Written by Craig D. Robins, cialis Esq.
The New Laws are Now in Effect. The new laws that all consumer bankruptcy attorneys have dreaded for quite some time are now upon us. On October 17, cialis 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, this country’s most sweeping bankruptcy legislation in decades, became effective. During the last month there was a flood of bankruptcy filings as cash-strapped consumers tried to get a jump on the new laws that will make filing much tougher for people to erase their debts.
Learning About the New Laws. The new laws are rather complex. Our Bar Association recently presented a three-hour C.L.E. seminar which seemed merely to provide an overview on just some of the new provisions. After attending a two day symposium and workshop in Florida sponsored by the National Association of Consumer Bankruptcy Attorneys last month, I believe that it would be difficult for a bankruptcy practitioner to effectively represent clients without such a thorough review. The National Association of Consumer Bankruptcy Attorneys announced that it will be offering some additional symposiums in the near future. Over 1,500 attorneys attended the one in Orlando. If you have the opportunity to attend any full-day seminars, I would urge you to do so. Just learning the intricacies of the means test can take an entire day.
Many, Many New Laws to Learn. Discussing the provisions of the new law could easily fill a thousand of these columns. The means test is a major component. Its ostensible purpose is to determine, after a series of calculations, whether a debtor who seeks to file for Chapter 7, would be abusing the bankruptcy laws because the debtor could afford to pay something back to their creditors. In addition to this totally new procedure, there are new provisions for determining property of the estate and calculating exemptions. There are new procedures for valuing assets. There are new laws concerning the automatic stay, which will not be so automatic in some instances. Treatment of secured claims has changed and debtors will likely have to reaffirm secured debts, a procedure that had been mostly done away with in this jurisdiction during the past decade. Matrimonial obligations are now treated totally differently in a way to designed to protect the innocent spouse. There are new exceptions to discharge. There are also greater limitations upon re-filing after a previous petition has been filed. And don’t forget, debtors must receive credit counseling as a condition to filing for bankruptcy relief, and budget counseling as a condition to receiving a discharge, and you will certainly need to assist them with this.
The Means Test: A New Horror. The essence of the new law is the means test, a six-page, fifty-five-line item, computational form that makes the most complicated tax return form look like a walk in the park. This form alone will intimidate the most seasoned practitioner and will likely have the effect, intended or not, of preventing many people from filing for bankruptcy for various reasons.
Be Prepared to Do Due Diligence With Each Case or Be Sanctioned. The number one concern that most consumer bankruptcy attorneys probably have about the new law is that it imposes a tremendous responsibility and potential liability on the attorney. The attorney must now conduct a reasonable investigation to verify the accuracy of the information provided by the client. In addition, the attorney must determine that the petition and all other information provided to the court and the trustee is well-grounded in fact. Finally, the attorney must certify that a Chapter 7 petition is not an abusive filing. The penalties for violating any of the new liability provisions can be strict and can include fee disgorgement plus actual damages including attorney’s fees and costs and possible civil penalties. These new responsibilities, combined with attorney liability, will likely cause many lawyers to leave the consumer bankruptcy practice, and will result in an increase in fees charged by those who stay.
New Mandatory Disclosures. Debtor’s attorneys are now required to make certain disclosures about the nature of legal services offered and the consequences of filing for bankruptcy. In addition, you are required to warn your clients of the penalties for failing to make less than a full and honest disclosure to the bankruptcy court. The consumer bankruptcy attorney must make these disclosures, notices and warnings no later than three days after you first offer legal services to the client. Failure to do so can mean additional sanctions.
Revising Your Advertising. If you advertise bankruptcy legal services, even by merely mentioning that you or your firm does bankruptcy, then be advised that the new law will restrict the way that you may advertise in the future. You must now identify yourself as a “Debt Relief Agency” in any advertisement and contain a disclosure essentially stating that you help people file for bankruptcy.
Revising Your Legal Fees. As a result of the additional amount of time that you will need to spend with each bankruptcy matter, combined with the added potential attorney liability, many attorneys are anticipating that they will end up doubling their existing fees. Legal fees of $2,000 to $3,000 for Chapter 7 cases and $3,500 to $5,000 for Chapter 13 cases may become the norm, although it is too early to determine. In addition, many bankruptcy attorneys will probably charge two separate fees: one to cover the several hours worth of work that will be involved with the means test, and another to cover the remainder of the bankruptcy filing including preparation of the petition and representation in court. After all, it will often be difficult to recommend filing Chapter 7 until the attorney devotes a substantial amount of time to reviewing all aspects of the case and then performing the means test.
Manuals and Books on the New Law are Imperative. Getting a new copy of the Bankruptcy Code is mandatory. In addition, the leading legal publishers such as Thomson-West and LexisNexis have published versions that contain an analysis. LRP Publications has an excellent manual about understanding the new laws. LRP also publishes a regular newsletter, Consumer Bankruptcy News, which often contains practice oriented articles. Additionally, National Consumer Law Center will be soon coming out with a new edition of my favorite handbook, which I refer to as the bible, entitled Consumer Bankruptcy Law and Practice.
Obtaining or Updating Your Software. With the advent of the new laws, combined with the local court requirement that attorneys file petitions electronically, it is inconceivable that a practitioner can prepare a bankruptcy petition without using a computer together with specialized and current software. If you plan to practice consumer bankruptcy, then you must make this investment. All of the leading petition preparation software publishers have rushed to prepare updated versions of their software. The software will be especially important in assisting you with the numerous calculations required by the means test. The software will also include all necessary databases regarding the IRS standardized expense tables and the state median income.
