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Status of legislation:
April 20, 2005: Bankruptcy Bill becomes
Law. President Bush signed the The Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 on Wednesday, April 20,
making it law. At the signing, he said, ''The act of Congress I sign today
will protect those who legitimately need help, stop those who try to commit
fraud and bring greater stability and fairness to our financial
system." The House voted to pass S. 256, on Thursday, April 14, 2005,
by a vote of 302 to 126. The Senate approved the bill by a vote of 74-25
on March 10.
Effective date: Section 1501 of Senate bill S. 256
makes the general provision that the legislation is effective as to cases which
are filed 180 days after enactment (cases filed Monday, October 17,
2005). However, the following sections will become effective immediately
unless otherwise noted: §§ 308, 322, 330, made effective by §
1501(b)(2) [limits Homestead Exemption to $125,000 under certain circumstances];
§ 324 [re district court's exclusive jurisdiction over professionals employed
in bankruptcy]; § 325 [US Trustee & filing fees]; § 434, effective 60 days
after date rules become effective for new forms under 28 USC §2075 [reporting
requirements for small business debtors in Ch 11]; § 601 effective 18 months
after enactment [compiling data in consumer cases]; § 603 effective 18 months
after enactment [random audits of Ch 7 & 13 cases]; § 1001 [permanently
reenacting Ch 12]; § 1213 [overruling DiPrezio rule]; § 1221 [re
transfers made by non-profit debtors]; § 1223 [re additional judgeships]; §
1234 [re involuntary cases]; § 1301-1306 [amendments to Truth in Lending Act];
§ 1401 [increasing cap on wage priority and expanding look-back period]; §
1402 [expanding look-back period for fraudulent transfers from 1 to 2 years and
avoidability of insider transfers; look-back change effective 1 year after
enactment]; § 1403 [re reinstatement of employee benefit plans]; § 1404
effective date unclear [amending §523(a)(19) re securities fraud debt]; §1405
[requiring appointment of trustee when fraud, dishonesty or criminal conduct
suspected of corporate officials]. For details, see the CLLA
report (pdf format).
Background: Previous versions of the bill were
stalled in the Senate (105th, 107th and 108th Congress). In the 107th and
108th Congress, a dispute between pro-choice and pro-life appeared to be the
only thing holding up passage of the bill in both houses. The bill's
supporters could not overcome pro-life opposition to an amendment added by Sen.
Charles Schumer (D-N.Y.) which would prevent the discharge of fines and damages
arising out of abortion clinic violence. The present bill does not
include the Schumer amendment. When the bill was passed by the 106th
Congress, it was pocket-vetoed by President Clinton. President Bush has
made the bill a priority in his legislative agenda, so it is expected that he
will promptly sign the legislation into law. (The National
Association of Bankruptcy Attorneys has reported that the primary sponsor of
the bill, MBNA, was the single largest contributor to President Bush's 2000
election campaign.) Most provisions of the new law will be effective
for cases filed 6 months after it becomes law.
Other status updates may be found at the Commercial
Law League of America website.
The full text of the new Bankruptcy
Code relating consumer cases (including chapters 7 and 13), with an
option to see a redline version showing what sections have changed can now
be reviewed on our new Bankruptcy Code
page.
Full text of "Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005," S. 205 (109th
Congress, 1st Session), passed March 10, 2005. Caution: Before
you click on the link you might want to know that it's 512 pages
long. 
A redline version of the bill can be found in the House
Judiciary Committee Report [link to copy on our site]. Search
for "XV", for the beginning of the interlineations. It may
also be found at http://thomas.loc.gov/cgi-bin/cpquery/T?&report=hr031p1&dbname=cp109&
. Attorneys Davis Polk and Wardwell
have also posted a blacklined version of the bill in pdf format at http://www.dpw.com/practice/code.blackline.pdf
, and attorney William D. Weber has
a web page version at http://www.weberlaw.com/BARF/barf-main-index.htm.
The bill is essentially a reintroduction of previous legislation
proposed since the 105th Congress.
Changes in the Bankruptcy Code Enacted by 107th
Congress of the United States
It appears that the new bankruptcy code will include the changes
described below, with links to the applicable statutory amendments.
This is not an exhaustive list of all changes. NOTE:
Although very similar--identical in most respects--this is NOT S. 256
passed by the 109th Congress.
