New Bankruptcy Law in California

The Bankruptcy Abuse Prevention Consumer Protection Act of 2005 (BAPCPA) went into effect on October 17, 2005. It is important to understand the effect of BAPCPA. Below are a few questions and illustrations that may help you better understand the changes under BAPCPA.

However, since each debtor's facts and circumstances vary, please do not rely on the information below. It is best to consult with an attorney to determine how BAPCPA will affect you. Wadhwani & Shanfeld, APLC, offers a free, in-depth consultation to determine your best option.

Will I Still Be Able To File Chapter 7 Bankruptcy?

Notwithstanding the massive amount of mis-information in the media and on the internet, the federal government estimates that fewer than 20% of the general public will be precluded from filing a chapter 7 bankruptcy under the new laws. The remaining (80% plus) population will likely qualify for a chapter 7 bankruptcy even under the provisions of BAPCPA. Below are some of the changes implemented by BAPCPA.

Means Test Calculation Under BAPCPA

If your income is greater than the median income in your state (see California median income figures below), then there is a presumption of abuse. That does not mean you do not qualify for a chapter 7 bankruptcy. You will be subjected to a means test to determine whether you can rebut the presumption of abuse and still qualify for a chapter 7 bankruptcy.

California Median Income Figures Are as Follows (Effective 03/15/09


Household Size	Median Annual Income

1 person family 2 person family 3 person family 4 person family 5 person family 6 person family 7 person family 8 person family 9 or more	$49,182 $65,097 $70,684 $79,971 $86,871 $93,771 $100,671 $107,571 Add'l $6,900 per person

If your income falls below the median annual income in California, then there is no presumption of abuse and you will not be subjected to the means test. More importantly, this means that you will likely still be able to file a chapter 7 bankruptcy.

Proof of Income Required

Debtors filing a Chapter 7 or Chapter 13 bankruptcy must provide proof of income for the last six months. Proof of income can be in the form of pay stubs, copies of checks, profit and loss statements, social security / pension statements. If you are a wage earner and do not have proof of income for the prior six months, most payroll departments can provide you with additional copies of your paystubs and/or transcripts thereof.

Income Tax Returns Required

Debtors filing Chapter 7 or Chapter 13 bankruptcy must provide to the trustee a copy of a tax return or transcript of a tax return, for the period for which the return was most recently due well in advance of the 341(a) hearing. Furthermore, the new laws provide that debtors must, on request of a party in interest or the court, file with the court, copies of any federal income tax return (or at the debtor's option, a transcript of the return) for three years prior to the filing of the bankruptcy.

Mandatory Credit Counseling

Under the new laws, debtors will be required to show the Bankruptcy Court a certificate from a non-profit credit counseling agency, stating that they have completed a credit counseling course prior to the filing of their bankruptcy. This course can be taken telephonically, via the internet or in person and will take approximately 90 minutes to complete.

Mandatory Debtor Education

Under the new laws, debtors will be required to complete a pre-discharge debtors education course. Similarly to the mandatory credit counseling course described above, this course can be taken telephonically, via the internet or in person.

Longer Time Between Filings

Under the new laws, debtors cannot not file a Chapter 7 case if they have received a Chapter 7 discharge within the previous eight years. In addition, the new laws limit serial filings by disallowing a discharge in a Chapter 13 if the debtor obtained a discharge in Chapter 7, 11 or 12 within the 4 years prior to the date of filing of the pending case, or in a Chapter 13 case filed within 2 years of the pending case. This provision, however, does not prevent the debtor from filing a Chapter 13 case, and receiving the benefits of the stay, including the ability to cure arrearages on secured claims over a period of time.

Dischargeability of Certain Debt

Under the new laws, certain obligations are non-dischargeable and may be given a higher priority in repayment. Please consult with our office to determine these changes.

Limits on Certain Exemptions

Under the new laws, certain restrictions are placed on exemptions that debtors may use. For example, if debtors have moved in the last two years prior to the filing of their case, they may not be able to use the exemptions of the state they currently reside in. Please consult with our office for further clarification on the availability of exemptions.

Conclusion

These are just some of the changes that affect individuals and small business wanting to file for bankruptcy. Although it is more difficult to qualify and more documentation is required by the courts, it is important to know that many consumers will still qualify for bankruptcy relief. The only way to determine whether you will qualify is to call now and speak with an attorney.

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