President Bush has signed into law a new bankruptcy bill with provisions intended to made it more difficult for individuals to file. Most provisions of the bill took effect effect in October 2005, 180 days after the bill was signed into law. The new laws affect both Chapter 7 and Chapter 13 bankruptcies, which are the vast majority of personal bankruptcies being filed today. In Chapter 7, non-exempted assets are liquidated and given to creditors, with many of the remaining debts cancelled.

In Chapter 13, a debt repayment plan is instituted over a period of up to five years. Payments not included in the plan do not have to be paid.

Under the new laws, more people have been forced to file under chapter 13, a boon to credit card companies who stand to collect hundreds of millions of dollars in debt that may have been cancelled under the previous laws.

• Qualifying

  Instead of the court determining if you qualify for Chapter 7 bankruptcy based on personal considerations, eligability will be determined by the "Means test" as follows.

  If the debtor's average monthly income for the preceding six months is less than the average monthly income of the state median, he or she is eligable to file for Chapter 7.

  If the debtor has enough income after allowed expenses to pay off debt of $10,000 over 5 years, Chapter 13 must be filed. If not,

  If the debtor has income after allowed expenses of over $100/month that is enough to pay 25 percent of unsecured debt, Chapter 13 must be filed. Otherwise Chapter 7 can be filed.

• Creditor Claims

  The new laws will allow creditors who won't receive any money to contest the ruling in both Chapter 7 and Chapter 13 cases. Currently creditors can only contest in Chapter 7 cases.

• Attorney Liability

  Bankruptcy attorneys will be subject to fees and fines if information about the client is found to be inaccurate.

  For instance, if a motion to convert to Chapter 13 or dismiss based on "abuse" is granted, the filer's attorney will be forced to pay the creditor's legal fees.

  This may make filing for bankruptcy much more expensive, because of the additional work needed to verify the client's finances and because fewer attorneys will want to take on the liability.

• Credit Counseling

  Under the new laws, the filer will be required to present a certificate from a credit counselor certifying that he or she has been briefed on opportunities for credit counseling and been assisted with a personal budget analysis.

  Fees will be the responsibility of the filer.

• Chapter 13 Changes

  Instead of you and the court determining what you can afford to pay and how much you will have to spend on transportation, housing and utilities, and other expenses, strict IRS standards will be employed. The court may require you to greatly reduce spending on luxury items, vacations, and other expenses.

  Contesting the IRS standards will require a hearing from a judge.

  If income exceeds the state median income, the plan must be for a full five years.

  Domestic support is given first priority. A Chapter 13 plan cannot be confirmed unless domestic support obligations are current. Ex-spouses are give additional means to collect maintenance and child support during the bankruptcy.

  All tax returns must be filed before a plan is confirmed.

  Certain debts for fraud and civil restitution payments that were dischargable under the old laws are no longer dischargable.

  Pension, profit sharing, & 401k loan payments will continue under a Chapter 13 plan.

• Other Changes

  Eight years must pass between filing Chapter 7 bankruptcies, from six. Similar measures will be made more stringent regarding Chapter 13 bankruptcies to deter repeat filers.

  Before debts are discharged, the filer will have to attend money management classes. Fees will be the responsibility of the filer.