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Bankruptcy Law Changes

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Nathalie Martin and John Penn
American Bankruptcy Institute
Tuesday, October 11, 2005; 12:00 PM

A new, more restrictive national bankruptcy law goes into effect next week. Nathalie Martin and John Penn from the American Bankruptcy Institute were online to answer your questions.

Martin, ABI's resident scholar, joined the University of New Mexico law faculty in 1998 after a 10-year career practicing bankruptcy law.

Penn, ABI's president, is a partner at Haynes and Boone in Fort Worth, Tex. He has more than 20 years of experience in representing parties in business bankruptcy cases.

An edited transcript follows.

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John Penn: Thank you for joining us today for the Bankruptcy Discussion. Nathalie Martin and I look forward to sharing our thoughts and experience with you.

We will try to answer as many questions as possible but might not be able to answer every question that is posted.

Also, there could be many questions that would require much more information about your situation before any answer could be given. In those instances, you really should contact an attorney in your area that can spend the time with you on a one on one basis.

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Baltimore. MD: Please explain the background check component of the new filing procedure; as well, for such an addition to the process, what my be the reasonable fees/charges for this component?

Nathalie Martin: There is no background check per se but perhaps you mean the new requirments that attorneys do a reasonable investigation into the facts and circumstances of a debtor's case. According to some people, this new reqirment will make it necessary for attorneys to independently verify the value of a debtor/client's assets, among other things. This and other new requriements of the law could cause the cost of a basic bankruptcy case to double. Fees vary accross the country so it is best to ask an attorney in your area what he or she charges for a case.

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Chalmette, LA: I live in an area that was devastated by hurricane Katrina. My house was completely submerged in floodwaters and I had no flood insurance. The adjuster from my homeowners insurance has told me that all that they will pay for is a new roof and that my house must be demolished. As I have a large amount remaining on my mortgage, how much will the changes in the bankruptcy law affect my filing if I wait until after next week?

washingtonpost.com: Bankruptcy Rules to Ease For Victims Of Disasters (October 6, 2005)

Nathalie Martin: For people who have an income that is below the median income, it is unlikley that waiting until after October 17 will change your case too much. It will be more complex and perhaps more expensive, but it may be worth it to wait and see how things work out. If your income is above the median income for your state, you may want to talk to an attorney this week. This may or may not make a difference and only an attorney who knows your case can be sure.

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Santa Rosa, CA: Don't the changes benefit the credit card issuers more than anyone else?

John Penn: It remains to be seen who will benefit from the changes.

Some predict that the prohibition on stripping liens on many car loans will actually increase recoveries by car lenders but might not increase the payments to credit card companies significantly.

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Dallas, Tex.: John --

It seems to me that the new act might have significant influence over certain types of businesses that have a lot of stock (or fuel) purchased in large amounts on credit.

When these sorts of transactions are in play at the time of a filing under the new act, what will be different about the outcome?

Do vendors who are owed for already delivered goods get a better or worse deal?

-drb

John Penn: Your question highlights a significant change in the law. Under the new law, creditors that sell goods to a debtor before the bankruptcy might receive an "administrative expense" for the goods that were delivered within 20 days before the bankruptcy filing.

An "administrative expense" is just about the highest level of priority a creditor can receive for goods sold on open account (that is, where no lien is obtained to secure the repayment). For a Chapter 11 plan to be confirmed, it must provide that all administrative expenses be paid in full in cash unless the claimant agrees to some other repayment plan.

Under existing law, a creditor would have to prove that the debtor received goods within 10 days before the bankruptcy, still had the goods on hand and was insolvent when the goods were delivered to hope to get a "reclamation claim" that would be allowed as an "administrative expense." However, if the goods that were delivered were subject to a lender's lien (such as a lien on inventory, work in progress, supplies or the like), the reclamation claim might be lost.

The automatic administrative expense status under the new law improves the priority of the claim for the goods delivered during the 20 days before filing. However, it remains to be seen whether this reduces the recovery for goods that were delivered before the 20 days since the debtor would have less cash to pay the remaining claim.

