Bankruptcy Reform Act

Law Office of John Bristol - 1776 N. Pine Island Road, #224, Plantation, Florida 33322 (954) 475-2265

Fort Lauderdale, FL. 33324 Bankruptcy Reform Act

Since 1988, Fort Lauderdale Bankruptcy Attorney Center of John Bristol has filed more than 5,000 consumer Chapter 7 Bankruptcy and Chapter 13 Bankruptcy Cases in the Fort Lauderdale area (the Southern District of Florida). As a Fort Lauderdale Bankruptcy Attorney; John concentrates his Bankruptcy law practice only in Broward County. We offer PAYMENT PLANS and give FREE CONSULTATIONS (954) 475-2265

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The Bankruptcy Abuse Prevention and Consumer Protection Act (Bankruptcy Reform Act) made changes to American bankruptcy laws, affecting both consumer and business bankruptcies. Many of the bill's provisions were explicitly designed by the bill's Congressional sponsors to make it "more difficult for people to file for bankruptcy."

The Bankruptcy Reform Act of 2005 was intended to make it more difficult for debtors to file a Chapter 7 Bankruptcy—under which most debts are forgiven and instead required them to file a Chapter 13 Bankruptcy—under which the debts they incurred are discharged only after the debtor has repaid some portion of these debts. Some of the bill's more significant provisions include the following:

Prior to the Bankruptcy Reform Act Amendments, debtors of all incomes could file for bankruptcy under Chapter 7. Bankruptcy Reform Act restricted the number of debtors that could declare Chapter 7 bankruptcy. The act sets out a method to calculate a debtor's income, and compares this amount to the median income of the debtor's state. If the debtor's income is above the median income amount of the debtor's state, the debtor is subject to a "means test".

The most noteworthy change brought by the 2005 Bankruptcy Reform Act amendments occurred within the act. Congress amended this section of the Bankruptcy Code to provide for the dismissal or conversion of a Chapter 7 case upon a finding of “abuse” by an individual debtor (or married couple) with “primarily consumer debt”. The pre- Bankruptcy Reform Act language of § 707(b) provided for dismissal of a chapter 7 case upon a finding of “substantial abuse”. Under the former § 707(b), only the court or the United States trustee could bring a motion to find abuse under the section. The 2005 amendments removed these restrictions.

Post-BAPCPA, § 707(b) provides two definitions of "abuse". “Abuse” may be found when there is an un-rebutted “presumption of abuse” arising under a Bankruptcy Reform Act created “means test”, or through a finding of bad faith, determined by a totality of the circumstances.

 

 

Fort Lauderdale Bankruptcy Attorney Center

Law Office of John Bristol

1776 N. Pine Island Road, Suite 224, Plantation, Florida 33322

(954) 475-2265 - J@Jbristol.com

Fort Lauderdale Bankruptcy Attorney John Bristol has filed more than 10,000 Bankruptcy cases in Florida since 1988. We concentrate Now our law practice on Chapter 7 Bankruptcy (liquidation) and Chapter 13 Bankruptcy (personal reorganization) cases in the Fort Lauderdale and Broward County area

 

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1776 N. Pine Island Road, #224, Plantation

Fort Lauderdale, FL. 33324 John Bristol

Coral Springs, Dania, Davie, Deerfield Beach, Fort Lauderdale, Hallandale, Hollywood, Lauderhill, Margate, Miramar, Pembroke Pines, Plantation, Pompano Beach, Sunrise, Tamarac

 The Law Office of John Bristol, 1776 N. Pine Island Road, #224, Plantation, Florida 33322 is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

 

Only debtors whose monthly income is higher than the median income of their state, as calculated by the Code, are subject to being found abusive under § 707(b)(2). Debtors whose income falls below the median income figure may be in violation of the means test, however no party is permitted to file a motion in order to find abuse under § 707(b)(2), . This creates a means test "safe harbor" for debtors below the state's median income figure.