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| Click for the Flowchart to
the new Bankruptcy Code. |
Establishing a Needs Based Bankruptcy 
- Excusing Debtors Having Income Below the
Median Income in the State - If a debtor's income for the 6
months preceding the filing of a bankruptcy is less than the median
income in the state, the Means Test (below, and under Chapter
13) will not apply. Explanation of the
Median Income §707(b)(7)
- The Means Test - If the debtor's
income is more than the median income in the state, any creditor, the
trustee or the court may force conversion of a Chapter 7 to Chapter 13
or 11 if the amount of the debtor's income left after deducting
allowed expenses over 60 months is greater than $6,000. If
income less expenses times 60 is between $6,000 and $10,000,
conversion is required only if it is more than 25% of the nonpriority
unsecured claims. Explanation of
the Means Test with Median Income and Allowable Deduction Estimates
§707(b)
The Chapter 7 Trustee and the US Trustee are to apply the Means
Test. §704
The clerk is to notice all creditors if there is a presumption of
abuse. §342(d)
Credit Counseling Required
- Credit Counseling Before Filing
- If the United States trustee has approved enough non-profit credit
counseling agencies to provide such services, an individual cannot
file Chapter 7, 11 or 13 unless he or she has received credit
counseling (including phone and internet) during the 180-day period
preceding the date of filing of the petition. This requirement may be
temporarily waived if the debtor submits a certification describing
exigent circumstances meriting the waiver, and stating that the debtor
requested credit counseling services, but was unable to receive it
within 5-days from the request. The debtor must receive counseling
within 30 days of filing the petition, or an additional 15 days if
extended by the court. §109(h)
The court is to approve credit counseling agencies using specific
guidelines. §111
Debtors must file a certificate and the repayment plan from the
approved credit counseling agency §521(b)
- Financial Management Course Required for
Discharge - A debtor must complete an instructional course
concerning personal financial management to receive a discharge in
Chapter 7 or 13. §727(a)(11), §1328(g)(h),
& (i) The United States trustee is to approve credit
counseling agencies using specific guidelines. §111
Discouraging Repeat Cases
- Time Between Bankruptcy Discharges
Increased - The period a debtor must wait after filing a
case in which debts were discharged before filing another case is
extended from 6 years to 8 years for Chapter 7 cases. §727(A)(8)
For Chapter 13, the House version adds a 5 year period between cases.
The Senate version makes this period 3 years from a case under
Chapters 7, 11, or 12, and 2 years (or less for an extreme hardship)
from a Chapter 13 case. §1328(f)
- Termination of the Automatic Stay in
Refiled Cases - The automatic stay which stops creditors
actions while the case is pending terminates the automatic stay 30
days after the commencement of Chapter 7, 11 and 13 cases if a
previous dismissed case was pending within 1 year before the present
case. The stay may remain in effect if the court finds that the
present case is in good faith. If 2 or more previous cases were
pending within 1 year before the present case, the stays do not go
into effect, but they may be put into effect if the court finds that
the present case is in good faith. §362(c)(3)
& (4) In addition, the relief from stays dealing with
real property may remain in effect for cases filed within the next two
years if it he bankruptcy petition was part of a scheme to delay,
hinder, and defraud creditors and involved transfer the real property
or multiple bankruptcy filings. §362(b)(20)
& (21)
Protecting Child & Spousal
Support
- Support Must Be Current to confirm a
Chapter 13 Plan - Domestic support obligations which are
due after a case is filed must be current for a plan to be
confirmed. §1325(a)
- Notice Regarding Domestic Support
- The Chapter 7 & 13 trustees must notify holders of domestic
support claims of the services of the the State child support
enforcement agency, and upon discharge, notify the State agency of the
debtor's address and creditors not discharged or reaffirmed.
Creditors are required to disclose the debtor's address on request by
the holder of a support claim. §704(c)
§1302(d)
- Priority of Child & Spousal Support
Moved Up - The priority of child and spousal support
claims, designated domestic support obligations, is moved from seventh
to first. Claims owed to a spouse, former spouse, child, parent
or legal guardian or responsible relative of the child are given
priority over claims assigned to a governmental unit. §507(a)
- Partial Payment of Assigned Support Claims
in Chapter 13 - As before the amendments, child and spousal
support must be paid in a Chapter 13 Plan, but the amendments allow a
5 year plan to pay less than the full balance of domestic support
obligations that are assigned to or owed to the government. §1322(a)(4)
- Domestic Relations Actions Not Stayed
- Domestic relations actions in general (paternity, support, custody,
visitation, domestic violence) are not stayed by a Bankruptcy.