You should note that the 20 day claim will not apply to services that were provided during that period. It will only apply to goods that were delivered in that window.

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Canton, GA: Under the new law, will a person be able to wipe out IRS and/or state tax debt? If so, under what conditions?

Nathalie Martin: If you mean income taxes, most recent income taxes (those for the three years prior to the bankrutpcy case) do not get wiped out in bankruptcy under either the new or the old law. However, older income taxes are typically wiped out or as we say, "discharged."

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Baltimore, MD: To what extent do you think this new law will ratchet up the aggressiveness of collection agencies?

Nathalie Martin: It is not clear. To the extent that the new law shifts the balance of power to creditors and away from debtors, and makes bankrutpcy less available and affordable, some may find agressive collection efforts more cost effective than before.

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Anonymous: What are the key elements of the more restrictive law?

If you have already filed bankruptcy, and you haven't gone to court to finalize it yet, will you be under the old bk law or the new one?

John Penn: The key elements are summarized at http://abiworld.net/bankbill/ and are entirely too lengthy for a simple discussion.

The date that you filed the bankruptcy decides if you're under the current or the soon to be effective new law. So, if you've already filed, you are under the current law.

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Charleston, SC: Please speak to the question of allowing the statute of limitation to run out VS filing bankruptcy.

My sister has been sick and not able to work for almost 2 and a half years. She was told to just let her debt go because she has relatively no income for 3 years. If she does that, then how does she handle the credit bureau clean-up?

John Penn: This really depends upon the law in the state where your sister lives since some statutes of limitations can be quite lengthy and, under certain circumstances, can even be extended. Also, if a creditor does file suit and obtain a judgment, that judgment can be enforced (absent a discharge in bankruptcy) for a number of years.

You sister should contact an attorney where she lives to help her understand her options and what each option means that she can and cannot do.

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Belfair, WA: Retired drawing Navy pension and social security. Sold my home, because I can't afford it anymore. Where would I be if I filed as far as paying off old debts...credit cards $10,000. Bob

John Penn: Since everyone's situation is unique, I'm not in a position to advise you about your specific situation and suggest that you contant an attorney in your area who could meet with you to advise you. A list of attorneys that have been board certified in bankruptcy law is available at www.abcworld.org. There may also be legal aid available in your area if you are unable to afford an attorney.

That being said, you can get general information about bankruptcy options and issues at http://www.abiworld.org/

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Arlington, VA: One should realize that filing a Chapter 7 bankruptcy may jeopardize your DOD security clearance and your eligibility to occupy a sensitive position in the Federal gov't. If you file the Chap 7 without a good reason or cause ie job loss, large medical bills, etc., you may find you clearance in jeopardy.

Nathalie Martin: I have not come accross this before but thank you for your comment.

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Woodbridge, VA: I am 28 years old and I am thinking about filing bankruptcy because a couple of years ago I got into trouble and was unable to pay my debts. I am currently working, but I make about $18,000 a year. I am wondering what would be my best suggestion in filing for bankruptcy, and would I qualify because of the amount of income I am making.

Nathalie Martin: You clearly qualify for a chapter 7, or straight bankruptcy case without a payment plan, even under the new law. An attorney can tell you if bankrutpcy is right for you.

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Randolph, MA: I am assisting someone who wants to file by this Friday. Some of the debt has been transferred and we're having a hard time determining who are the actual creditors. Any advice?

John Penn: Since the date of the petition determines which law will apply, it might be possible to file a petition and then file the Statement of Financial Affairs and Schedules within the 15 days allowed by the Bankruptcy Rules of Procedure - unless the Court or trustee in your area follows different guidelines.

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Silver Spring, MD:

When I first heard about this law, I thought it was awful. But the details don't sound so bad. Is it true that if you are in the bottom 50% of your local income, then the new law does not apply- in other words, only people who should be able to pay have to?

Also, how meaningful is the oft-repeated phrase that (some high percentage) of bankruptcies are due to medical issues? I would like to know how many of those people with medical-related bankruptcies had premium cable, or a new car, or designer clothes, or a house they couldn't afford, and yet no catastrophic health insurance. In other words, the bankruptcy-causing event may not tell us the whole story about how responsible the person has been overall.

