New Bankruptcy Law
BAPCPA 2005 amends the US Bankruptcy Code by adding new duties for the debtor. Essential the New Bankruptcy Law demands the debtor to comply with their tax filing responsibilities, make available previous tax returns filed if the case requires it, and seek credit counseling and debtor education services. These apply to cases filed on or after Oct. 17, 2005.
An elaboration of the New Bankruptcy Law is given below.
Under the new Bankruptcy Law, if a debtor fail to file a return which can become a due after the date of their Bankruptcy appeal or if there is a failure to file an extension for this; then the IRS can request the court to order for a conversion. A conversion entails a change from Chapter 7 of the Bankruptcy Code to Chapter 11 or from chapter 11 to Chapter 13 etc. IRS is entitled to even seek dismissal of the case in such a scenario.
- Availability of Free Transcripts.
Proofs of prior filed tax returns will have to be produced if the court demands it. If a debtor has failed to keep the copy of such data, then transcripts of it can be obtained from the IRS. There will be charges on the user fees.
- Means Testing for Chapter 13
Under the New Bankruptcy Law, the individual debtor who passes certain tests will be expected to make regular payments on their debts under the Chapter 13 plan. The New Bankruptcy Law also invests the authority of modification of IRS expense standards and their use in executing the 'Means Test' with the Bankruptcy Courts.
How does the New Bankruptcy Law affect you?
- Under the New Bankruptcy law, Chapter 7 Bankruptcy will become harder to file. There will be restricted eligibility for Chapter 7 Bankruptcy as against before when most filers could and did choose this form of Bankruptcy. Also the law puts new requirements on the lawyers and you might find it tough to get one to represent your case.
- Under the New Bankruptcy Law, you must first calculate your current monthly income against that of the median income for a house of your size in your state. If that value is equal to or lesser than the latter, then you can apply for Bankruptcy under Chapter 7. If the value is more, then you will have to pass the 'Means test'. The purpose of the Means Test will be to deduce if you possess enough disposable income. This is simple in practice and you will even find lot of online test kits available.
- Counseling requirements prior to filing and course in debtor education are mandatory under approved agencies. The site www.usdoj.gov/ust will be of help to know more. The objective is to let you have a thorough analysis on whether you indeed need to file for Bankruptcy and if so how best can you manage your resources in future.
The New Bankruptcy Law was made to prevent abuses of the Bankruptcy Law and it sure serves the purpose.
