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Bankruptcy law changes next week

By Times Staff Writer
Published October 10, 2005

If a bankruptcy filing is in your future, this week is your last chance to file before sweeping changes in the bankruptcy law apply.

New rules take effect Oct. 17 that will make it more difficult to wipe out debts if your household income is above the median for your state, with adjustments for household size. In Florida, the change affects people who make more than $44,831 for a household of two ($59,798 for four).

If you make less than that, you can still file for Chapter 7 and wipe out all your debts. If you make more, you'll have to go through a means test to determine if you could afford to make payments of at least $100 a month over the next five years. If the court decides you could, you will be forced into a Chapter 13 repayment plan.

About 5 to 10 percent of all filers are expected to be affected. About the only plus: Chapter 13 allows homeowners who are behind on their mortgage payments to catch up without threat of foreclosure.

Credit counseling and financial education will be required for all filers under the new law, although it looks like telephone and online counseling will be the main ways people comply. So far, all the organizations approved to offer the programs in Central Florida are based out of state.

Other changes that take effect Oct. 17 include restrictions on repeat filing and increased paperwork requirements, including proof of income.

The Justice Department has said it will cut Hurricane Katrina victims some slack in several areas, including enforcement of paperwork rules, credit counseling and even residency requirements for those forced by the disaster to relocate to a new state.

Nationwide, debt-burdened consumers have been rushing to file Chapter 7 before the new rules apply.

[Last modified October 7, 2005, 18:14:03]