Are You Ready for All of This? If all of the above does not sound intimidating enough, one of the judges at the recent Bar Association seminar commented that he could not imagine how the court system and United States Trustee’s Office would be able to function after October 17, considering all of the major changes and obligations that they will have to address as well. To make matters more tenuous, many commentators have suggested that Congress should delay the effective date of the new law as it would be unfairly harsh to those who have been adversely affected by the recent hurricanes in the Gulf states. Finally, if you decide to continue your bankruptcy practice, be prepared to spend a substantial amount of time reviewing the new laws, attending seminars and workshops, and re-adjusting your perspective as to how bankruptcy works. It will be an evolutionary process.
About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a frequent columnist for the Nassau Lawyer, the official publication of the Nassau County Bar Association in New York. This article appeared in the November 2005 issue of the Nassau Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
New Laws Apply. On October 17, hospital 2005, mind the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), cheap this country’s most sweeping bankruptcy legislation in decades, became effective. The new laws have many far-reaching effects in a multitude of areas. The new laws extend the period of time an individual must wait before re-filing a new petition in which the objective is to discharge new debts. In addition, the new laws seek to stop the perceived abuse of serial filers who previously filed multiple Chapter 13 petitions in an effort to delay foreclosure sales.
The Serial Filing Debtor Seeking to Stay Foreclosure. Prior to BAPCPA, consumer bankruptcy practitioners often experienced the following scenario: a client, whose prior Chapter 13 case was dismissed because they didn’t make the necessary payments, comes in the day before a foreclosure sale saying they want to re-file another petition to stop the sale. The practitioner, searching for a clue that the debtor’s financial circumstances have changed for the better so that the debtor can now afford his Chapter 13 obligations, determines that a new filing would therefore be in good faith. The practitioner immediately files a new petition, knowing without a doubt that this mere act will stay the sale and save the day. However, not any more.
New Exceptions to Automatic Stay. Consumer bankruptcy practitioners may no longer blindly rely on the features of the automatic stay. BAPCPA shortens the automatic stay for debtors who have filed for bankruptcy once during the previous 12 months, and it eliminates the stay entirely for debtors who have filed more than one bankruptcy during the previous 12 months.
Debtor Had One Case Dismissed in Past 12 Months. If a debtor had any case (Chapter 7 or 13) dismissed in the past 12 months, then the automatic stay expires thirty days after the petition is filed, unless the Court extends this time upon a showing by the debtor that the case was brought in good faith. The new section providing for this (Code section 363(c)(3)) has the effect of shifting the burden to the debtor to maintain the stay, whereas in the past, the burden was on the creditor to lift the stay.
This provision means that in such situations, the consumer bankruptcy practitioner will now need to rush to file a motion to extend the stay within 30 days of filing and will need to demonstrate the debtor’s good faith and a change in circumstances.
Debtor had Two or More Cases Dismissed in the Past 12 Months. If the debtor had two or more cases dismissed in the past 12 months, then the automatic stay does not go into effect at all. (Code section 363(c)(4)). This means that a motion or order to show cause would be necessary to impose the stay.
Practical Tip. The above provisions limiting the stay are totally new, and it is likely that the bankruptcy judges in our district will set up special chambers rules pertaining to applications extending or imposing stay relief. Accordingly, be on the lookout for this.
Filing to Discharge Debts After a Prior Bankruptcy Case. Under the old law, a debtor had to wait six years before being eligible to receive another Chapter 7 discharge after a prior Chapter 7 case. However, a debtor must now wait a longer period of time between the prior case and the new case in order to receive a discharge in the new case. Depending on which chapter the prior case was, and which chapter the new case will be, the debtor will have to wait either two, four, six or eight years.
Note that a debtor can re-file for bankruptcy relief at any time after a previous discharge, but will not be entitled to a discharge in the new case unless the requisite period of time has passed. Also note that these waiting times do not apply if the Court did not grant a discharge in the prior case. The waiting times are as follows:
Prior Case Was Chapter 7 and New Case Will Be Chapter 7. Debtor must wait eight years from the date of commencement of the prior Chapter 7 case. (Code section 727(a)(8)).
Prior Case Was Chapter 13 and New Case Will Be Chapter 7. If the allowed unsecured claims in the prior Chapter 13 received more than 70% of the amount of their claims, then no waiting period applies. However, if the allowed unsecured claims received less than 70%, then the debtor must wait six years from the date of the prior Chapter 13 date of filing. (Code section 727(a)(9)).
Prior Case Was Chapter 7 and New Case Will Be Chapter 13. Debtor must wait four years from the date of the prior Chapter 7 date of filing. (Code section 1328(f)(1)).
Prior Case Was Chapter 13 and New Case Will Be Chapter 13. Debtor must wait two years from the date of the prior Chapter 13 date of filing. (Code section 1328(f)(2)).
Practical Tip. If your client had a prior bankruptcy filing which resulted in a discharge, and is not eligible for a discharge in a new filing, but nevertheless needs to quickly file a Chapter 13 proceeding to stop a foreclosure, then you can still file for Chapter 13 relief. The debtor will get the benefit of the stay and the use of the Chapter 13 plan to cure the mortgage arrears and pay off any unsecured debt. However, the debtor will need to provide for payment in full, including interest, to unsecured creditors to avoid those creditors pursuing the debtor after the closing of the case.
Practical Tip. The new time frames can be confusing. In addition, you will not remember if the time from the previous case runs from the date of filing or from the date of discharge. Therefore, I urge you to cut out this article and save it for future reference.
Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared issue of the Suffolk Lawyer in November 2005. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com