This isn't to excuse the banks for making so many dumb loans, but I don't feel a lot of sympathy for irresponsible spendthrifts who want to get out of their legitimate debts, either.

Nathalie Martin: Thanks you for your comments. The new law applies to all cases filed on or after October 17, 2005.

If your median income is below the median income for your state, then the means test imposed by the new law (which could require a payment plan) does not apply to you. The rest of the law applies, however.

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Seattle, WA: Will the new law restrict or prevent bankruptcy due to catastrophic medical bills?

If the answer is "Yes"...

How will the uninsured protect themselves (prevent homelessness) after a medical crisis?

In Washington State, hospitals and physicians extract medical debts directly from checking accounts without advance notice.

Nathalie Martin: If you otherwise qualify, you won't be precluded from filing for bankruptcy as a result of medical bills. Also, after a bankrutpcy, medical providers cannot collect their debts directly from your bank account. You may even be able to get back some payments collected in this way before your bankrutpcy, if they resulted from garnsihment during the 90 days prior to your case.

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Alexandria, VA: Many Katrina survivors had jobs that no longer exist.

They weren't fired, they didn't quit, and they weren't laid off due to poor performance. What happened to them could have happened to anyone.

Will the requirement to consider a person's income history be onerous on Katrina survivors?

John Penn: The "means test" provisions of the new law allow debtors to show that "special circumstances" exist so their income and expenses should be adjusted to determine whether their case should either be dismissed if they do not voluntarily convert it to a Chapter 13 case.

Most would believe that losing your job or home to a natural disaster would qualify as a "special circumstance." While their income history would be considered in making the initial "means test" calculations, they would be able to show that they now have less income and higher living expenses in the future to justify a general discharge under Chapter 7.

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Washington, DC: What are the changes to the bankruptcy law?

John Penn: This is the most substantial change in bankruptcy law since the Bankruptcy Code was enacted in 1978 so the changes are to extensive to list in a discussion format. However, please go to our web site http://abiworld.net/bankbill/ where we have summarized the most important business and consumer changes. You can also download a copy of the entire Bankruptcy Code that has been marked to show all of the changes.

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Manasas,VA: Is there an online checklist where I can "run the numbers" to determine whether bankruptcy is a viable option for me?

John Penn: I am not aware of any checklist or site where you can "run the numbers" on a potential bankruptcy. Since everyone's situation is unique, I would be somewhat suspicious of a "one site fits all" type of solution.

That being said, you can get general information about bankruptcy options and issues at www.abiworld.org/Template.cfm?Section=Consumer_Education_Center

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Washington, DC: Good afternoon. How does one go about filing for bankruptcy and what are the downfalls of filing when someone pulls your credit report?

Nathalie Martin: To file, you should go see a bankrutpcy attorney, perhaps interviewing more than one to make sure you make the right choice. Bankruptcy will remain on your credit report for 10 years. Bankruptcy clearly reflects negatively on your report, but so does having a lot of debts unpaid and in default.

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Woodbridge, VA: If I decide to file myself, how would I go about filing in the State of Virginia for a Chapter 7?

Nathalie Martin: You will need to find an attorney liscenced to practice in Virginia. You can find one through the state bar or the ABI web page.

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Berkeley, Calif.: I made about $6K last year and I want to rid myself of $30-40K of credit card debt by declaring Chapter 7. Will the new law affect me?

John Penn: The new law applies to cases filed after Oct. 16. If you file after that date, the new law will apply.

You can see if your income is above or below your state's median income by going to http://www.usdoj.gov/ust/bapcpa/bci_data/median_income_table.htm

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Boston: Good afternoon.

I would like to know what is the median income for my state? I am currently reside Massachussets.

Thanks

John Penn: You can find the median income for all states at http://www.usdoj.gov/ust/bapcpa/bci_data/median_income_table.htm

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Anonymous: Have been making payments under Chapter 13 for 2 years. If at some point I want to convert to Chapter 7 as allowed under old law, would my conversion be governed by my original filing, or would I be bound by this new law ?

