Overview of BAPCPA (BANKRUPTCY ABUSE PREVENTION & CONSUMER ACT PROTECTION)
It has been over six years since the Bankruptcy reform act was implemented and some consumers are still in the dark about how the laws have changed. Therefore, in this article we will look at an overview of the new law. In October of 2005, Congress and then President Bush signed into law changes to the Federal Bankruptcy Rules. There are some key points that changed because of this new Bankruptcy law. One of them is the mandatory Credit Counseling course consumers must go through before they file a bankruptcy case.
This is a government-approved program and there is list of the approved agencies for each state. The agencies are non-profit budget and credit counseling agencies. The U S trustee must thoroughly review the qualification of these agencies to make sure they conform to the standards now in place. The agencies must prove they can provide qualified counselors, maintain adequate provisions for safekeeping and payment of client funds provide adequate counseling with respect to client credit problems and deal responsibly and effectively with other matters relating to the quality, effectiveness and financial security of the services it provides.
In order to be approved by the U S trustee or the bankruptcy administrator the agency will at a minimum have a board of directors where the majority is not employed by the agency. In addition, they will not directly or indirectly benefit financially from the outcome of the counseling services provided to such agency and if a fee is charged for these counseling services, they will charge a reasonable amount and still provide services without regard to ability to pay the fee. The agencies will also provide for safekeeping and payment of client funds including an annual audit of the trust accounts and appropriate employee bonding. They are required to provide full disclosures to a client, including funding sources, counselor qualifications, possible impact on credit reports and any costs of the program, which will be paid by the client and how it will be paid.
Credit Counseling agencies must provide trained counselors who receive no commissions or bonuses based on the outcome of the counseling service as well as demonstrate adequate experience and background in providing credit counseling and also have adequate financial resources to provide continuing support services for budgeting plans over the life of any repayment plan. These rules also pertain to the Financial Management classes required in bankruptcy case before it will be discharged. A Certificate of completion will be filed with the bankruptcy court to prove the debtor complied with the requirements.
In chapter 7 cases, the eligibility is much stricter as certain requirements have to be met. A means test is required to be taken to see if your current monthly income is less than the median in your state. If you total current monthly income is above the median in your state and you can afford to pay $100 per month toward paying off your debt, you cannot file a chapter 7 and must proceed under a chapter 13. Whether you can afford to pay $100 per month towards your debt or
$6000 over a five-year period is based on a formula that includes your monthly income, expenses and the total amount of your debt.
If you are considering filing bankruptcy, you should hire an experienced bankruptcy attorney that can explain the pros and cons of filing and the difference in the Chapters.