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Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

New Bankruptcy Revisions
(Expected to be passed in April '2005 when Congress reconvenes)

New bankruptcy revisions and how they may affect you. 

Statistics:

According to the American Bankruptcy Institute, personal bankruptcy filings have reached historic highs. For example, filings first cleared the 1 million mark in 1996. They then surpassed the 1.5 million mark in 2002. And they continue to average more than 1.6 million annually (although in 2004 they have eased off their highs).

Major revisions:

With the biggest rewrite of the bankruptcy code in 27 years, filing for relief may become a path less often traveled. The most significant part of the new revisions will make it more difficult for individuals to file for relief under Chapter 7 under which approximately 70% of all personal bankruptcies petitioners seek protection.

The legislation will soon require a needs-based test for qualifying under the bankruptcy code for chapter 7. In particular, the new revisions will require any individual with an income higher than his/her states medium income and with an ability to pay at least $6000.00 over a 5 year period ($100.00 per month), to file under chapter 13. 

Additionally, states that have unlimited homestead exemptions (Florida, Iowa, Kansas, South Dakota and Texas) and allow anyone to file and shelter their primary residence regardless of value, will now have limits of up to $125,000.00 if the petitioner bought the residence less than three years and four months before filing. Homes purchased before that cut-off would still qualify for the full exemption allowed in that state.

Last year, 1.5 million individuals filed for bankruptcy protection, down from 1.7 million in 2003. This comes to about 5 out of every 1000 people in the United States. The new law is expected to disqualify approximately 30,000 to 210,000 per year who seek relief under chapter 7. 

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