New here? Start with these articles to learn about US bankruptcy, debtor bankruptcy
alternatives like debt consolidation, debt settlement, debt negotiation, and debt management.
You'll also learn the causes of debts that can lead you to file bankruptcy and how to recover
from it.Washington Bankruptcy and the Reforms of 2005
In 2005, after deep concerns by Congress and the nation’s creditors, sweeping changes to the US Bankruptcy Code were signed into law. After 25 years of little change, many felt that the laws in effect were being abused by consumers and businesses and that bankruptcy was much too easy a way to get rid of debt. Plus, proponents of the changes felt that the old laws allowed for easy abuse and even encouraged bankruptcy filings. So, with the urging of creditors, new reforms were developed and passed that made filing much harder, exempted some debts from being discharged and demanded that filers be educated on credit management, among other changes. The changes affected attorneys as well, increasing the amount of time attorneys had to put into preparing bankruptcy petitions and thereby raising the cost to the already cash strapped consumer.
Before considering a Washington DC bankruptcy, acquaint yourself with the new requirements:
Mandatory credit counseling - As part of the reforms, bankruptcy applicants, before filing, must undergo mandatory credit counseling with a government approved counseling service. A list of approved services can be obtained from the US Trustee Program or from any Washington DC bankruptcy lawyer’s office.
The “Means Test” - Bankruptcy applicants who wish to file for Chapter 7 have to pass a “means test” first. If the applicant’s net yearly income falls below the median income for their state, then they are eligible to file for Chapter 7 relief. However, if their monthly income is above the state median and they are able to pay $100 per months to their debtors, then they are entitled to file Chapter 13, or the “wage earner’s plan”, in which a portion or all of their debts are to be repaid to their creditors over time. This ability to pay $100 per month is calculated based on a formula that includes monthly income, monthly expenses and amount of debt.
Proof of income and tax returns required - Under the new laws, bankruptcy filers must now provide proof of income by providing their tax return for the past year. If the filers have unpaid taxes, they must first pay these taxes before they can file for bankruptcy.
Mandatory financial management education - After a bankruptcy has been approved, but before any debt can be discharged, the filer must complete training in financial management education from a government- approved financial management educator or program. A list of these programs is available from the US Trustee Program.
Greater priority for child supports and alimony - Bankruptcy filings order a filer’s creditors in specific order to receive any funds collected. Under the new laws, people who are owned child support or alimony receive higher priority on that list.
Tougher on the lawyers - and more expensive - Part of the new reforms require Washington DC bankruptcy attorneys to personally voucher for the validity of all information submitted for their clients. This requires the attorneys to spend more time and effort of each case and consequentially, makes the fees for such services higher. Unfortunately, this also makes it harder to find an attorney willing to handle bankruptcies.
Less “automatic stays” - Historically, filing bankruptcy gave the filer certain immediate protections from creditors and others such as debt collections and lawsuits. Termed “stays” in legal terms, these advantages have changed under the new laws. Immediate protection from evictions, driver’s license revocations, legal measures for child support and divorce no longer apply.
About the Author:
When faced with overwhelming debt and the possibility of bankruptcy, a Washington bankruptcy lawyer can help get your financial situation back under control.
Nick Messe | Bankruptcy Basics |
Tags: bankruptcy attorney, bankruptcy lawyer, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy
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