Current monthly income is defined in as the monthly average of the income received by the debtor (and the debtor’s spouse in a joint case) during a defined six-month time period prior to the filing of the bankruptcy case. Some narrow classes of payments, for example, social security, are excluded from these figures. Notably, the average income may be higher or lower than the debtor's actual income at the time of filing for bankruptcy. This has led some commentators to refer to the bankruptcy code’s “current monthly income” as “presumed income”. It should be noted that if the debtor's debt is not primarily consumer debt, then the means test is inapplicable.

The applicable median income figure is adjusted by family size. Generally, the larger the family, the greater the applicable median income figure and the more money the debtor must earn before a presumption of abuse arises. A chart of the most recent applicable median incomes by state can be found at the US Trustee’s website

This code section then requires a comparison between the debtor’s “current monthly income” and the median income for the debtor’s state. If the debtor’s income exceeds the median income, then the debtor must apply the means test. For more information see Wikipedia

The Law Office of John Bristol,1776 N. Pine Island Road, #224, Plantation, Florida 33322 is a debt relief agency. We file Bankruptcy cases under the Federal Bankruptcy Code

The Law Office of John Bristol

 

The Fort Lauderdale Bankruptcy Attorney Center

Law Office is on the Corner of Sunrise Boulevard and Pine Island Road

From I 95: Take Sunrise Boulevard West to Pine Island Road

From I 595: Take Pine Island Road Drive North to Sunrise Boulevard

1776 N. Pine Island Road, #224

Plantation, Florida 33324

(954) 475-2265

J@JBristol.com

In 2005, Congress added two more exceptions to the automatic stay provisions. These exceptions concern landlords seeking to evict tenants. First, any eviction proceedings in which the landlord obtained a judgment of possession prior to the filing of the bankruptcy petition may be continued. Second, eviction proceedings filed after bankruptcy proceedings are exempt if the proceeding involves evicting the tenant on the basis of using illegal substances or "endangerment" of the property.

Pursuant to the new provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act, certain restrictions were added to section 362. If the debtor had a case dismissed in a case pending during the year before the bankruptcy case was filed, the automatic stay will expire to a certain extent unless the debtor obtain. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is a legislative act that made several significant changes to the United States Bankruptcy Code. Referred to colloquially as the "New Bankruptcy Law", the Act of Congress attempts to, among other things, make it more difficult for some consumers to file bankruptcy under Chapter 7; some of these consumers may instead utilize Chapter 13. Voting record of S. 256. It was passed by the 109th United States Congress on April 14, 2005 and signed into law by President George W. Bush on April 20, 2005. Most provisions of the act apply to cases filed on or after October 17, 2005.

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The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made changes to American bankruptcy laws, affecting both consumer and business bankruptcies. Many of the bill's provisions were explicitly designed by the bill's Congressional sponsors to make it "more difficult for people to file for bankruptcy". The BAPCPA was intended to make it more difficult for debtors to file a Chapter 7 Bankruptcy—under which most debts are forgiven (or discharged)--and instead required them to file a Chapter 13 Bankruptcy—under which the debts they incurred are discharged only after the debtor has repaid some portion of these debts.

Some of the bill's more significant provisions include the following: Presumption of abuse
Prior to the BAPCPA Amendments, debtors of all incomes could file for bankruptcy under Chapter 7. BAPCPA restricted the number of debtors that could declare Chapter 7 bankruptcy. The act sets out a method to calculate a debtor's income, and compares this amount to the median income of the debtor's state. If the debtor's income is above the median income amount of the debtor's state, the debtor is subject to a "means test".

The most noteworthy change brought by the 2005 BAPCPA amendments occurred within 11 U.S.C. § 707(b). Congress amended this section of the Bankruptcy Code to provide for the dismissal or conversion of a Chapter 7 case upon a finding of “abuse” by an individual debtor (or married couple) with “primarily consumer debt”. The pre-BAPCPA language of § 707(b) provided for dismissal of a chapter 7 case upon a finding of “substantial abuse”. Under the former § 707(b), only the court or the United States trustee could bring a motion to find abuse under the section. The 2005 amendments removed these restrictions.

