December 2, 2005 - 6 Month Rolling-Average Test for Income May Not Be As Burdensome As Previously Anticipated

     Income under the new bankruptcy laws is calculated on an average of the last six months income instead of your actual income.  Bankruptcy attorneys initially thought this would lead to situations were recently laid-off clients would be deemed to have thousands of dollars in income when in reality their income is zero.  Although this is still possible, it appears that in practice this will not be as large an issue as previously anticipated.  This is because people rarely file bankruptcy immediately after losing their jobs.  It is only after several months of joblessness that bankruptcy becomes an option for most people.  As a result, most bankruptcy clients will not be harmed be the requirement that income be calculated on a six month average.

November 28, 2005 - Bankruptcy Automatic Stay Now More Limited in Scope

     Traditionally, an automatic stay has gone into effect upon the filing of a bankruptcy case.  The automatic stay is a type of restraining order that prevents creditors from taking actions to collect a debt, such as foreclosing on a house, unless they seek the court's permission first.  Under the newly effective bankruptcy law, the automatic stay can be limited or non-existent for certain filers.  Without the protection of the automatic stay, many of the benefits of bankruptcy are eliminated.  People filing their own bankruptcies without an attorney are especially vulnerable to this problem. 

November 20, 2005 - Constiutional Challenge to New Bankruptcy Law Filed in Minnesota

     A lawsuit challenging the constitutionality of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was filed in Minnesota. The suit alleges violations of the First and Fifth Amendments to the U.S. Constitution.  More specifically the suit alleges that classifying bankruptcy attorneys as Debt Relief Agencies limits attorney's free speech rights by limiting what advice they can give to clients.

November 14, 2005 - Very Few Cases Filed Since October 17th Law Change

     There was a huge surge of thousands of last minute bankruptcy filings prior to the October 17th law change.  Now hardly any new cases have been filed in the last month.  This is generally viewed in the bankruptcy community as a temporary and very much expect lull.  Most people that needed to file bankruptcy did so prior to October 17th, but the underlying factors that lead to bankruptcy such as divorce, medical catastrophe, layoffs, and high debt levels still exist.  These factors as well as high gasoline prices, Katrina and Rita economic after effects, and an increase in credit card minimum payments will continue to force people into seeking bankruptcy protection.

November 9, 2005 - Jobs Not At Risk Because of Bankruptcy Filing

     Federal law prohibits an employer from firing an employee solely because that person has filed bankruptcy.  As a practical matter, it is very unlikely that an employer would even know their employee filed bankruptcy unless they were also a creditor of the employee.  The bottom line is that it is illegal for your boss to fire you because you filed bankruptcy.

November 1, 2005 - 8 Years Between Chapter 7 Filings Now Required

     As of October 17, 2005 the Bankruptcy Code now limits a debtor's ability to get a discharge in Chapter 7 to cases filed at least 8 years apart.  This is an increase from the previous requirement of 6 years between filings.  It is important to note that this requirement is viewed from filing date to filing date, not from discharge date to filing date.

October 25, 2005 - Alternatives to Bankruptcy May Have Hidden Costs

     Most people want to avoid bankruptcy at all costs.  This is perfectly reasonable, but some bankruptcy alternatives have hidden consequences because of a concept called "imputed income" or "forgiveness-of-debt income".  Even if you can work with your creditors and have them forgive most of your debt you could still face a stiff tax bill.  The IRS taxes your income and defines income as any increase in your wealth.  Your wealth can be thought of as what you have minus what you owe. 

     Let's say you own $10,000 worth of belongings, but you owe $6,000 on your credit card.  Your "wealth" would be $4,000 ($10,000 minus $6,000).  If you work with your credit-card company and get them to agree to lower the amount you owe to only $1,500 then your "wealth" is now $8,500 ($10,000 minus $1,500).  From the IRS' point of view your "wealth" has increased from $4,000 to $8,500 and they may tax you on your "income" of $4,500.  They treat any forgiveness of debt the same as if the credit card company had written you a check for the amount they have forgiven. You must generally pay income taxes on the amount forgiven.  If you are lucky enough work out a large amount of debt forgiveness outside of bankruptcy you may still get stuck unknowingly with a tax bill for tens of thousands of dollars.  And these types of taxes may not be dischargeable in bankruptcy.  Bankruptcy is not right for everyone, and alternatives may be the best course for you, but any decision should be based on knowing all the risks and not some blind assumption that bankruptcy is always bad and avoiding it is always good. 

