The New Bankruptcy Law  

The following are just some of the changes that make it more difficult for consumers under the new bankruptcy "reform" law that took effect in 2005.  Despite these changes, most people that qualified under the old law still qualify under the new law.  A competent bankruptcy attorney can help guide you through this new legal maze and help make your case successful so you can get back on track financially.

Median Income Test -  A debtor must compare their Current Monthly Income (which is calculated on the basis of a historical 6 month rolling average) with the median income for their state.  If their income is higher than the median, they must take the bankruptcy Means Test.

Means Test -  If you earn more than the median income for your state you will not be able to file a Chapter 7 bankruptcy unless your "excess income" is less than the very strict new limits put in place.  The amount of your "excess income" is determined by a complex mathematical calculation that uses IRS standard deductions for certain expenses.

Home Equity Restrictions -  Under the new law you can no longer keep an unlimited amount of equity in your Texas homestead if you haven't had an interest in the homestead for the last 1215 days.  How "interest" is defined can be complex.  This complexity stems from how the rules governing how "rolled over" equity from a previous home is treated.  Your attorney will be able to determine how this restriction affects your case.

Mandatory Credit Counseling -  Consumers must now attend a credit counseling before they are allowed to file.  This class usually lasts about 90 minutes and can be taken in person, on the phone, or over the internet.

Mandatory Financial Education Course -  Consumers must now attend a financial education course (in addition to the credit counseling course above) before their case is over.  This class can also be taken in person, on the phone, or on the internet.

Redemption Valuation Change -  If you choose to redeem property you must now do so for retail replacement value not wholesale value.  Most people who file in the Dallas / Fort Worth Texas area do not redeem property so this change will not affect most cases.  In other parts of the country this change may be more significant.

Reaffirmation Hearings -  Because of new law's provisions it is much more likely that you will have to go in front of the judge in order to be able to reaffirm a car or other loan.  Speak to your attorney to find out how this change will affect your case.

Higher Filing Fee -  The Chapter 7 filing fee charged by the courts has increased from $209 to $299.  Your attorney keeps none of this money, but simply forwards it on to the court.