Just over ten years ago, on October 17, 2005, the Bankruptcy Abuse and Consumer Protection Act became law, and amended the federal bankruptcy requirements in many fundamental ways. Folks still call us up and ask about the changes and what the differences are.
What was the New Bankruptcy Law Supposed to Do?
Well, as the name suggests, it was designed to prevent abuse of the bankruptcy laws and procedures. Some folks, mostly those tied to the banks who issued credit cards, felt that it was too easy to file for personal bankruptcy, and that consumers were not learning how to prevent their debts from going out of control.
Unfortunately, the part of the name that indicates that consumers are being protected is somewhat of a misnomer in our experience.
What Were Some of the Changes in the New Bankruptcy Law?
There were numerous changes. One change was that now all personal bankruptcy filers must complete a credit counseling class prior to filing. While some view this as punitive, and expensive, many clients have appreciated the lessons of this class. And the price has come down significantly with competition – there are well over 100 companies that provide pre-bankruptcy certification classes over the internet and telephone.
During the course of bankruptcy, consumers are required to take a second class, or the debtor education class. This too is not difficult for most clients and the number of providers for this class is over 200.
The dreaded chapter 7 “Means Test” is usually a simple pass or fail for most folks in Massachusetts. For example, as of this writing in February 2016, for a household of one person, if your income is below $55,794, you “pass” and qualify for bankruptcy; for a couple, the household income is $69,569; and for a family of four, it’s $105,299. This has limited many potential clients; on the other hand, there are often circumstances that can be plugged into the test calculations which would allow for a “pass” with income above these median household incomes.
Another change includes certification of statements in the bankruptcy petition and schedules. Under the new law, attorneys must certify that they have reviewed the documentation of their clients that supports the facts and figures in the filing. On the one hand, this requires more work and costs the consumers more money; on the other hand, the Petitions and Schedules are likely more accurate with such scrutiny. We have published many articles about bankruptcy fraud; this is the part the new law that keeps fraud down.
Finally, rules about timing have changed. Debtors may not file for bankruptcy until 8 years have passed; it used to be 6 years.
These are just a few of the changes; you should consult with an attorney experienced in Massachusetts bankruptcy to determine your best course of action.
Are There any Statistical Indicators that We Can Point to?
The number of bankruptcies is down from just under 1.6 million in 2002, 2003, and 2004, to just 819,240 in 2015. However, the number of filings was up significantly during the recession; for example, the number was almost 1.6 million in 2010. In 2015, the number of bankruptcies filed per 1,000 persons was 2.5 which is the lowest ratio since 1989.
According to Credit Slips, the December 2015 numbers were the lowest ever for December, which could indicate a downward trend.
How Do I Find an Effective Massachusetts Bankruptcy Attorney?
Attorney Neil Burns has been representing consumers in Massachusetts filing for personal bankruptcy since 1985. He offers a free initial consultation, fair and reasonable fees. Put his 30 years of experience to work for you. Call today: 617-227-7423