An action for dissolution of marriage is stayed only to the extent
that it seeks to divide property of the estate. §362(b)(2)
- Collection of Child and Spousal Support Is
Not Stayed - The exclusion of actions to collect child
support and spousal maintenance from the stay is broadened.
Actions specifically excluded from the stay include withholding of
income under a court order; suspension of drivers', professional,
occupational and recreational licenses; reporting of overdue support;
interception of tax refunds, and enforcement of medical
obligations. §362(b)(2)
- Child and Spousal Support Must Be Paid for
Chapter 13 Discharge - A Chapter 13 case may be dismissal
or conversion for failure to pay domestic support obligation becoming
due after the petition is filed. §1307(c)(11)
The debtor must certify that post-petition child support obligations
have been paid to be discharged in Chapter 13. §1328(a)
Additional Rights of Secured
Creditors
- Dismissal if Statement of Intentions Not
Filed - If the Statement of Intentions required under §521(a)(2)
is not filed within 45 days of commencement of a Chapter 7 or 13 case,
the case will be automatically dismissed. §521(j)
- Termination of the Automatic Stay if Debt
Is Not Reaffirmed - The automatic stay which stops
creditors actions while the case is pending terminates as to personal
property securing a claim if the debtor does not file and perform
under a Statement of Intention. §362(h), §521(a)(6)&(d)
- Default of Lease - If the
debtor does not timely reaffirm, lease provision placing the debtor in
default by filing bankruptcy will apply. §521(d)
- More Paid on Secured Claims in Chapter 13
Plan - A plan must pay the full balance of purchase money
loans on vehicles incurred within 5 years (House version) or 3 years
(Senate version) before filing. The full balance must also be
paid for purchase money loans for anything else of value if incurred
within 1 year before filing. The plan must provide for equal
monthly payments sufficient to adequately protect the creditor's
interest on those claims. §1325(a)
- Secured Creditors Retain Liens in Chapter
13 - Liens for secured claims are retained until the claim
is paid or discharged, and survives conversion or dismissal. §1325(a)(5)(B)(i)
- Chapter 13 Debtor Must Provide Proof of
Insurance - Within 60 days the case is filed, a Chapter 13
debtor must provide the creditor with evidence of required insurance
on leased or secured property. §1326(a)4)
- Secured Claims Protected upon Conversion
from Chapter 13 to Chapter 7 - Values of property and
claims established in Chapter 13 cases do not apply in the case when
converted to Chapter 7. Secured creditors retain their claims
when a case is converted to Chapter 7 unless the claim has been paid
in full. Unless a prebankruptcy default has been fully cured it
will be given effect upon conversion. §348(f)
- Mortgage Excluded from Injunction After
Discharge - Creditors holding a security interest in real
property that is a debtor's principal residence are excepted from the
injunction of §524(a)(2) which
prohibits creditors from attempting to collect a discharged
debt. §524(j)
- Failure to Credit Payments May Violate Stay
- The willful failure of a creditor to credit payments received is
made a violation §524(a)(2), but only
if it results in material injury to the debtor, and only if a plan is
not dismissed, is not in default, and the creditor has received
payments in accordance with a plan. §524(i)
Lessor Protection
- Automatic Termination of Stays -
If a lease is rejected or not assumed, the stay is terminated. §365(p)(1)
- Assumption in Chapter 7 - In
Chapter 7, the debtor may notify a lessor that the debtor wants to
assume a lease, and if the lessor agrees, the lease is assumed.
