Like any other legal matter, each person's situation must be evaluated. However, if you are contemplating bankruptcy, you should be aware the Bankruptcy Code has undergone its most drastic changes in over 27 years. On April 14, 2005, the House of Representatives passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. On April 21, 2005, President Bush signed the bill into law.
The changes affect greatly who can file under Chapter 7 of the Bankruptcy Code, and contain a number of prerequisites making it more difficult to initiate a filing under Chapter 7. There will also be numerous modifications to longstanding Chapter 7 principles that are not favorable to Debtors. There will also be extensive changes to Chapter 13, which will result in Debtors paying more money to both secured and unsecured creditors through their Chapter 13 plans.
The changes also place greater responsibilities on attorneys who are preparing bankruptcy schedules which will result in a substantial increase in the amount of work performed and fees charges. Potential filers should also be aware that effective October 17, 2005, Chapter 7 filing fees will increase over from $209.00 to $274.00. Chapter 13 filing fees will decrease slightly, from $194.00 to $189.00. There is also proposed legislation to increase filing fees another 40.00 that is ready approval. In addition, clients must now pay for pre-petition consumer credit counseling and a post-petition debt management course.
Clients should also be aware the United States Bankruptcy Court for the Western District of New York has gone to an all electronic filing effective October 1, 2004. After October 1, 2004, no paper filings are being accepted. This has changed the procedures for the filing of bankruptcy cases.
According to a recent CNN report, a bankruptcy filing that used to cost between $500.00 and $1,500.00 now costs between $1,000.00 and $3,000.00. Moreover, for those who now try to file on their own, the law works at cross purposes. Because it has become more complicate and created traps even for veteran attorneys, consumers filing for bankruptcy are often finding their cases being dismissed for failure to file newly required documents under the Code.
In short, the substantive law of bankruptcy has not been substantially changed. However, the procedural law of bankruptcy has been changed to make filing requirements more onerous, thereby making it too costly for them to afford an attorney, and too complicated for them to do it on their own.