Changes to the bankruptcy laws

What are some of the changes to the bankruptcy law that are about to take place? When will these changes take effect?

Ray M.
San Marcos, TX

The changes to the bankruptcy code are effective October 17, 2005. The bill has many features, but here are a couple of the key changes:

Lawyers must sign a statement that they have done "an investigation" and don't know of any falsehood in your bankruptcy petition. Some feel this may require your lawyer to pay for an asset check to be performed on you by a private investigator. That would add to the cost of filing bankruptcy.

Also, if you make over the median income for your state (approx. $39,000/year in Texas), you can't file a Chapter 7 bankruptcy unless you meet a strict means test (i.e. you have just enough income to buy basic food and shelter). In applying the means test, the average income over the past six months is used, regardless of present actual income.

So in all likelihood, you will have to file a Chapter 13 bankruptcy. When you do, this same means test will be applied, and every dollar above what is required to provide a subsistence living for yourself will be taken and given to your creditors for the next five years.

For more info about these changes to the bankruptcy laws, see the Lawyers.com Bankruptcy Law Changes writeup.