Nathalie Martin: If you filed your original case under the old (or current) law, then the converted case also would be governed by the old law.

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Lake Charles, Louisiana: Its seems as though credit card companies will benefit more from the new law than most entities, will there be some sort of "control" to limit the amount of interest they are allowed to charge??

John Penn: Limits on interest rates has historically been controlled by state law, rather than federal law. The Bankruptcy Code changes do not address whether there should be any limitation on credit card interest rates.

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Fayettteville, Ark.: I have nothing but debt (no assets) and maybe $25,000 in my TIAA-Cref retirement account. I plan upon filing this week BEFORE the change. However, if I need to amend my bankruptcy creditors list next week, will any amendments be under the new laws? If yes, then what will be the difference... I am mostly unemployed since neck and back surgery a year and a half ago. I have the typical credit card debt and massive health bills. HELP.

Nathalie Martin: If you file this week, you can add most of the paperwork to complete the disclosures in the case during the next two weeks. Your entire case will be governed by the old (or current)law, inclduing amendments or additions.

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Alexandria, VA: My bankruptcy was discharged in December 1998. I thought my student loan was discharged as well, but it was not, and now I owe close to $250,000. What do I do to reduce the amount to a manageable level?

Nathalie Martin: Most student loans are not affected by a bankruptcy. You should contact the student loan provider and try to work out a payment plan. Often, they will work with consumers who do not have the income to pay the debt under regular time constraints.

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Temple Hills, MD: Is it too late to file for bankruptcy before the new law takes effect?

Nathalie Martin: Not necessarily but the time to see a lawyer is now. The lawyer will have until Sunday at midnight to get the filing done.

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Anonymous: How will this new law affect rural areas within the U.S., especially in the Southeast?

Nathalie Martin: The laws apply equally to all people accross the coutry. If you are reffering to the effects of the hurricanes, please see one of the responses below.

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Rockford, Ill.: Can your bank or credit union you have a car loan with take your vehicle if you file for bankruptcy?

John Penn: Thanks for your question. It's not as simple or clear-cut as I'm sure you had hoped.

The "automatic stay" that comes into existence when the bankruptcy case is filed provides some protection from the car being repossessed. However, the automatic stay can be terminated by the Court or by an agreement with the lender entered after the bankruptcy was filed.

As a general rule, most courts will require that the car lender receive some payments during the bankruptcy case. Depending upon when you filed the bankruptcy and the circumstances of your individual case, the amounts that are to be paid may be different from your regular monthly payment. There could also be requirements that insurance and taxes be kept current as well as other requirements that are tailored to your specific situation. It is not unusual for a court to provide that failing to comply with its Order regarding the car would allow the lender to repossess the car after the bankruptcy was filed.

There is also the possibility that the car could be repossessed if you do not comply with the provisions of the Chapter 13 Plan or any "reaffirmation agreement" that you reach during your case.

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Alexandria, VA: Critics of the new bankruptcy law claimed that the sorts of bankruptcy that the very wealthy apply for were left in place by this law.

Supposedly there are certain types of bankruptcy for which the filing fees and legal expenses are so high that only the wealthy can afford them.

Can you explain what whether the wealthy have additional bankruptcy options that were unaffected by this new law?

John Penn: High income individuals might elect to file for Chapter 11 rather than Chapter 7 or Chapter 13. The amount of their debts might be more than is allowed in a Chapter 13 so that option might not be available to them.

Chapter 11 cases are, as a general rule, much more expensive than Chapter 7 or Chapter 13 cases. While all individuals have the right to file under Chapter 11, the sheer cost associated with a Chapter 11 case makes it unlikely to be used by most debtors.

Chapter 11 was also modified to deal with individuals, including requiring that individuals devote their "disposable income" (as defined in the Bankruptcy Code) toward repaying their debts for 5 years after the plan is confirmed. They would also need to go through the same debt counseling that is required of all individual debtors.

