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Suppose
you were an idiot... And suppose you were a member of Congress... But I repeat myself.
Mark Twain
Politics
is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first.
Ronald Reagan
An honest politician is one who, when he is bought, will stay bought.
Simon Cameron
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I am not a fan of
the relatively new (2005) bankruptcy law , known as "BAPCPA". I think it is a disgraceful example of government
at its worst.
But complaining about it does little good. I hope to provide some information and dispel some myths
about BAPCPA. It is a bad law, but bankruptcy is still the most effective consumer protection law.
Some media
reports continue to say that it is now nearly impossible for people to file for bankruptcy relief. That is wrong. Our experience
is nearly as many people now qualify for Chapter 7 (usually the prefered type) as under the prior law. That means about 85%
to 95% of people filing for bankruptcy relief in Iowa will qualify for Chapter 7. People with large incomes will have the
most trouble.
There are some people who will qualify but may face serious problems. People who have not lived in
this state continuously for the past two years many face problems, especially if they have purchased a home recently. Whether
this is a problem depends on the facts of the case, and so detailed consultation with an attorney is a must.
Generally
speaking, the biggest changes in the new law are:
1. To qualify and assess your ability to pay debt, the court
looks at the average of the last six months of your income (and your spouse's income, unless you're separated) in addition
to your actual current income. This means if you have recently suffered a major loss of income, you may not qualify until
a few months pass and your income average drops.
2. Your income is not only compared to your actual expenses to
determine your ability to pay debt, but also is compared to hypothetical expense levels published by the I.R.S.
While
these new provisions appear to be harmful to consumers, in practice they are not harmful in most cases. In cases where these
requirements are a problem, it is likely that good legal advice will allow the bankruptcy case to succeed.
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Another big change
in the law is that your lawyer is now required to personally verify the accuracy of tbe information on your bankruptcy forms.
Failure to do so will likely result in your lawyer being required to pay a fine to the court. In the past the lawyer may
have taken your word (and your sworn statement on your bankruptcy forms filed with the Court) that you received, for example,
$791 per month of social security income. Now, your lawyer is required to verify that information, and so wants to see
proof: bank statements showing the deposit, a statement from the social security administration, etc. A skeptic would say
the law was intended to force your lawyer to devote a lot more time to each case, and therefore drive up the cost of even
simple bankruptcy cases. Whatever the intent, that is the effect.
You should expect your attorney to require a
certain number of monthly bank statements, billing statements, and similar documents.
New ways your bankruptcy
case can be dismissed:
1. Failure to file your past-due tax returns before you file your bankruptcy case and the
returns that come due during your case.
2. Failure to provide your latest tax return to your case trustee and any
creditor who wants it.
3. Failure to file a certificate of completion of credit counseling (required before you
can file your case).
4. Failure to file a certificate of completion of a course on personal financial management
(required to be done during your case).
5. Failure to file all pay advices (pay stubs and other proof of income
from employment) received in the 60 days before your case is filed.
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