and completed contract;
`(3) clearly and conspicuously disclose in any advertisement of
bankruptcy assistance services or of the benefits of bankruptcy
directed to the general public (whether in general media, seminars
or specific mailings, telephonic or electronic messages, or
otherwise) that the services or benefits are with respect to
bankruptcy relief under this title; and
`(4) clearly and conspicuously use the following statement in
such advertisement: `We are a debt relief agency. We help people
file for bankruptcy relief under the Bankruptcy Code.' or a
substantially similar statement.
`(b)(1) An advertisement of bankruptcy assistance services or of the
benefits of bankruptcy directed to the general public includes--
`(A) descriptions of bankruptcy assistance in connection with a
chapter 13 plan whether or not chapter 13 is specifically mentioned
in such advertisement; and
`(B) statements such as `federally supervised repayment plan' or
`Federal debt restructuring help' or other similar statements that
could lead a reasonable consumer to believe that debt counseling was
being offered when in fact the services were directed to providing
bankruptcy assistance with a chapter 13 plan or other form of
bankruptcy relief under this title.
`(2) An advertisement, directed to the general public, indicating that
the debt relief agency provides assistance with respect to credit defaults,
mortgage foreclosures, eviction proceedings, excessive debt, debt collection
pressure, or inability to pay any consumer debt shall--
`(A) disclose clearly and conspicuously in such advertisement
that the assistance may involve bankruptcy relief under this title;
and
`(B) include the following statement: `We are a debt relief
agency. We help people file for bankruptcy relief under the
Bankruptcy Code.' or a substantially similar statement.'.
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