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Bankruptcy

Bankruptcy Abuse Prevention and Consumer Protection Act  
 
 
 
The “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” makes some sweeping changes to the former bankruptcy law. Impacting cases filed on or after October 17, 2005, the Act includes the development of a “means test.” The Trustee or any creditor can now bring a motion to dismiss a Chapter 7 bankruptcy if the debtor’s income is greater than the state median income. Certain debtors who meet a new standard would be shifted from a Chapter 7 bankruptcy to five-year repayment plan in Chapter 13.  
 
The bill also includes two provisions mandating financial counseling and education: Before filing for bankruptcy, consumers would be required to have a briefing on the alternatives to bankruptcy; and before receiving a bankruptcy discharge a debtor would be required to complete “an instructional course concerning personal financial management.” These provisions were included to provide debtors in bankruptcy with the skills and tools needed to avoid future financial problems.  
 
 
 
Other changes include:  
  • In the absence of undue hardship, student loans from government and non-government sources are not able to be discharged.
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  • Debts owed to a single creditor totaling more than $500 for luxury goods incurred within 90 days of filing are presumed non-dischargeable; cash advances of $750 within 70 days cannot be discharged.
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  • Under the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you can file for Chapter 7 only once every eight years, instead of every six years.
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  • Domestic child and spousal support obligations now have the first priority in distribution over governmental owed obligations.
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  • Under Chapter 13 bankruptcy, a secured creditor can retain its lien on a vehicle until the payment of the entire debt, not just the secured portion, where the creditor holds a security interest in a motor vehicle purchased within 910 days of the filing.
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  • A debtor may exempt up to $125,000 of interest in a homestead that was acquired within the 1,215-day period prior to the filing.

    * Approval by the EOUST does not endorse or assure the quality of the agency’s service.

    **In those cases where it is established that clients are unable to afford the costs for bankruptcy counseling or bankruptcy-related financial education, the agency will, on a case-by-case basis, provide the services at a reduced price or, in extreme circumstances, for free.



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