Post-BAPCPA, § 707(b) provides two definitions of "abuse". “Abuse” may be found when there is an unrebutted “presumption of abuse” arising under a BAPCPA-created “means test”, [see 11 U.S.C. § 707(b)(2)], or through a finding of bad faith, determined by a totality of the circumstances [see 11 U.S.C. § 707(b)(3)]. Only debtors whose monthly income is higher than the median income of their state, as calculated by the Code, are subject to being found abusive under § 707(b)(2). Debtors whose income falls below the median income figure may be in violation of the means test, however no party is permitted to file a motion in order to find abuse under § 707(b)(2), [see 11 U.S.C. § 707(b)(7)]. This creates a means test "safe harbor" for debtors below the state's median income figure.

Current monthly income is defined in 11 U.S.C. § 101(10A) as the monthly average of the income received by the debtor (and the debtor’s spouse in a joint case) during a defined six-month time period prior to the filing of the bankruptcy case. Some narrow classes of payments, for example, social security, are excluded from these figures. Notably, the average income may be higher or lower than the debtor's actual income at the time of filing for bankruptcy. This has led some commentators to refer to the bankruptcy code’s “current monthly income” as “presumed income”. It should be noted that if the debtor's debt is not primarily consumer debt, then the means test is inapplicable.

The applicable median income figure is adjusted by family size. Generally, the larger the family, the greater the applicable median income figure and the more money the debtor must earn before a presumption of abuse arises. A chart of the most recent applicable median incomes by state can be found at the US Trustee’s website.

This code section then requires a comparison between the debtor’s “current monthly income” and the median income for the debtor’s state. If the debtor’s income exceeds the median income, then the debtor must apply the means test.

For debtors subject to the means test, the test is calculated as follows. The debtor's “current monthly income” is reduced by a set of allowed deductions specified by the IRS. These deductions are not necessarily the actual expenses the debtor incurs on a monthly basis. Some commentators have referred to these deductions as “presumed expenses”.

The deductions applicable in the “means test” are defined in 11 U.S.C. § 707(b)(2)(A), (ii)-(iv) and include: living expenses specified under the "collection standards of the Internal Revenue Service", actual expenses not provided by the Internal Revenue Standards including “reasonably necessary health insurance, disability insurance, and health savings account expenses”, expenses for protection from family violence, continued contributions to care of nondependent family members, actual expenses of administering a chapter 13 plan, expenses for grade and high school, up to $1,500 annually per minor child provided that the expenses are reasonable and necessary, additional home energy costs in addition to those laid out in the IRS guidelines that are reasonable and necessary, 1/60th of all secured debt that will become due in the five years after the filing of the bankruptcy case, 1/60th of all priority debt, and continued contributions to tax-exempt charities.

A “presumption of abuse” will arise if: (1) the debtor has at least $182.50 in current monthly income available after the allowed deductions (this equals $10,950 over five years) regardless of the amount of debt, or (2) the debtor has at least $109.59 of such income ($6,575 over five years) and this sum would be enough to pay general unsecured creditors more than 25% over five years. For example, if a debtor had exactly $109.59 of “current monthly income” left after deductions and owed less than $26,300 in general unsecured debt, then the presumption of abuse would arise, [see 11 U.S.C. § 707(b)(2)(A)(i)].

Even in cases where there is no presumption of abuse, it is still possible for a Chapter 7 case to be dismissed or converted. If the debtor's "current monthly income" is below the median income, as discussed above, only the court or the United States trustee (or bankruptcy administrator) can seek dismissal or conversion of the debtor's case. If the debtor's "current monthly income" is above the median income, as discussed above, any party in interest may seek dismissal or conversion of the case. The grounds for dismissal under 11 U.S.C. § 707(b)(3) are the filing of a petition in “bad faith”, or when “the totality of the circumstances (including whether the debtor seeks to reject a personal services contract and the financial need for such rejection as sought by the debtor) of the debtor’s financial situation demonstrates abuse”.

