Bankruptcy reform law has been an on-going agenda in Congress for a number of years. Due to various reasons, the law has either failed to pass over objections in the Senate or House, or due to Presidential veto. On April 20, 2005, President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act. This Act makes more comprehensive changes to the bankruptcy laws than any other law since 1978 when Congress enacted the current Bankruptcy Code. This new law contains 15 separate titles, the result of which will significantly effect consumer bankruptcy filings.

Some of the most striking changes are the following:

1. New means testing eligibility requirements for Chapter 7 relief;
2. Credit counseling and educational requirements;
3. New disclosure and advertising requirements for “debt relief agencies” (which include attorneys who provide bankruptcy assistance to debtors whose debts are primarily consumer debts and whose non-exempt property is worth less than $150,000.00);
4. Provisions to protect personally identifiable information through the use of a “consumer privacy ombudsman”;
5. Amending a section of the Bankruptcy Code (Sec.521) to eliminate the option of retaining collateral and remaining current on payments;
6. Increasing the domicile period required for determining a debtor's entitlement to a state's exemptions;
7. Setting a new homestead cap and reducing a homestead for fraud;
8. Eliminating much of a “super discharge” that used to be available in Chapter 13;
9. Requiring debtors to supply copies of all payment notices;
10. Eliminating the exceptions to the exception to discharge non-support debts;
11. Allowing a trustee to avoid some transfers made up to 10 years prior to filing.

The current law has a presumption in favor of the granting of Chapter 7 relief. The new law, which goes into effect on October 17, 2005, has no such presumption. Instead, there will now be a “presumption of abuse” in many cases. Allowable expenses, which under current law are “reasonable and necessary” as determined by an understanding and compassionate judge, are now those expenses only as allowed by the IRS as set forth in their Standards.

This mean-spirited law will do nothing more than increase the cost and difficulty of filing a bankruptcy and will no doubt dissuade many deserving people from filing for this much needed relief. Very few individuals willfully abuse the system, and the existing law contained provisions to deal with those few. The new bankruptcy law will still grant relief to those in need; but, it is now more important than ever to be properly represented by knowledgeable legal counsel for guidance through this new law.