Major Intent of Bankruptcy Reform:
Major Intent of Bankruptcy Reform:
The major intent of
bankruptcy reform is to require people, who can afford to make some payments
towards their debt, to make these payments, while still affording them the right
to have the rest of their debt erased. These people must file Chapter
13.
Status of
the Bills:
The Senate passed the Bill on March 11, 2005 and the Congress
on April 14, 2005.
When will this be
Law:
The bill was signed into law by the
president on April 20, 2005.
Sections
308, 322 and 330, all concerning the homestead exemption, take effect
immediately.
This is law now:
The exemption is limited to $125,000 if the property was acquired within the
previous 1215 day (3.3 years). The cap is not applicable to any interest
transferred from a debtor's previous principal residence (which was acquired
prior to the beginning of such 1215-day period)
The rest of the
provisions of the law will come into effect 180 days after the Bill is signed or
on October 17, 2005.
MAJOR
CHANGES:
Means
Test:
This will identify debtors who have the financial capacity to
pay some money to their creditors. The test will work as follows:
TEST #
1:
Is the family earning above the average income for their
state?
ž 1997 US average for a family of one = $18,762;
ž 1997 US
average for a family of two = $39,343;
ž 1997 US average for a family of
three = $47,115;
ž 1997 US average for a family of four = $53,165.
If
the answer is "No" Chapter 7 can be filed!
TEST # 2:
If the answer
is "Yes" to TEST # 1 , do you have excess monthly income of more than
$166.66/month to pay $10,000 of debt over 5 years?
If the answer is "No"
you must answer another question, if "Yes" Chapter 7 cannot be filed but Chapter
13 may be filed!
TEST # 3:
If
the answer is "No" to TEST # 2 do you have excess income of greater than
$100/month to pay over the next 60 months at least 25% of your unsecured
debt?
If the answer is "No" you can file Chapter 7, if "Yes" chapter 7
cannot be filed but Chapter 13 may be filed!
Proof of
Income:
Debtors
filing Chapter 7 or Chapter 13 bankruptcy, must provide to the trustee, at least
seven days prior to the 341 meeting, a copy of a tax return or transcript of a tax return, for the period
for which the return was most recently due.
State
Exemptions:
You cannot use the exemptions in your state of residence
unless you have lived there at least 2 years.
Homesteads:
This goes into
effect as soon as the bill is signed by the president! The exemption is limited
to $125,000 if the property was acquired within the previous 1215 day (3.3
years). The cap is not applicable to any interest transferred from a debtor's
previous principal residence (which was acquired prior to the beginning of such
1215-day period)
Counseling:
You must have finished counseling within the last 6
months before you can file.
Child Support and
Alimony:
These debts would go from a priority of 7th to 1st.
Tithing:
Up to
15% of your income can be given to charity. This is seen by some as a loophole
allowing people who may be just over the thresh hold of having to file Chapter
13 to drop down low enough to file Chapter 7.