The lessor may condition the assumption on curing of any
default. §365(p)(2)
- Assumption in Chapter 13 - In
Chapters 11 and 13, if a lease of personal property is not assumed in
the plan confirmed by the court at the conclusion of the confirmation
hearing, the lease is rejected and stays are lifted. §365(p)(3)
- Assumption by Trustee -
Requirements of the trustee to cure non-monetary defaults are
modified, and provisions relating to air terminals are deleted. §365(b)(1),
§365(c)&(d)
Additional Protection of IRS and
State Taxes
- Taxes Must Be Filed in Chapter 13
- All required tax returns must be filed for a plan to be
confirmed. §1325(a) §362(b)(27)
- Setoff of Tax Refunds Excluded from Stay
- Tax refunds for periods ending before the start of the bankruptcy
may be applied to the taxing authority to taxes owed for periods
ending before the bankruptcy. §362(b)(27)
- Stay Reduced for Tax Court - The
applicability of the stay to United States Tax Court cases is reduced.§362(a)(8)
- A Chapter 13 Debtor Required to File
Returns - A Chapter 13 debtor must file all returns for tax
periods ending within the 4 years prior to the filing of the case by
the day before the §341 meeting, but the trustee may extend this
deadline. §1308
Paying More in Chapter 13
- 5 Years of Payments Required in Some Cases
- If a debtor's income for the 6 months preceding the filing of a
bankruptcy is greater than the median income in the state, a Chapter
13 Plan must be 5 years in duration. §1325(b)(4)
Explanation of the Median Income Social
Security Benefits are excluded from current monthly income. §101(10A)
- Amount of Plan Payments Based on IRS
Allowances and Other Expenses - The amount of plan payments
is the debtor's current monthly income (excluding Social Security and
amounts to repay pension loans), based on a 6 month average, less
amounts necessary for:
- The maintenance or support of the debtor or a dependent of the
debtor, and
- A domestic support obligation that first becomes payable after
the date the petition is filed, and
- Charitable contributions of up to 15 percent of gross income,
and
- Payment of expenditures necessary for the continuation,
preservation, and operation of a business.
Deductions for expenses are to be determined accordance with the Means
Test of §707(b)(2) if the debtor's income
exceeds the median income in the state. Explanation
of the Means Test and Allowable Deduction Estimates §1322(d)
& (f), §1325(b)(2) & (3)
- Scope of Chapter 13 Discharge Reduced
- Debt for fraudulent taxes, fraud or misrepresentation, unscheduled
debt, and certain civil restitution & damages for willful or
malicious personal injury, which were previously discharged in Chapter
13, are excepted from discharge. §1328(a)
Favorable Treatment of Pension,
Profit Sharing, & 401k Loans
- Stay Does Not Apply - The
withholding of payments on pension, profit-sharing, stock bonus, 401k,
etc. loans from the debtor's pay are not stopped by the filing of a
Bankruptcy. §362(b)(19)
- Cannot be Modified by Chapter 13 -
A Chapter 13 plan cannot modify repayment of loans from pension,
profit-sharing, stock bonus, or other plans. The payment on such
loans is excluded from "disposable income." §1322(f)
Additional Documents Provided by
Debtor
In addition to the list of creditors, schedules of assets, liabilities,
income & expenditures, and statement of financial affairs already
required, debtors must provide or file:
- Certificate of Credit Counseling
- The debtor must file a certificate and the repayment plan from
the approved credit counseling agency. §521(b)
- Statement Regarding §342(b) Notice
- A statement of the attorney or document preparer that the debtor has
been given the notice under §342(b), or
if there was no preparer, a statement that the debtor has obtained and
read the notice. §521(a)(1)(B)(iii)
- Pay Stubs - Evidence of payment
from employers, if any, received within 60 days before the filing of
the petition. §521(a)(1)(B)(iv)
- Itemized Monthly Income - A
statement of monthly net income, itemized to show how the amount is
calculated. §521(a)(1)(B)(v)
- Statement of Anticipated Increases
- A statement of reasonably anticipated increase in income or
expenditures over year after filing. §521(a)(1)(B)(vi)
- Tax Return for Last Period -
Debtor's tax return or transcript for the latest taxable period prior
to filing, which the debtor must also provide to any creditor that
request it. §521(e)(2)
- Tax Returns During Case - Copies
of all tax returns which are required to be filed from the
commencement of the case to the termination of the case. The
case can be dismissed or converted if required tax returns are not
filed. §521(f), §521(k)
- Income & Expenses - In
Chapter 13, an annual statement of income and expenses giving specific
information regarding income sources, parties responsible for support
of dependants, and contributions to household income. §521(f)(4),
§521(g)
- Disclosure of Educational Account &
Tuition Interests - Debtors must disclose interests in
education individual retirement account or under a qualified State
tuition programs. §521(c)
- Photo ID - If the trustee
requests, a photo identification. §521(i)
Additional Exclusions from
Preferences
