The Bankruptcy Abuse and Consumer Protection Act of 2005 is the most significant overhaul of the bankruptcy system in almost three decades. The changes to the system were designed to make it more difficult for people to eliminate debt in bankruptcy. This page highlights the changes to bankruptcy law, but it is important to consult a bankruptcy attorney for information specific to your situation. Our firm represents consumers in Xenia, Fairborn, Jamestown, Beavercreek, and Dayton Ohio.
One change to bankruptcy law is a credit counseling requirement. Within 180 days prior to filing, you are required to begin credit counseling with a 90 minute session to determine if bankruptcy or a possible repayment plan suggested by the credit counselor is the best solution. After filing, you will need to take a second credit counselling, commonly referred to as Financial Management, prior to having your debt discharged.
There are additional requirements to eliminate debt under Chapter 7 bankruptcy. You are able to retain your home and assets that are protected by the state, while other unprotected assets may be sold and used to repay creditors before remaining debt can be discharged. A means test is now used to evaluate income and ability to pay your debts, if your income exceeds the median income of the state.
When a consumer is deemed ineligible for Chapter 7, they have to file for Chapter 13 and use all disposable income to repay creditors according to a repayment plan for a period of up to five years. If you are under the means test median income level, you are required to pay your available disposable income into your chapter 13 plan for at least 36 months. If you are over the median income level, you will be required to commit you available disposable income for 60 months.
Prior to the change in bankruptcy law, people were generally able to keep used cars, furniture, and family heirlooms. The new law requires that property be valued at retail price replacement cost, which significantly increases the value of property and potentially enables creditors to seize property to satisfy debts. States have laws that set limits regarding personal property and bankruptcy, but you must live in a state for at least two years before claiming the exemptions allowed in that state and at least three years and four months before using the homestead law in your state.
When financial problems are caused by extenuating factors, you may be eligible for a special circumstances exemption. However, you need to prove special circumstances, such as loss of income due to a serious injury, illness, military service, and significant natural disasters.
Experienced bankruptcy attorneys are the best source of information and advice about the changes and how they affect your situation. If you are considering bankruptcy in Xenia, Fairborn, Jamestown, Beavercreek, or Dayton Ohio, please contact our office for help in determining the best debt relief solution for you.