Bankruptcy Reform Act

Bankruptcy Reform Act Changes

What are the Major Changes Under the Bankruptcy Reform Act?

Means testing
If your household income exceeds the Oklahoma median income for a family your size, you may no longer be eligible for Chapter 7 relief. Exigent circumstances may allow you to file Chapter 7 anyway. Otherwise, you will be required to repay a portion of your debts through a Chapter 13 repayment plan.

Increased emphasis on accuracy
The Office of the United States Trustee oversees the administration of bankruptcy cases and is charged with ensuring the information contained in bankruptcy cases is accurate. The U.S. Trustee’s Office will conduct random audits of bankruptcy information to ensure accuracy. Debtors and their attorneys are required to check the bankruptcy information for accuracy, to disclose all required information, and can be held accountable for inaccurate information.

Credit briefing required
Those filing for bankruptcy relief must first attend a briefing by an approved non-profit credit counseling agency. This requirement is designed to offer non-bankruptcy alternatives to those with financial problems. Once the bankruptcy case has been filed, debtors must attend a financial management seminar in order to obtain a discharge.

Restrictions on bankruptcy protection
The “automatic stay” is the part of the Bankruptcy Code that provides protection from collection activity. If you had a Chapter 13 case dismissed within the prior year, the automatic stay terminates after 30 days unless the Court extends it for cause. If you’ve had 2 or more cases dismissed, the automatic stay does not go into effect at all unless the Court orders it for cause. The automatic stay is now limited with respect to domestic relations cases, landlords, taxing authorities, and collection of child support.

Time between cases enlarged
You are not eligible for Chapter 7 if you received a bankruptcy discharge within the past 8 years. You are not eligible to receive a Chapter 13 discharge if you received a Chapter 7 discharge within the past 4 years or a Chapter 13 discharge within the past 2 years. However, you can still seek bankruptcy protection by repaying all or part of your debts in Chapter 13.

Changes affecting attorneys
Many of the changes under the Bankruptcy Reform Act concern attorneys. Attorneys are now held accountable for the accuracy of the information provided by their clients. This means that attorneys are required to conduct a “reasonable investigation” into their client’s finances, such as obtaining a credit report and checking public records. Attorneys are also required to provide certain “disclosures” to their clients explaining bankruptcy options and changes under the Reform Act. Additionally, attorneys are required to provide prospective clients with written fee agreements.

Changes affecting Chapter 13
Chapter 13 used to provide a “super discharge;” many debts that could not be discharged in Chapter 7 could be discharged in Chapter 13. Debts that can no longer be discharged in Chapter 13 include debts related to fraud, certain taxes, civil restitution, and unscheduled debts. Other changes to Chapter 13 include increased protection for creditors whose loans are secured by automobiles, creditors whose debts are child or spousal support, and recipients on ongoing support. Debtors can now repay retirement loans while in Chapter 13, which provides debtors the ability to replenish retirement accounts while repaying other debts simultaneously. In certain cases where the debtor’s income exceeds Oklahoma’s median income, Chapter 13 plans must last a minimum of 5 years rather than the usual 3.

Changes to discharge provisions
“Discharge” is the legal term for getting rid of your debts. You may not be able to discharge debts that were for luxury goods, cash advances, etc., if made within the few months prior to filing for bankruptcy; debts attributable to employee wages; were education loans, regardless of whether insured by the Federal government; debts related to marital property settlement; and debts owed to a pension or retirement plan, among others.

Attorneys fees can vary depending on the type of case and complexity involved.

Other changes
Many changes under the Reform Act are technical in nature. Debtors are required to provide more documentation relating to their income, expenses, bills, and other financial information. In some cases, failure to provide timely documentation can result in dismissal of the bankruptcy case. There are increased notice requirements designed to protect creditors. Tax returns must be filed and provided to the trustee and taxing authorities. There is also increased privacy protection for Debtors; family member names, complete social security numbers, and account numbers are no longer available on public records.

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