October 17, 2005 was the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). Beginning on that date bankruptcy as we have known if for many years, ceased to exist and the new laws consisting of several mandatory requirements which must be met before a new case may even be filed, let alone the granting of a discharge of debts, was instituted.
The old law allowed the eligible consumer to file for bankruptcy at any time. The new law, however, requires the consumer to undergo a 90 minute credit counseling course and receive a certificate of completion before even attempting to file for bankruptcy protection. Generally, this must occur at least five (5) days prior to any bankruptcy filing. In addition, consumers are also required to take a credit management counseling class at the end of the bankruptcy process.......or no bankruptcy discharge will be granted.
To prepare for bankruptcy filing the consumer is now required to provide the attorney with a variety of detailed paperwork for verification of the consumers financial status. An example of some of the required documents include, two (2) years of prior tax returns, six (6) months of prior bank statements, documents relating to the purchase, refinance or transfer of any real property over the past three (3) years, all documentation regarding the purchase of any vehicles and/or other secured items over the last 910 days, copies of all insurance policies, six (6) months of pay stubs along with proof of all other income (from all working persons in the household), information regarding any anticipated increase in income over the following months, six (6) months of checkbook registers and information regarding any other pending legal actions. Finally, the debtor must provide the U.S. Trustee with copies of your most recently filed Federal and State tax returns ...... or no bankruptcy discharge will be granted.
Using the information provided, the consumer is now required to submit to a seven (7) page "means test" which is required to alert the Court to any possible "substantial abuse". In order to overcome the presumption of substantial abuse, the consumer must provide information indicating that they are living below various governmental financial guidelines. For Prince George's County, examples of these guidelines include the following for a family of four (4): household Income not to exceed $85,554.00; $1,928.00/mo. for rent and utility expenses; $407.00/mo. for the operational costs of two vehicles and/or public transportation; $1,500.00/yr. for private schooling expenses; $543.00/mo. for groceries; $207.00/mo. for clothing and $44.00/mo. for personal items and toiletries. Should any family of four (4) exceed these permitted expense guidelines, the court is automatically alerted that the filing of the case is possibly abusive and not eligible for a discharge. The consumer must then provide explanations for any and all expenses over and above the guidelines in order to gain approval from the Court....or no bankruptcy discharge will be granted.
Finally, if you successfully make it through the process, don't think of coming back anytime soon. The time for refiling bankruptcy cases has increased from six (6) years to eight (8) years between Chapter 7 cases. The waiting period for the filing of Chapter 13 cases has increased from the current maximum of 180 days to four (4) years and when filing a Chapter 7 following a Chapter 13 case, two (2) years is the minimum waiting period. These waiting times may exist regardless of whether or not your prior case was a success. In other words, any repeat filing is presumed to be an abuse of the system regardless of the outcome of the prior case. Thus, it is imperative that you choose your legal counsel wisely. A failed case can bar you from filing bankruptcy at all and thus relieving yourself from any dischargeable debts, possible repossession or home foreclosure.