Another change that resulted from the BAPCPA was an extension of the time between multiple bankruptcy filings. 11 U.S.C. § 727(a)(8) was amended to provide that the debtor would be denied a discharge if a debtor had received a discharge in a prior Chapter 7 case filed within eight (8) years of the filing of the present case. Prior to BAPCPA, the rule was six (6) years between chapter 7 filings. BAPCPA did not change the rule for the waiting period if the debtor filed a chapter 13 previously.

Another major change to the law enacted by BAPCPA deals with eligibility. Section 109(h) provides that a debtor will no longer be eligible to file under either chapter 7 or chapter 13 unless within 180 days prior to filing the debtor received an "individual or group briefing" from a nonprofit budget and credit counseling agency approved by the United States trustee or bankruptcy administrator.

The new legislation also requires that all individual debtors in either chapter 7 or chapter 13 complete an "instructional course concerning personal financial management." If a chapter 7 debtor does not complete the course, it constitutes grounds for denial of discharge pursuant to new 11 U.S.C. § 727(a)(11). The financial management program is experimental and the effectiveness of the program is to be studied for 18 months. Theoretically, if the educational courses prove to be ineffective, the requirement may disappear.[citation needed]

A 2007 GAO report[6] was inconclusive regarding the efficacy of the counseling provisions and concluded that there is no mechanism in place to evaluate it: the value of the counseling requirement is not clear. The counseling was intended to help consumers make informed choices about bankruptcy and its alternatives. Yet anecdotal evidence suggests that by the time most clients receive the counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy. As a result, the requirement may often serve more as an administrative obstacle than as a timely presentation of meaningful options. Because no mechanism currently exists to track the outcomes of the counseling, policymakers and program managers are unable to fully assess how well the requirement is serving its intended purpose.

The automatic stay in bankruptcy is the court order that requires all collection proceedings to stop. There are exceptions, of course, but generally this is the term for the “relief” from collection proceedings a debtor receives by filing the bankruptcy with the bankruptcy clerk’s office. BAPCPA limited the protections the stay provides in some re-filed cases. New § 362(c)(3) provides that if the debtor files a chapter 7, 11 or 13 case within one year of the dismissal of an earlier case, the automatic stay in the present case terminates 30 days after the filing, unless the debtor or some other party in interest files a motion and demonstrates that the present case was filed in good faith with respect to the creditor, or creditors, being stayed. If the present case is a third filing within one (1) year, the automatic stay does not go into effect at all, unless the debtor or any other party in interest files a motion to impose the stay that demonstrates that the third filing is in good faith with respect to the creditor, or creditors, being stayed.

The provision presumes that the repeat filings are not in good faith and requires the party seeking to impose the stay (usually the debtor) to rebut the presumption by clear and convincing evidence. There are exceptions. Notably, § 362(i) provides that the presumption that the repeat filing was not in good faith would not arise in a “subsequent” case if a debtor’s prior case was dismissed “due to the creation of a debt repayment plan.”

BAPCPA also limited the applicability of the automatic stay in eviction proceedings. The stay does not stop an eviction proceeding if the landlord has already obtained a judgment of possession prior to the bankruptcy case being filed, § 362(b)(22). The stay also would not apply in a situation where the eviction is based on “endangerment” of the rented property or “illegal use of controlled substances” on the property, § 362(b)(23). In either situation the landlord must file with the court and serve on the debtor a certificate of non-applicability of the stay spelling out the facts giving rise to one of the exceptions. There is a process for the debtor to contest the assertions in the landlord’s certificate or if state law gives the debtor an additional right to cure the default even after an order for possession is entered,

In addition, BAPCPA extends the exceptions to automatic stay to certain paternity, child custody, domestic violence and domestic and child support proceedings. BAPCPA enacts a provision that protects creditors from monetary penalties for violating the stay if the debtor did not give “effective” notice pursuant to § 342, [§ 342(g)]. The new notice provisions require the debtor to give notice of the bankruptcy to the creditor at an “address filed by the creditor with the court,” or “at an address stated in two communications from the creditor to the debtor within 90 days of the filing of the bankruptcy case. The notice must also include the account number used by the creditor in the two relevant communications [§ 342(c)(2)(e) & (f)]. An ineffective notice can be cured if the notice is later “brought to the attention of the creditor.” This means that the notice must be received by a person designated by the creditor to receive bankruptcy notices.

