Key changes in the Bankruptcy Abuse Prevention Act 2005:
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THE FOLLOWING IS A GENERAL STATEMENT OF INFORMATION PROVIDED AS A COURTESY TO
ALL STRUGGLING TO MEET FINANCIAL OBLIGATIONS:
Services Available from Credit Counseling Agencies
With limited exceptions, § 109(h) of the Bankruptcy Code requires that all individual debtors who
file for bankruptcy relief on or after October 17, 2005, receive a briefing that outlines the
available opportunities for credit counseling and provides assistance in performing a budget
analysis. The briefing must be given within 180 days before the bankruptcy filing. The briefing
may be provided individually or in a group (including briefings conducted by telephone or on the
Internet) and must be provided by a nonprofit budget and credit counseling agency approved by
the United States trustee or bankruptcy administrator. The clerk of the bankruptcy court has a list
that you may consult of the approved budget and credit counseling agencies.
In addition, after filing a bankruptcy case, an individual debtor generally must complete a
financial management instructional course before he or she can receive a discharge. The clerk
also has a list of approved financial management instructional courses.
The Four Chapters of the Bankruptcy Code
Available to Individual Consumer Debtors
Chapter 7: Liquidation
1. Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their
existing debts.
Debtors whose debts are primarily consumer debts are subject to a "means test" designed to
determine whether the case should be permitted to proceed under chapter 7. If your income is
greater than the median income for your state of residence and family size, in some cases,
creditors have the right to file a motion requesting that the court dismiss your case under §
707(b) of the Code. It is up to the court to decide whether the case should be dismissed.
2. Under chapter 7, you may claim certain of your property as exempt under governing law. A
trustee may have the right to take possession of and sell the remaining property that is not
exempt and use the sale proceeds to pay your creditors.
3. The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If,
however, you are found to have committed certain kinds of improper conduct described in the
Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you
filed the bankruptcy petition will be defeated.
4. Even if you receive a general discharge, some particular debts are not discharged under the
law. Therefore, you may still be responsible for most taxes and student loans; debts incurred to
pay nondischargeable taxes; domestic support and property settlement obligations; most fines,
penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly
listed in your bankruptcy papers; and debts for death or personal injury caused by operating a
motor vehicle,
vessel, or aircraft while intoxicated from alcohol or drugs. Also, if a creditor can prove that a debt
arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the
bankruptcy court may determine that the debt is not discharged.
Chapter 13: Repayment of All or Part of the Debts of an Individual with
Regular Income
1. Chapter 13 is designed for individuals with regular income who would like to pay all or part of
their debts in installments over a period of time. You are only eligible for chapter 13 if your debts
do not exceed certain dollar amounts set forth in the Bankruptcy Code.
2. Under chapter 13, you must file with the court a plan to repay your creditors all or part of the
money that you owe them, using your future earnings. The period allowed by the court to repay
your debts may be three years or five years, depending upon your income and other factors. The
court must approve your plan before it can take effect.
3. After completing the payments under your plan, your debts are generally discharged except
for domestic support obligations; most student loans; certain taxes; most criminal fines and
restitution obligations; certain debts which are not properly listed in your bankruptcy papers;
certain debts for acts that caused death or personal injury; and certain long term secured
obligations.
Chapter 11: Reorganization
Chapter 11 is designed for the reorganization of a business but is also available to consumer
debtors (although very rarely recommended for individuals). Its provisions are quite complicated,
and any decision by an individual to file a chapter 11 petition should be reviewed with an
attorney.
Chapter 12: Family Farmer or Fisherman
Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a
period of time from future earnings and is similar to chapter 13. The eligibility requirements are
restrictive, limiting its use to those whose income arises primarily from a family-owned farm or
commercial fishing operation.
ALL STRUGGLING TO MEET FINANCIAL OBLIGATIONS:
Services Available from Credit Counseling Agencies
With limited exceptions, § 109(h) of the Bankruptcy Code requires that all individual debtors who
file for bankruptcy relief on or after October 17, 2005, receive a briefing that outlines the
available opportunities for credit counseling and provides assistance in performing a budget
analysis. The briefing must be given within 180 days before the bankruptcy filing. The briefing
may be provided individually or in a group (including briefings conducted by telephone or on the
Internet) and must be provided by a nonprofit budget and credit counseling agency approved by
the United States trustee or bankruptcy administrator. The clerk of the bankruptcy court has a list
that you may consult of the approved budget and credit counseling agencies.
In addition, after filing a bankruptcy case, an individual debtor generally must complete a
financial management instructional course before he or she can receive a discharge. The clerk
also has a list of approved financial management instructional courses.
The Four Chapters of the Bankruptcy Code
Available to Individual Consumer Debtors
Chapter 7: Liquidation
1. Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their
existing debts.
Debtors whose debts are primarily consumer debts are subject to a "means test" designed to
determine whether the case should be permitted to proceed under chapter 7. If your income is
greater than the median income for your state of residence and family size, in some cases,
creditors have the right to file a motion requesting that the court dismiss your case under §
707(b) of the Code. It is up to the court to decide whether the case should be dismissed.
2. Under chapter 7, you may claim certain of your property as exempt under governing law. A
trustee may have the right to take possession of and sell the remaining property that is not
exempt and use the sale proceeds to pay your creditors.
3. The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If,
however, you are found to have committed certain kinds of improper conduct described in the
Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you
filed the bankruptcy petition will be defeated.
4. Even if you receive a general discharge, some particular debts are not discharged under the
law. Therefore, you may still be responsible for most taxes and student loans; debts incurred to
pay nondischargeable taxes; domestic support and property settlement obligations; most fines,
penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly
listed in your bankruptcy papers; and debts for death or personal injury caused by operating a
motor vehicle,
vessel, or aircraft while intoxicated from alcohol or drugs. Also, if a creditor can prove that a debt
arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the
bankruptcy court may determine that the debt is not discharged.
Chapter 13: Repayment of All or Part of the Debts of an Individual with
Regular Income
1. Chapter 13 is designed for individuals with regular income who would like to pay all or part of
their debts in installments over a period of time. You are only eligible for chapter 13 if your debts
do not exceed certain dollar amounts set forth in the Bankruptcy Code.
2. Under chapter 13, you must file with the court a plan to repay your creditors all or part of the
money that you owe them, using your future earnings. The period allowed by the court to repay
your debts may be three years or five years, depending upon your income and other factors. The
court must approve your plan before it can take effect.
3. After completing the payments under your plan, your debts are generally discharged except
for domestic support obligations; most student loans; certain taxes; most criminal fines and
restitution obligations; certain debts which are not properly listed in your bankruptcy papers;
certain debts for acts that caused death or personal injury; and certain long term secured
obligations.
Chapter 11: Reorganization
Chapter 11 is designed for the reorganization of a business but is also available to consumer
debtors (although very rarely recommended for individuals). Its provisions are quite complicated,
and any decision by an individual to file a chapter 11 petition should be reviewed with an
attorney.
Chapter 12: Family Farmer or Fisherman
Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a
period of time from future earnings and is similar to chapter 13. The eligibility requirements are
restrictive, limiting its use to those whose income arises primarily from a family-owned farm or
commercial fishing operation.
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