Finally, Congress did extend the time for a bankruptcy trustee to set aside or "avoid" payments made to a "self-settled trust." Under the new law, transfers into such a trust can be set aside up to 10 years after they were made. The trustee has to file a lawsuit (or adversary proceeding) to set aside those transfers.

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Alexandria, VA: Is it true that once a divorced parent files for bankruptcy any subsequent child support obligations receive the same priority as credit card debt?

My understanding is that previously child support obligations incurred after a bankruptcy filing received priority over credit card payments, unless a judge decided otherwise.

Nathalie Martin: No, the child support obligations have a higher priority than credit card debt. What you are reffering to is that now both child support and some credit card debts will be non-dischargeable. Some scholars think that dischargeability is the more important issue. It means that that both child support and some credit card debt will need to be repaid after the bankruptcy, thus making it potentially more difficult to collect the child support from a limited pot of money.

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Wildwood, NJ: What impact will the changes have on mortgage lenders?

Nathalie Martin: The most significant change for mortage lenders, in my view, is that when a debtor files serial or repeat cases to avoid a mortage foreclosure, the automatic stay is less automatic and less protective in cases filed after the first one.

The stay goes into effect for only 30 days in the second case filed within a year, and will not go into effect at all in subsequenst cases. In these subsequent cases filed within one year, the debtor needs to ask to have the stay implemented and prove that the subsequent cases were not filed in bad faith.

While this provision was designed to discourage repeat filings that do nothing but delay a foreclosure, it applies to cases that get dismissed because of a mistake as well.

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Peoria, IL : If our company chooses to become a credit counseling service must we meet guidelines established by Congress?

Must we remain a non profit Consumer Credit Counseling Service?

Does the new law allow the consumer to pick their own Credit Counseling Service or must they choose from a list passed by Congress?

Must we be pre-certified as a Consumer Credit Counseling by rules established by Congress?

Can any Consumer Credit Counseling Service service offer their services to a consumer according to the new law?

Thanking you in Advance.

Donald Cummings

Luebke Baker & Associates

John Penn: Consumer counseling services have to be approved by the United States Trustee (or Bankruptcy Administrator in districts without as US Trustee) according to the standards set by Congress.

A list of the agencies that have been approved is available at www.usdoj.gov/ust/bapcpa/ccde/cc_approved.htm.

Only those agencies that have been approved may provide the services contemplated by the Bankruptcy Code (as amended). Consumers can always use the agency of their choice but if the agency is not approved, the debtor would not have complied with the Bankruptcy Code's requirements for debtors that file bankruptcy for relief.

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Millbrae, CA: How do the new US bankruptcy laws compare to those of other countries (i.e. Canada, UK, etc)?? Are they having similar changes in the law as consumer credit is expanded?

Nathalie Martin: In general, U.S. law is more forgiving toward debtors than the laws of other countries, including the UK and Canada. This is still true after bankrutpcy reform, though less so than before.

Interestingly, as we become more stringent, many countries around the globe are loosening thier systems in order to promote economic growth in their economies. Generally, systems loosen rather than tighten as consumer credit expands.

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Virginia: Thanks for taking questions. How do the new laws affect those who have filed in the past and have since re-established a large (huge) amount of debt.

My mother filed Chapter 7 about 10 years ago and now finds herself working 60 hrs a week to survive, along with several medical bills and issues.

John Penn:

There are limits on how frequently a person can have their debts discharged and this varies depends on whether the prior bankruptcy was under Chapter 7, 11 or 13.

If your mother filed bankruptcy 10 years ago, it is likely that she would be eligible to file bankruptcy again. She should contact an attorney to advise her regarding whether that would be appropriate for her to do now.

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Eldridge, Missouri: Nathalie and/or John,

I am grossly overextended in personal debts and obligations. I cannot pay all my monthly obligations in any one month but by juggling and pleading with debtors I have not lost my home, etc.

I am 63 years old, my wife is 60, neither of us is employed but I work part time as a Realtor but have not closed a transaction in months.

I am a retired Federal Civil Service employee and I am a retired Navy Reservist and my combined retirement is $37K per annum before taxes. My monthly debts are right at $4K a month.