The following are excluded as preferential transfers which may be
avoided by the trustee:
- Credit Counseling Payments -
Transfer between the debtor and any creditor as a part of an
alternative repayment plan of an approved credit counseling agency.§547(h)
- Domestic Support Payments -
Transfers in payment of domestic support obligations, broadening the
scope of the exclusion of child support and spousal maintenance
transfers by removing the exception for support assigned to another
entity. §547(c)(7)
- Perfection of Security Interests
- Extending from 10 to 30 days the time in which a security interest
must be perfected to be excluded as an avoidable preference. §547(e)(2)
- Perfection of Purchase Money Security
Interests - Extending from 20 to 30 days the time in which
a purchase money security interest must be perfected to be excluded as
an avoidable preference. §547(e)(2)(C)
- Payments in Ordinary Course -
Changing the language excluding transfers in payment of a debt
incurred by the debtor in the ordinary course of business. §547(c)(2)
- Non-Consumer Transfers Under $5,000
- Transfers effecting an aggregate value of less than $5,000 of
property by debtors whose debts are not primarily consumer
debts. §547(c)(9)
- To a Non-Insider that Benefit an Insider
- Transfers to a creditor who is not an insider which benefit an
insider, which are made between 90 days and 1 year before the date of
the filing, but as to the creditor who is an insider the transfer
continues to be a preference. §547(i)
Reduction and Changes in Exemptions
Available
- Time of Residence to Claim a State's
Exemption Increased - The domiciliary requirement to claim
a state's exemptions, other than the homestead, is increased from 180
days to 730 days (2 years), or if the debtor was not in the state for
2 years, the state where the debtor resided for the majority of the
180 days preceding the 2 year period. §522(b)(3)(A)
- Homestead Limited to $125,000 in Senate
Version - The Senate version of §522(o)
limits the state homestead exemption to $125,000, except for the
principal residence of a family farmer.
- Homestead Limited to $100,000 in House
Version - §522(p), in the
House version only, limits the state homestead exemption to $100,000,
except for a homestead owned for 2 years before the bankruptcy, and
except for the principal residence of a family farmer. The House
version of §522(o) reduces the exemption
to the extent that it comes from property that the debtor disposed of
within 7 years before filing bankruptcy if the debtor could not have
exempted the property and there was intent to hinder, delay, or
defraud a creditor.
- Limitation of Household Goods on Which
Liens May Be Avoided - The household goods on which the
debtor may avoid the fixing of a nonpossessory, nonpurchase-money lien
are specified by §522(f)(4).
- Tax Exempt Retirement Benefits are Defined
and Limited - §522(b)(3)(C)
and §522(b)(4) specify tax exempt
retirement benefits which are exempt. The exemption available to
certain individual retirement accounts is limited to $1,000,000. §522(n)
Expanded Exceptions to Discharge
- Taxes - The description of taxes
not discharged is expanded. §523(a)(1)(B)
- Luxury Goods or Services and Cash Advances
- The exclusion from discharge of debt for "luxury goods or
services" and cash advances, previously not dischargeable if more
than $1,150 (amount effective April 1, 2001) incurred within 60 days
before the bankruptcy, is expanded. Debts for luxury goods or
services owed to a single creditor aggregating more than $250 (House
version) or $750 (Senate version) incurred within 90 days before
filing are are presumed to be nondischargeable. Cash advances
aggregating more than $750 within 70 days before filing are presumed
to be nondischargeable. §523(a)(2)(C)
- Death or Injury Caused While Intoxicated
- The exception to discharge for debt incurred for death or personal
injury caused by the debtor's operation of a motor vehicle while
intoxicated is expanded to include the operation of a motor
vehicle , vessel, or aircraft. §523(a)(9)
- Domestic Support Obligation -
The definition of child support and spousal maintenance made not
dischargeable in Chapters 7, 11, 12, and 13 by §523(a)(5)
and (18) (referring to support owed to a State or municipality) is
replaced by "domestic support obligation" which is defined
in §101(14A).
- Educational Loans - The
description of educational loans excepted from discharge by §523(a)(8)
is broadened.
- Debt Incurred to Pay Taxes - The
exception from discharge for debt incurred to pay Federal taxes is
broadened to include debt to pay taxes of any governmental unit.
§523(a)(14A)
- Debt Incurred to Pay Fines and Penalties
- The Senate version adds an exception to discharge for debt incurred
to pay fines or penalties imposed under Federal election law. §523(a)(14B)
- Debt from Divorce, or Separation
- Debt incurred in a divorce or separation made non-dischargeable by §523(a)(15)
is limited to that owed to a spouse, former spouse, or child.
The limitations regarding the debtor's ability to pay and weighing the
benefit of the discharge against the detriment to the spouse or child
are deleted. The court hearing required in §523(c)
to determine that such debt is not discharged is deleted.
