Bankruptcy – the new law

New provisions under bankruptcy law became effective on October 17, 2005. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed by the 109th Congress on April 14, 2005, and signed into law by President Bush on April 20, 2005. ; The new legislation made sweeping changes to existing bankruptcy law, and the main result appears to be that it will now be more difficult for certain individuals to discharge all debt in Chapter 7 filings than under the old law. Individuals under the new law will have to demonstrate whether or not they have the ability to repay some or all of their debt. If the court determines that the consumer does have the ability to repay, s/he will be forced into Chapter 13, as opposed to Chapter 7. The filer as an alternative may simply withdraw the filing. There is now a ?means test? to qualify for Chapter 7. Simply put, Chapter 7 results in the extinguishment of all debt, other than priority debt such as child support, taxes, and certain types of judgments. Chapter 13 does not extinguish all non-priority debt, but requires repayment of at least some debt (often including unsecured debt) over a certain time period?generally three years under the prior statute and five years under the new.