I don't own anything of value and my house is mortgaged to its appraised value of $105K. I have a couple of early 90's vehicles with more than 200K miles on each that have little or no value.

I don't want to file bankruptcy because I do not want to get behind in my payments any more than necessary. Can I file for reorganization under Chapter 13 and would that be of benefit to me?

Thanks for your comments and suggestions.

Sincerely,

Joe Hollinger

Nathalie Martin: It sounds as though a regular chapter 7 liquidation case woudl suit you better than a chapter 13. You would continue to pay your home mortage and be relieved of some of the other debts. You should talk it over with an attorney. Bankruptcy or no bankruptcy, you need to keep the home mortgage payments current.

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Laurel, MD: Good Morning,

Thank you for taking my question. I heard the other day that if you're disabled you can wipe out student loans along with your other debts. Is this true? If so, what are the criteria? What about Unemployment benefits that must be repaid due to an unfavorable hearing?

Nathalie Martin: Being disabled alone does not release a person from student loans. In most cases, student loans will not go away. In a few rare cases, student loans can be discharged, where the court finds that paying the loans would constitute an "undue hardship" for the debtor.

This test is hard to meet and involves looking into whether the debtor might be able to pay back the debt in the future, as well as whether the debtor has attempted to pay back the debts in the past.

As long as there was no fraud in obtaining the unemployment benefits, the debtor can normally discharge the debt for repayment of these amounts. If the benefits were obtained through fraud or false statements, the amounts will need to be paid back.

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VA: What exactly is the minimum and maximum numbers to file for bankruptcy? And do different states have different rules/laws?

John Penn: I'm not sure that I understand the "minimum and maximum" numbers part of the question. You might be able to find the answer to your question about numbers at www.abiworld.org/Template.cfm?Section=Consumer_Education_Center.

It will also give you general information about the bankruptcy system, including the fact that different states have different rules regarding which assets may be exempt from creditor claims. So, while the Bankruptcy Code is a uniform national law, it does allow each state some flexibility in how exemptions are treated.

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Arlington, Va.: A while ago, I was the victim of identity theft. I did not find out until I went to establish a phone line for the first time. I filed a report with the police department. That was a few years ago. I have recently checked my credit report and noticed that I not only had the phone bill against my credit still, but a few additional marks against me as well that I did not do. How am I to have this removed from my credit report?

John Penn: I'm sorry that you were victimized. Unfortunately, correcting information on credit reports is beyond this scope of today's discussion.

You can find information about dealing with identity theft from the Federal Trade Commisssion at www.ftc.gov/bcp/conline/pubs/credit/idtheft.htm

It is possible that the Virginia Attorney General's Office might have additional information as well. Finally, the major credit reporting agency web sites provide information about how to dispute information included in their reports.

I hope that these sites can help you get through the issues that the theft caused.

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Not Washington: I have worked in the bankruptcy field for nearly 20 years and have a good knowledge and feel what really occurs where the rubber meets the road. My assessment at this point is that the primary effect of the new legislation will be to dramatically increase administrative costs, and I submit that nearly always it is the creditor body who ultimately pay such costs. With certain exceptions (mainly cars) the people who bought this legislation I think are going to be net losers at least inside the bankruptcy system. Perhaps that will be offset by significant numbers being dissuaded from filing at all and maybe that was really what they were shooting for. Any comments?

John Penn: As with any substantial change in the law, we will all need to have some experience with the new law to see what actually occurs. I suspect that the effects of these changes will be debated for years - in much the same way that many have debated the changes from the enactment of the Bankruptcy Code itself in 1978.

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Fort Lauderdale, FL: Can I file with the court on October 17, 2005 for my Bankruptcy or does it have to be on Friday the 14?

Nathalie Martin: You can file until Sunday October 16, 2005 at midnight. Filing can be done through the courthouse itself, electronically, or by putting the documents into a dropbox, in most courts.

After business closes on Friday, one must file electronically or through the courthouse dropbox.

