The “New” Bankruptcy and You

By now you may have heard rumors about a law that was passed in 2005 that changed the bankruptcy rules to make it more difficult, or impossible to file. These rumors are false.

The Truth: Bankruptcy and You

On October 17, 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act (also known simply as “BAPCPA”) became effective and changed many of the ways in which attorneys representing consumers in bankruptcy practice. For instance, the lawyer now has a separate obligation to ensure that the information contained in the papers filed with the bankruptcy court are complete, truthful and accurate. This means that it is no longer sufficient (if it ever was) to simply hand the client a questionnaire. Instead the lawyer now performs the functions of an auditor. The lawyer may request documents such as credit reports, bank statements, statements from creditors, pay advices (pay stubs) and tax returns. The lawyer may check public databases to insure that all vehicles and real estate that a debtor owns are disclosed. Lawyers are also subject to periodic audits from the U.S. Department of Justice to ensure that all information provided to the court is accurate and also to ensure that the lawyer performed his or her “due diligence” in researching the consumer’s financial condition.

So, all of this has made life a little more difficult for the lawyers. From your perspective however, not much has changed. There are two requirements that have been added to the old procedure, neither of which pose any substantial obstacle to bankruptcy and you.

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