BAPCPA also provided more protections to creditors because it expanded the exceptions to discharge. The presumption of fraud in the use of credit cards was expanded. The amount that the debtor must charge for “luxury goods” to invoke the presumption is reduced from $1,225 to $500. The amount of cash advances that would give rise to a presumption of fraud has also been reduced, from $1,225 to $750. The time period was increased from 60 days to 90 days. Thus, if a debtor purchases any single item for more than $500 within 90 days of filing, the presumption that the debt was incurred fraudulently and therefore non-dischargeable in the bankruptcy arises. Prior to BAPCPA, the presumption would not have arisen unless the purchase was for more than $1,225 and was made within 60 days of filing (§ 523(a)(2)(C)).

BAPCPA amended § 523(a)(8) to broaden the types of educational ("student") loans that cannot be discharged in bankruptcy absent proof of “undue hardship.” The nature of the lender is no longer relevant. Thus, even loans from “for-profit” or “non-governmental” entities are not dischargeable. Some types of liens may be avoided through a chapter 7 bankruptcy case. However, BAPCPA limited the ability of debtors to avoid liens through bankruptcy. The definition of “household goods” was changed -- for example, by limiting “electronic equipment” to one radio, one television, one VCR, and one personal computer with related equipment. The definition now excludes certain items such as works of art not created by the debtor or a relative of the debtor, jewelry worth more than $500, with adjustment for inflation (except wedding rings), and motor vehicles[10] Prior to BAPCPA, the definition of household goods was broader so that more items could have been included.

Under the new law, the homestead exemption, which allows bankruptcy filers in some states to exempt the value of their homes from creditors, is limited in various ways. If a filer acquired their home less than 1,215 days (40 months) before filing, or if they have been convicted of security law violations or been found guilty of certain crimes, they may only exempt up to $125,000 (adjusted periodically), regardless of a state's exemption allowance.(§ 522(p)(1)). Filers must also wait 730 days before they are allowed to use their state's exemptions. (§ 522(b)(3)(A)). There is an exception if the property is “reasonably necessary for the support of the debtor and any dependent of the debtor.” These provisions were largely intended to prevent filers from forum shopping, i.e. moving assets and domiciles to a state with more favorable exemptions and filing. tempted to eliminate the perceived “forum shopping” by changing the rules on claiming exemptions. Exemptions define the amount of property debtors may protect from liquidation to pay creditors. Typically, every state has exemption laws that define the amount of property that can be protected from creditor collection action within the state. There is also a federal statute that defines exemptions in federal cases. In bankruptcy, Congress allowed states to opt out of the federal exemption scheme. Opt out states still controlled the amount of property that could be protected from creditors, or “exempted” from creditors, in bankruptcy cases.

Under BAPCPA, a debtor who has moved from one state to another within two years of filing (730 days) the bankruptcy case must use exemptions from the place of the debtor’s domicile for the majority of the 180-day time period preceding the two years (730 days) before the filing [§ 522(b)(3)]. If the new residency requirement would render the debtor ineligible for any exemption, then the debtor can choose the federal exemptions.

Also, there is a “cap” placed upon the homestead exemption in situations where the debtor, within 1215 days (about 3 years and 4 months) preceding the bankruptcy case added value to a homestead. The provision provides that “any value in excess of $125,000” added to a homestead can not be exempted. The only exception is if the value was transferred from another homestead within the same state or if the homestead is the principal residence of a family farmer (§ 522(p)). This “cap” would apply in situations where a debtor has purchased a new homestead in a different state, or where the debtor has increased the value to his/her homestead (presumably through a remodeling or addition). From Wikipedia

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The Law Office of John Bristol, 1776 N. Pine Island Road, #224, Plantation, Florida 33322 is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. Disclosure: The hiring of a lawyer is an important decision that should not be based solely on advertising. Before you decide please ask us for information concerning out qualifications and experience
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Law Office of John Bristol
Email: j@jbristol.com
Phone: (954) 475-2265
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