- Homeowner Association, Condominium, &
Cooperative Fees - Homeowner association, condominium, and
cooperative fees incurred after filing, which were previously not
discharged only as long as debtor continued to reside in or rent out
the unit, are now excluded from discharge as long as the debtor legal,
equitable, or possessory ownership interest in the unit. §523(a)(16)
- Fees on Prisoners - Fees imposed
by courts, excepted from discharge by §523(a)(17),
are limited to fees "on a prisoner."
- Pension, Profit Sharing Debt -
Debt owed to a pension, profit-sharing, stock bonus, or other
plan are excepted from discharge by §523(a)(18).
- Interference with Lawful Provision of
Services - The Senate version only of §523(a)(19)
excepts from debts incurred through violation of laws relating to
provision of lawful goods or services (directed toward interference
with abortion providers).
Additional Property Excluded from the
Bankrupt Estate
The following property is not property of the bankrupt estate:
- Education IRAs and Tuition Credit Accounts
- Education individual retirement accounts and tuition credit accounts
in State tuition programs. §541(b)(5)
& (6)
- Employee Benefit Plan Health Insurance
Deductions - Amounts withheld or received by an employer
from the wages of employees for an employee benefit plan and for
health insurance plans. Amounts withheld for benefit plans are
also excluded from disposable income as defined in §1325(b)(2).
§541(b)(7)
- Assets Transferred for Securitization
- Eligible asset transferred to eligible entities in connection with
an asset-backed securitization before the commencement of the
case. §541(b)(8) Eligible
assets entities are defined in §541(f)
- Pawned Property - Personal
property held by a licensed lender and pledged to the lender as
collateral for a loan, if the debtor has no obligation to repay the
loan, and the right to redeem is not timely exercised. §541(b)(9)
Additional Limits and Penalties for
Bankruptcy Petition Preparers
- Exclusion of Attorney's Employees
- An employee of an attorney is excluded from the definition for
"bankruptcy petition preparer" only if the employee is under
the direct supervision of the attorney for the debtor. §110(a)(1)
- Signature of Preparer - Requires
an officer, principal, responsible person, or partner of the preparer
to sign the document if the preparer is not an individual, and to
print the name and address of that party on the document. §110(b)(1)
- Notice to Debtor - Before
preparing forms or accepting fees, the preparer must give written
notice on an official form, signed by the to debtors and the preparer.
The notice is to inform the debtor that the preparer is not an
attorney and may not give legal advice. The notice,
prepared by the Judicial Conference of the United States may contain a
description of examples of legal advice that a bankruptcy petition
preparer is not authorized to give. §110(b)(2)
- Identification Numbers -
Identifying numbers, instead of a Social Security Number, for a
bankruptcy petition preparer who is not an individual are
specified. §110(c)
- No Legal Advice - Bankruptcy
petition preparers are prohibited from giving legal advice and the
kinds of advice which a preparer cannot give is itemized. §110(e)(2)
- Maximum Fees - The court may set
the maximum fees that a bankruptcy petition preparer may charge.
The preparer may forfeit fees for violations of §110. §110(h)
- Damages for Violations - The
debtor, trustee, United States trustee, or bankruptcy administrator,
may move for the court to order the preparer to pay the debtor damages
for any violation of §110 or for any act that the court finds to be
fraudulent, unfair, or deceptive. Dismissal because of the
failure to file bankruptcy papers is removed as a specific basis for
sanctions. Although creditors are removed as a party that may
move for damages, language remains in subsection
(2) requiring the award of $1,000 to creditors who file the
action. §110(i)
- Injunctions - The bases for
injunctive relief are expanded by adding §110(i)(3),
and deleting the requirement that violations subject a person to
criminal penalty in §110(j)(2)(I).
- Fines - Fines of $500 for each
violation of §110 may be tripled if the preparer has advised the
debtor to omit assets or income, or use a false Social Security
number, or has failed to inform the debtor that the debtor was filing
for bankruptcy or has failed to the preparer's identity. Fines
in a district that has a U.S. Trustee are to be paid into a fund to
enforce §110. §110(l)
Requirements for Attorneys,
Bankruptcy Petition Preparers, and Other Debt Relief Agencies
A "debt relief agency" is defined by §101(12A)
to be anyone who provides bankruptcy assistance for money, specifically
including "bankruptcy petition preparers" defined in §110(a)(1),
and presumably includes attorneys, but does not include "any person
that is an officer, director, employee or agent" of the debt relief
agency, nonprofit organizations, creditors, or authors of copyrighted
materials.