October 18, 2005 - Bankruptcy Protection is Still Available

     The new bankruptcy law is now in effect.  We have been writing for months about the many negatives of the new law, but now we must learn to live under the new system.  While there is no doubt that most consumers were better off under the old law, we want to emphasize that BANKRUPTCY PROTECTION HAS NOT ENDED.  Yes, it will cost more.  Yes, you must attend classes now.  Yes, you will have to produce more paperwork now.  But bankruptcy is still here if you need help.  The new, complex system of bankruptcy rules will be a challenge to navigate, but bankruptcy attorneys across the country are ready to continue helping deserving individuals and families get back on their feet.

October 14, 2005 - Bankruptcy Filings Rise Dramatically in Advance of Bankruptcy Law Change

     With less than three days before the most far-reaching change in the bankruptcy laws in twenty-five years consumers are scurrying to file bankruptcy in record numbers.  People are waiting for hours in line at bankruptcy courts around the country to be able to beat the deadline.  Bankruptcy attorneys are also feeling the crunch as last minute filers flood their offices. 

October 7, 2005 - Means Test Only Applicable When Debt is Primarily Consumer Debt

     Of the dozens and dozens of changes to the current bankruptcy law about to take place, the most talked about change is the means test.  This means tests would limit many consumers' ability to qualify for Chapter 7 bankruptcy protection.  One bright spot in the new law, however, is that the means test only applies to consumers whose debt is primarily consumer debt.  If your debt is not primarily consumer debt, then you are not subject to the means test. 

September 29, 2005 - Fair Debt Collection Practices Act (FDCPA) Claims May Increase in Light of Harsh New Bankruptcy Laws

     The debt collection industry may see a significant rise in the number of FDCPA claims as a result of the new bankruptcy legislation.  For years many bankruptcy lawyers have avoided these types of claims because client problems could be more easily and cost effectively solved through the bankruptcy courts.  Now that the credit-card industry and Congress have made access to bankruptcy protection harder to get, there is increased incentive to go after violators of these less-often-used federal laws. The debt collection industry has violated these laws for years with little or no consequences and through their greed in trying to exact the last pound of flesh from already suffering debtors they may now be called to account for their illegal behavior.
 

September 14, 2005 - Domestic Support Obligations Become First Priority in Bankruptcy

     Domestic Support Obligations, which include such items as child support payments, have moved up to become the first priority of claims paid in bankruptcy. This may seem to be a positive development and huge victory for child advocates. In theory, it makes sense that child support payments be put ahead of payments to credit card companies or other creditors. However, the change in does little in actual practice because having priority only matters when there are funds (i.e. assets) in the bankruptcy to distribute. Most Texas consumer bankruptcies are no asset cases where there are no funds to distribute. Consequently, having a priority claim means nothing in most cases.

September 4, 2005 - New Bankruptcy Law Makes Reaffirmation Agreements More Difficult

     Bankruptcy relieves a debtor of the obligation to pay back debts. Sometimes, however, it is beneficial for a a debtor to renew (i.e. reaffirm) an obligation that would otherwise be forgiven. This generally occurs with secured property such as houses or cars. The Bankruptcy Code lays out specific requirements for such reaffirmations agreements. The new bankruptcy law adds additional requirements that must be met in order for these reaffirmation agreements to be valid. These new requirements add yet another layer of cost to the bankruptcy process. The added costs under the new bankruptcy law will mean fewer deserving debtors will be able to afford bankruptcy protection. Of course, that was exactly what the credit industry wanted.
 

August 17, 2005 - Number of Pro Se Filings May Rise Under New Bankruptcy Law

     Because of the cost increases expected under the new bankruptcy law many debtors may choose to file bankruptcy on their own without the help of an experienced bankruptcy attorney. This increase in pro se debtors may have many negative consequences. More cases will be dismissed because of technical errors by debtors. Debtors may lose property they would otherwise be entitled to keep. The court system will be slowed down by additional hearings. Creditors will be in a position to take advantage of inexperienced debtors who are unfamiliar with the bankruptcy system.