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Clinton, Md.: Can you explain the law to me in a simply way . Please

I need to file but do not want to rush before monday, I need time to get things together.

washingtonpost.com: Bankruptcy Filings Soar In Advance of New Law (October 5)

Nathalie Martin: Bankrutpcy is too complex to explain here but you can visit http://www.abiworld.org/Template.cfm?Section=Consumer_Education_Center, for some good general information.

Just so you know, a case can be filed with just a small amount of paperwork. Your attorney can file the rest of the papers during the next two weeks or so. If this were done by this Sunday, the entire case would be governed by the old (or current) law. But bankrutpcy (in both chapters, with or without a payment plan)will still be available to most people after October 17. It will just be more complex and more expensive.

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Indiana: I would like to know what responsibility the creditors hold towards the filings. Personally knowing several people who have filed in the past, it seems to me that the creditors target those who are least able to make good on these debts (generally due to financial restrictions).

Who holds these companies responsible for their mistakes and poor judgment? Not to mention the tax breaks they obtain from the bad debt write-offs.

John Penn: The answer to your question probably lies in the Boards of Directors of the companies making the loans and, for public companies, the market itself. For national banks, they are regulated by the Comptroller of the Currency. For state banks, they would be regulated by the appropriate agency in their state.

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Washington, D.C.: Where's the public service announcement that dispels the myth that the new laws are simply a boon for the credit card industry? Consumers should benefit as the cost of debt is borne by those who cause that cost and NOT averaged across the products, services, and debt the rest consume. WE pay higher interest rates because of those who write off debts. It's not a matter of IF someone pays, it's a matter of WHO pays! I think debt relief can be a good thing as long as it's not abused.

John Penn: Thank you for your comments. I've not seen any PSA's on this but do recall some advertisements that were run in the past to express similar views.

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Bladensburg, MD: There appears to be some ambiguity between a debtor filing a notice of intent and the automatic stay terminating with respect to motor vehicles. Can you explain how the 45 day and 30 day differences should be addressed?

Nathalie Martin: This is the subject of much debate and will have to be worked out by the courts. One thing I can say, though, is that the remedy for not filing the notice of intent is to have the stay lifted as to that piece of property. Section 521(a)(5) says that this remedy kicks in if the statement of intent is not filed within 45 days. Sorry I can't be of more help. Professor Jean Braucher has written a short papaer on this that I know she would share by e-mail.

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Washington, DC: If you're judgment-proof, why not just default and wait five years, instead of going through the hassle of bankruptcy?

Nathalie Martin: This is a good question. People who are judgment-proof do not need a bankruptcy to protect their assets. Some people prefer to file anyway, hoping to wipe out the past problems, start fresh, and acquire some future property free from future collection efforts.

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Alexandria, Va.: If I can't afford an attorney, what are my options?

John Penn: Many local bar associations have referral services for pro bono work where attorneys donate their time to help people who cannot afford an attorney. The new law also includes provisions that allow people to file without paying a filing fee under certain circumstances.

The law always allows an individual to represent themselves - that is, to appear in court without an attorney. That being said, I strongly suggest that filing a bankruptcy should not be undertaken without an attorney. There are a number of deadlines and responsibilities that are imposed upon debtors that you would be required to satisfy even if you do not have an attorney. The end result from missing a deadline or requirement is that your case could be dismissed and the amount of relief available to you should you refile would be limited. As such, the new law includes some substantial consequences for problems that arise and filing without an attorney is not an excuse.

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Hastings, Minn.: If you filed for bankcruptcy on a business, could one use the loss toward one's taxes as business loss?

Nathalie Martin: This is one that is best directed to your tax advisor.

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Bethesda, MD: What is the purpose of the new advertising restrictions on Bankruptcy lawyers (i.e. Debt Relief Agency requirements, etc)?

John Penn: This is the first time that I'm aware of Congress attempting to regulate advertising by attorneys.

From my recollection of the legislative history, Congress was attempting to address a perceived problem in part of the country where people had bankruptcies filed for them without their knowledge and viewed this as a way to address that issue.

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Nathalie Martin: Thanks very much for participating in this lively on-line discussion. We enjoyed working with you and hope you found it useful.

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