BAPCPA ------ Bankruptcy Abuse Prevention and Consumer Protection Act was passed on October 17, 2005 was a 510 page amendment to the Bankruptcy Code that has attempted to reform Bankruptcy Law, Rules and regulations. Although the changes were numerous the following changes are the ones most likely to affect the individual's ability to file bankruptcy.
- Under BAPCPA bankruptcy attorneys must look back to the 6 months prior to the filing of the case and examine the debtor's income. The purpose of this is to make sure that the debtor is insolvent and that the debtor is unable to pay unsecured creditors any money. If there is some ability to pay unsecured creditors the Court may require that the debtor be in a Chapter 13 case. And even though Chapter 13 is a repayment plan, the unsecured creditors will normally get some percentage like 10% or 20% so the debtor may not be required to pay the unsecured creditors in full. The percentage a debtor has to pay varies from person to person and is tied to the debtor's ability to pay. So debtors who are struggling and can't keep paying their credit cards and other unsecured creditors in full may have a way to pay them less through chapter 13.
- The second major change in the Bankruptcy Code is that debtors have to provide to the Court a copy of the last filed tax return. In addition the debtor must file any delinquent tax returns that are due no later than the day prior to their court date. Most clients have a copy of their last year's tax returns (federal and state) but the Trustee in your case may accept a tax transcript that you can obtain for free from the IRS. If you are behind on your tax filing requirements now is the time to come clean.
- The Bankruptcy Code now requires the debtor to undergo credit counseling. There are two classes that are required. There are many credit counseling agencies that are approved by the Eastern District of Missouri Bankruptcy Court and we would be happy to provide you with a list of them. We use one credit counseling company that does both classes over the internet so that the debtor will be able to do the class on their own time at any time of the day or night. Most clients are concerned where they will have to go to do the class and how long it will take. Through the convenience of the internet, the debtor may log on from any computer. If our client does not have a computer, the client may schedule a time to come to our office to use one of ours. If the client does not know how to use a computer, there are other alternative available too. Some credit counseling companies will arrange for the client to do the courses over the phone or in person.
- The first class is mostly a summarization of income and expenses, debts and liabilities and to see what kind of shape the debtor is in. Perhaps congress didn't really know that we debtor's attorneys were already delving deep into those facts and that the first counseling class is duplicative of what we have already done. In that regard the first class does frustrate some debtors who realize they are going through all their fact twice, once for the debtor's counsel, and once for the credit counselors. We advise clients to just grin and bear it and just get it done.
- The second class is informative and educational. The class will teach the debtor about the basics of budgeting, the relationship between FICO scores and interest rates, and will teach the debtor about the consumer laws that were passed to protect the consumers from various bad behaviors. The second class, which is called the Financial Management Course, takes two hours to complete.
This advice is given as of the date of publication, is intended for debtors filing in the Eastern District of Missouri (in the following counties: Crawford, Dent, Franklin, Gasconade, Iron, Jefferson, Lincoln, Maries, Phelps, St. Charles, St. Francois, St. Louis City, St. Louis County, Ste. Genevieve, Warren and Washington Counties) and is subject to change by your friendly neighborhood Congressmen or Congresswomen at any time.