July 31, 2005 - New Bankruptcy Law May Have Chilling Effect on Small Business Start-ups

     Small businesses account for a significant part of the economy and of new job creation. However, opening a small business has always been risky. This risk was tempered by the fact that should worse come to worst there was the safety net of bankruptcy to keep you from having to live under your local highway underpass. That safety net has now been weakened considerably by the new bankruptcy law.  Why should we care? Because if the bankruptcy laws discourage people from opening new businesses, then there will be less new jobs, less tax revenue, and a weaker economy.

July 10, 2005 - Income Under New Bankruptcy Law Calculated on 6 Month Rolling Average

     Under current law your income is determined by what your actual income is on the day you file your bankruptcy case. The new law considers your income to be the rolling average of your income for the six months prior to the month of your filling. For example, if you file your case on July 8, your income would be the total of your monthly income from January to June divided by six. The net result is that a debtor who had been making $3000 per month but gets laid off in July will be viewed by the bankruptcy court as still making approximately $3000 per month even though, in reality, they have no income.
 

July 5, 2005 - Texas Homestead Exemption No Longer Unlimited

     Texas has traditionally had an unlimited homestead exemption under bankruptcy law. This means that you can not lose your home no matter how much it is worth. The new bankruptcy law now limits the amount of equity you can have in your homestead to $125,000. This limitation only applies to those who haven't owned their home (or rolled over equity from another Texas homestead) for at least 1215 days prior to filing their bankruptcy case. This change will affect very few consumer debtors, but is an important consideration for some debtors.

July 1, 2005 - New Bankruptcy Law Protects 529 College Savings Plans

     Although the newly passed bankruptcy legislation hurts consumers overall, there are a few bright spots.  One clear bright spot is that 529 College Savings Plans are not counted as property of the bankruptcy estate.  This means that the money in these plans, which have become a popular way to save for college in recent years, can not be taken by the bankruptcy court and given to creditors.  There are some limits imposed on this new rule, but overall this is a very positive development.

June 24, 2005 - Bankruptcy Can Benefit Your Kids

     There are many significant and immediate benefits for children when their parents declare bankruptcy.  Harassing phone calls from creditors stop.  The overall level of stress in the house caused by money problems goes down.  Parents, who are now debt free, are able to start saving for college.  A parent can choose whether or not they discuss the bankruptcy with their children, but declaring bankruptcy can bring definite improvements to their children's lives, both immediately and in the years to come.

June 15, 2005 - Bankruptcy Costs Expected to Rise Under New Bankruptcy Law 

     Bankruptcy legal fees are expected to go up once the new bankruptcy law goes into effect in October 2005.  The new law imposes many additional requirements on both debtors and their attorneys.  The additional time and work required under the new law will likely increase the price of an average bankruptcy by an additional $500 to $1500.  Many consumers who need bankruptcy protection are filing now before the new law takes effect in order to avoid the new requirements of the law as well as the additional fees.

June 13, 2005 - Fair Credit Reporting Act Violations Common After Bankruptcy

     The Fair Credit Reporting Act (FCRA) is a set of federal laws that require the information on your credit report to be accurate.  Many people who file bankruptcy may not be getting the full benefit of that bankruptcy filing because their credit report contains inaccuracies relating to the bankruptcy.  The bankruptcy wipes out most debts and those debts should be changed in the credit report to a balance owed of zero.  If the balance is not zeroed then that debt will continue to drag down the consumer's credit score.  This inaccuracy is a violation of the FCRA and consumers should not tolerate it.  If you find yourself in this situation contact an attorney so that you can get your credit report corrected.  Most attorneys do not charge clients for these types of cases because the law requires the "other side" who broke the law to pay your attorney's fees for you.

