There are major changes in bankruptcy law, effective October 17, 2005. These are some of the major changes.

Mandatory Credit Counseling

Most bankruptcy applicants will have to have credit counseling in a government-approved program before filing.

Approved Credit Counseling Agencies

Stricter Eligibility for Chapter 7

If an applicant's monthly income is less than the median income in his state, he is eligible bankruptcy under Chapter 7 (complete discharge of debts). If income is above the median income, and the applicant can afford to pay $100 per month toward debt, the applicant must proceed under Chapter 13 instead, which means there will be a five-year repayment plan. There is a formula that includes monthly income, expenses, and the total amount of debt used to determine eligibility for Chapter 7. Some debts can never be discharged in bankruptcy, and the new law also changes how car payments are calculated for people who want to retain their cars.

See US Department of Justice Means Testing

or

US Census Median Income Information

Tax Returns and Proof of Income

Applicants for either Chapter 7 or Chapter 13 must show proof of their income by providing federal tax returns from the last tax year. If a bankruptcy filer has not paid taxes for the previous tax year, he or she must do so before the bankruptcy can proceed.

Fewer "Automatic Stay" Protections

Filing for bankruptcy will no longer delay or stop eviction actions; driver's license suspensions; actions to withhold, suspend or restrict professional licenses; paternity, child support or divorce proceedings or lawsuits related to domestic violence.

Priority for Unpaid Child Support and Alimony

Bankruptcy laws provide a system of re-payment priority for creditors. There are some changes in priorities, including this: people who are owed unpaid child support and alimony will take priority over any other creditor.

Mandatory Financial Management Education

After the hearing, but before any debt can be discharged, bankruptcy debtors must participate in a government-approved financial management education program.

Approved Debtor Education Providers

See US Department of Justice Approved Education Providers