FAQ - Questions About the New Bankruptcy Law

Was bankruptcy repealed in 2005? Am I not allowed to file if I own a home?
What is the means test?
Why does bankruptcy cost more now?
Can't I just do it myself?
I heard about a company in a nearby strip mall that will prepare all my documents for me for only $500! Why can't I just go there?
Where can I learn more about this new law?

Creditors and collection agencies are telling me that I'm not eligible to file for bankruptcy because I own a home, or that bankruptcy was repealed last year. I remember reading something about this. Are they right?

If anyone - creditor or otherwise - is telling you something similar to these statements, rest assured: they are most certainly not correct. More and more debtors' attorneys are reporting that their clients are hearing comments like these, leading some to wonder whether collection agencies and creditors are reading from the same "script." The truth is this: bankruptcy relief absolutely does still exist and is available to most who need its protections. However, it is also true that the recent 2005 amendments to the Bankruptcy Code were dreadfully drafted and as a result, the state of the law is complex and uncertain. For these reasons, anyone considering filing for bankruptcy protection should seriously consider retaining the services of a bankruptcy attorney.

What is the means test?

The means test is a complex calculation required by the new bankruptcy laws. In part, it determines your eligibility to file Chapter 7 (if your current monthly income is over the median income for your household size in your state) and in Chapter 13 it is utilized in part to determine the parameters of your plan.

Why does bankruptcy cost more now?

Simply put: the new law increased the hours of work required by bankruptcy attorneys representing debtors, by some estimates as much as over three times what the prior law required. The increased fees primarily can be attributed to onerous new documentation requirements, coupled with the complexity of the means test. In addition, the law is simply badly written, and requires a great deal of thought and effort to decipher in some instances.

Can't I just do it myself? Or, alternately, why can't I hire this company in a nearby strip mall that will prepare all my documents for me for only $500?

The desire to save money when you're facing bankruptcy is overwhelming, but don't let it override common sense. Certain Bankruptcy Petition Preparers may be a good idea for a very few, but for the vast majority of preparers and the vast majority of consumer debtors, a competent consumer bankruptcy attorney will more than pay for the cost of his or her services - in property, fees, and fines saved.

Where can I learn more about the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)?

For more information, read my article, "More on the New Bankruptcy Law: Myth and Reality," describing and the top five myths about the new bankruptcy law, and setting the record straight. Click here for the article in PDF (Adobe Reader required).

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The Law Office of Sheryl Sisk Schelin is a debt relief agency under the laws of the United States, including the Bankruptcy Code, and assists its clients by helping them to file for relief under the Bankruptcy Code, among other solutions, and as appropriate to their individual needs.