- Prohibitions - A Debt Relief
Agency cannot:
- Fail to perform a service it informed the assisted person it would
perform. §526(a)(1)
- Make a false or misleading statement. §526(a)(2)
- Counsel an assisted person to make a false or misleading statement
in a bankruptcy document that is untrue and misleading or that the
agency should have been known upon exercise of reasonable care to be
untrue or misleading. §526(a)(2)
- Misrepresent the services the agency will provide or the benefits
and risks if a person becomes a debtor. §526(a)(3)
- Advise a person to incur more debt prior to filing. §526(a)(4)
- Advise a person "to pay an attorney or bankruptcy petition
preparer fee or charge for services performed as part of preparing
for or representing a debtor in a case under this title."
§526(a)(4)
- Liability for Intentional or Negligent Acts
- A "debt relief agency" is liable to the assisted person
for fees charged, actual damages, and attorneys fees, if the agency is
found to have:
- Intentionally or negligently failed to comply with §526,
§527, or §528. §526(c)(2)(A)
- Provided assistance in a case dismissed or converted because of
the agency's intentional or negligent failure to file required
documents. §526(c)(2)(B)
- Intentionally or negligently disregarded material requirements of
the bankruptcy code or rules. §526(c)(2)(C)
- Disclosures - A debt
relief agency must make numerous disclosures at various times,
including:
- Under §527(a)(1), to provide the
written notice which the court is required to give under §342(b)(1),
which includes:
- A description of chapters 7, 11, 12, and 13 and the general
purpose, benefits, and costs of proceeding under each of those
chapters.
- A description of the types of services available from credit
counseling agencies;
- A statement that a person who knowingly and fraudulently
conceals assets or makes a false oath or statement under penalty
of perjury in connection with a bankruptcy case shall be subject
to fine, imprisonment, or both; and
- A statement that all information supplied by a debtor in
connection with a bankruptcy case is subject to examination by the
Attorney General.
- Under §527(a)(2), within 3 days
after first offering to provide bankruptcy assistance, the agency
must also advise assisted persons that:
- All information that the assisted person is required to provide
with a petition and thereafter during a case under this title is
required to be complete, accurate, and truthful;
- All assets and all liabilities are required to be completely and
accurately disclosed in the documents filed to commence the case,
and the replacement value of each asset as defined in section 506
of this title must be stated in those documents where requested
after reasonable inquiry to establish such value;
- Current monthly income, disposable income, are required to be
stated after reasonable inquiry; and
- Information may be audited, and that failure to provide such
information may result in dismissal of the case under this title
or other sanction including, in some instances, criminal
sanctions.
- Under §527(b), before commencement
of the case (presumably since that is when the clerk is to give the
notice required under §342(b)(1),
although no time is specified when the agency must give the same
notice, and this notice is to be given at the same time as the
agency is to give that notice), the agency is to give a specific
notice stated in §527(b) in a separate
document including:
- The debtor may represent himself, can hire an attorney, or
bankruptcy petition preparer.
- That the law requires a written contract specifying what the
cost will be and what the attorney or preparer will do.
- That the debtor or the attorney should analyze the debtor's
eligibility.
- That a Petition, Schedules and Statement of Financial Affairs,
as well as in some cases a Statement of Intention need to be
prepared correctly.
- The debtor will have to attend the required first meeting of
creditors.
- That in chapter 7 the debtor may be asked to reaffirm a debt.
- That in chapter 13 the debtor will repay creditors what the
debtor can afford over 3 to 5 years.
- That the bankruptcy case may also involve litigation.
- That only attorneys, not bankruptcy petition preparers, can
givelegal advice.
- Under §527(c), except to the extent
the debt relief agency provides the required information itself,
reasonably sufficient information on how to provide required
information, including:
- How to value assets at replacement value, determine current
monthly income and deductions, and in a chapter 13 case, how to
determine disposable income.
- How to complete the list of creditors.
- How to determine what property is exempt and how to value exempt
property at replacement value.