June 5, 2005 - Social Security Not Counted as Income Under New Bankruptcy Law 

     Although the new bankruptcy law is a major defeat for consumers generally, it does have a few benefits for select debtors.  One of these benefits is that Social-Security income is not counted as income for purposes of qualifying for bankruptcy under Section 707(b) of the Bankruptcy Code.  This provision will help at least some debtors qualify under the harsh new bankruptcy rules.

May 17, 2005 - John Saitis to Present Lecture on New Bankruptcy Bill to the Tarrant County Debtor Bar Association

     John Saitis will be lecturing on the changes to the Bankruptcy Code, specifically section 707(b)(6), to the Tarrant County Debtor Bar Association.  The Debtor Bar Association is made up of the top bankruptcy attorneys in the Fort Worth Tarrant County area.

May 8, 2005 - Chapter 7 Bankruptcy Filing Fees to Increase

    Under the new bankruptcy laws the filing fee for a chapter 7 bankruptcy will increase from $209 to $254.  While this increase may seem minor, it represents just one more hurdle that cash-strapped debtors will have to clear before being able to get their financial lives back on track through bankruptcy.

April 29, 2005 - NACBA Holds Annual Conference in San Diego

     The National Association of Consumer Bankruptcy Attorneys (NACBA) is holding their annual convention in San Diego, California today through Sunday.  The major thrust of the convention will be educating bankruptcy attorneys from across the country about the newly-passed bankruptcy laws.  The Law Offices of John Saitis, PLLC will be in attendance so that we may keep up with the latest changes in the bankruptcy laws.

April 20, 2005 - President Bush Signs Bankruptcy Bill into Law

     President Bush signed the Bankruptcy "Reform" bill into law today.  A few provisions of this new law go into effect immediately, but the majority of the changes will not be effective for another 6 months.  Some of the changes include a "means test" that will make it more difficult to qualify for bankruptcy, new paperwork requirements, a credit counseling requirement, and dozens of other changes aimed at making bankruptcy protection harder and more expensive to obtain.

March 16, 2005 - Surge in Bankruptcy Filing Predicted

     A surge in bankruptcy filings is predicted if the Bankruptcy "Reform" bill becomes law.  If passed, the majority of the new law's provisions will not take effect for six months.  In those months many people who have been on the edge of bankruptcy are predicted to file so they can take advantage of the benefits of the current law.

March 15, 2005 - Credit Counseling Mandatory Under "Reform" Bill

     The Bankruptcy "Reform" bill require all debtors to attend mandatory credit counseling classes before they can file for bankruptcy.  On the surface, this sounds like a very reasonable idea.  After all, what's wrong with people learning about how to manage credit more effectively before deciding if they should file bankruptcy?  The problem is most people considering bankruptcy are past the point where counseling would help.  These folks are drowning in debt and need immediate help.  Some may lose their house within 24 hours to a foreclosure if a bankruptcy is not filed. 

     The true purpose of this new requirement is to put up yet another obstacle to filing bankruptcy and to increase the cost of bankruptcy.  The credit industry figures that if they make it difficult enough, and expensive enough, to file bankruptcy that some people will just give up.  Unfortunately, they are right.  Many people will give up and be forced from their homes, lose their cars, and their last chance to start fresh. 

     America has always been about second chances, but the future seems much less hopeful now for those unfortunate folks who need the second chance that a bankruptcy could provide. 

March 12, 2005 - "Means Test" Limits Chapter 7 Availability

     The means test in the new bankruptcy bill is designed to deny Chapter 7 bankruptcy protection to deserving families.  Currently, each bankruptcy is reviewed on a case-by-case basis to determine if the debtor is deserving of help.  The new means test forces a cookie-cutter approach by having all cases compared against the median income for that state.  If you don't meet the strict new requirements you aren't allowed to get your discharge in a Chapter 7 bankruptcy.

March 10, 2005 - Senate Passes Bankruptcy "Reform" Bill

     Today the Senate passed the so-called reform bill by a vote of 74 to 25.  Eighteen Democrats voted for this bill.  The real fight over this bill was in the Senate, and now that it has passed it becomes an almost forgone conclusion that this bill will become law.  As a result many deserving families will be denied bankruptcy protection and predatory credit-card companies can add just a little more to the $30 BILLION profit they made last year.