Fri Aug 22 2014   

Bankruptcy Law Research Guide:
Recent Changes to Bankruptcy Law

Major Changes

On April 20, 2005, Congress passed Public Law 109-8, which made sweeping changes to the Bankruptcy Code of 1978. Most of the amendments to the law took effect on October 17, 2005. A few of the significant changes are listed below.

For more information, see the American Bankruptcy Institute’s 25 Changes to Personal Bankruptcy Law website.

Mandatory Counseling

A debtor must now complete credit counseling with an agency approved by the United States Trustee’s office before filing for Chapter 7 or Chapter 13 bankruptcy. If the agency creates a debt management plan for the debtor, it must be filed with the court. 11 U.S.C. § 521(b).

A list of approved agencies is provided on the United States Bankruptcy Trustee Credit Counseling & Debtor Education Information website.

Means Test

There is now an income limitation to file a Chapter 7 bankruptcy. To determine whether you meet the income requirements, first compare your currently monthly income (which is your average monthly income in the 6 months before you file) with the median income for your family size in your state. Median income information is available from the United States Trustee Program’s Means Testing website.

For example, the yearly median family income for a family of three in Arizona was $51,348.00 for 2004. To determine the monthly income, you divide the figure by 12. If your income is less than or equal to the median, you are eligible to file for Chapter 7 bankruptcy.

If your income is over the state median, you can still file for Chapter 7 bankruptcy if you pass the means test. The means test determines whether you have enough income after paying allowed expenses to fund a Chapter 13 plan. 11 U.S.C. § 707(b).

Homestead Exemption

To elect a state exemption, a debtor must have lived in the state for 730 days before filing for bankruptcy. If the debtor has moved during the last 730 days, the debtor must use the state exemption for the state the debtor lived in the majority of time for the 180 days before the 730-day period. 11 U.S.C. § 522(b)(3)(A). Regardless of the state exemption, if the homestead property has been acquired within 1,125 days before a bankruptcy filing, there is a new limit of $125,000 on the amount of the debtor's interest in homestead property that may be exempted. 11 U.S.C. § 522(p).

Limitation on Filing

A Chapter 7 debtor cannot receive a discharge of debts if a previous discharge was received within 8 years (changed from 6 years) of the new bankruptcy filing. 11 U.S.C. § 727(a)(8).

Page Updated:  5 November 2008