- Within 5 days after the first date that the agency provides
bankruptcy assistance services, but prior to a petition being filed,
execute a written contract that explains the services that the
agency will provide and the fees, charges, and terms of payment and
provide the assisted person with a copy of the contract. §528(a)(1)
- Disclose in advertisements that services are with respect to
bankruptcy relief. §528(a)(2)
- Include the statement "We are a debt relief agency. We help
people file for bankruptcy relief under the Bankruptcy Code" in
advertisements. §528(b)
Other Changes
- Chapter 13 Play May Pay Interest on
Nondischargeable Debt - A plan may pay interest on
nondischargeable claims after full payment of all allowed claims. §1322(b)(10)
- Denial of Discharge for Misstatement in
Audit - The failure to explain misstatement in audit and
failure to make available records requested in audit is added as a
basis to deny discharge. §727(d)(4)
- Landlord Protection - Under
certain conditions, forcible detainer actions under residential rental
agreements are excluded from the stay. §362(b)(22),
(23) & (24)
- Reduction of Unsecured Claims of Creditors
Refusing to Negotiate - Unsecured claims may be reduced by
20% if the creditor unreasonably refused to negotiate with an approved
credit counseling agency proposing payment of 60% of the debt over the
period of the loan, or a reasonable extension. The proposal must have
been made at least 60 days before the filing of the petition. §502(k)
- Minor Children's Names Not Disclosed
- The debtor cannot be required to disclose the name of minor children
in public records. §112
- Court to Give Additional Notice
-
- The notice that the clerk is to give to debtors is
expanded. §342(b)
- The clerk is to notice to all creditors if there is a
presumption of abuse under is §707(b).
§342(d)
- A creditor may file with a notice with the court stating its
address for notice in cases under chapters 7 and 13, and the court
is then required to give notice of new cases to that
address. §342(f)
- Debtors to Give Additional Notice
- Including debtor's name, address, and taxpayer identification number
of the debtor is required. Notice to creditors is to include
account numbers and to be sent to creditors at address they have
listed in at least 2 communications sent to the debtor within 90 days
prior to filing. §342(c)(2)
- Damages from Intoxication Given Priority
- A tenth priority is added for death or personal injuries resulting
from the operation of a motor vehicle or vessel if such operation was
unlawful because the debtor was intoxicated from using alcohol, a
drug, or another substance. §507(a)(10)
- Expanded Disclosure for Reaffirmation
Agreements - Disclosure required for reaffirmation
agreements, §524(c), are expanded to include
"Amount Reaffirmed," "Annual Percentage Rate,"
security, repayment schedule in addition to other requirements. §524(k)
Sections of the Bankruptcy Code
Amended by the Bankruptcy Reform Act/Bankruptcy Abuse Prevention and
Consumer Protection Act
CHAPTER 1--GENERAL PROVISIONS
§ 101. Definitions
§ 109. Who may be a debtor
§ 110. Penalty for persons who negligently or
fraudulently prepare bankruptcy petitions
§ 111. Credit counseling agencies; financial
management instructional courses [New
Section]
§ 112. Prohibition on disclosure of identity of
minor child [New Section]
CHAPTER 3--CASE ADMINISTRATION
§ 342. Notice
§ 348. Effect of conversion
§ 365. Executory contracts and unexpired leases
CHAPTER 5--CREDITORS, THE DEBTOR, AND THE ESTATE
§ 502. Allowance of claims or interests
§ 507. Priorities
§ 521. Debtor's Duties
§ 522. Exemptions
§ 523. Exceptions to discharge
§ 524. Effect of discharge
§ 526. Restrictions on debt relief agencies [New
Section]
§ 527. Disclosures [New
Section]
§ 528. Requirements for debt relief agencies [New
Section]
§ 541. Property of the estate
§ 547. Preferences
CHAPTER 7--LIQUIDATION
§ 704. Duties of trustee
§ 706. Conversion
§ 707. Dismissal of a case or conversion to a case
under chapter 11 or 13
§ 727. Discharge
CHAPTER 11--REORGANIZATION
§ 1106. Duties of trustee and examiner
§ 1115. Property of the estate [New Section]
§ 1129. Confirmation of plan
CHAPTER 12--ADJUSTMENT OF DEBTS OF A FAMILY FARMER WITH REGULAR
ANNUAL INCOME
§ 1202. Trustee
§ 1208. Conversion or dismissal
§ 1225. Confirmation of plan
§ 1228. Discharge
CHAPTER 13--ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR
INCOME
§ 1302. Trustee
§ 1307. Conversion or dismissal
§ 1308. Filing of prepetition tax returns
[New Section]
§ 1322. Contents of plan
§ 1324. Confirmation hearing
§ 1325. Confirmation of plan
§ 1326. Payments
§ 1328. Discharge
§ 1329. Modification of plan after confirmation
28 USC § 1334. Bankruptcy cases and
proceedings
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