| Understanding
the new bankruptcy law | | |
| "The effect of this is that
when your collateral is worth more, that puts a higher value on your assets in
the bankruptcy petition, which could ultimately result in you making higher payments
to your unsecured creditors."
Increased paperwork and expense
load
Paperwork overview. The burden
on the consumer to document income and expenses has vastly increased under the
new law. According to the American
Bankruptcy Institute, consumers must provide: - A list
of all creditors, secured and unsecured.
- Schedules of assets
and liabilities.
- Schedules of income and expenses.
- Certificate
of credit counseling.
- Evidence of payment from employers,
including pay stubs of the past 60 days.
- Statement of monthly
net income.
- Tax returns for the most-recent tax year.
- Tax
returns for several years prior to the filing, if those returns hadn't previously
been filed with the IRS.
- Photo identification.
If these documents aren't provided to the bankruptcy
court within 45 days of the initial filing, the court will automatically dismiss
the case. You can file for one 45-day extension, which may or may not be granted. Legal
costs. John Penn, president of the American Bankruptcy Institute and a
partner with the law firm Haynes and Boone in Fort Worth, Texas, estimates that
legal costs involved in a bankruptcy filing are likely to be twice what lawyers charged under the old law.
"The main reason it will be more expensive is
there is so much more work required of lawyers and debtors," he says. While
there is no set fee for these cases throughout the country, typical fees currently
range from $750 to $1,500, he says. Doubling those fees drives up the cost to
between $1,500 and $3,000. Besides increased costs, lawyers
will labor under increased burdens. They will be required to certify that their
clients' claims for their assets, liabilities, income and expenses are accurate,
and could face court sanctions if they aren't.
Lawyers are also placed in the odd position of being unable to advise their clients to take on new debt
before they file for bankruptcy, including the debt of legal fees. "You can't
advise your client to incur additional debt, but paying the lawyer will result
in more debt," says Ehrenberg. "You have violated the code if you have
encouraged them to incur an additional debt, whether that is legal fees or other
costs, even if that is the best advice you can offer."
Refiling
and serial filings
Refiling. If your
bankruptcy case is dismissed for any reason and you still can't pay your bills,
you'll have to refile. Before the law went into effect, it wasn't much of an issue because completing
a case is much easier and there aren't penalties for refiling. But that has changed.
"There are provisions in the law that sharply limit relief
if you are filing after a prior case has been dismissed," says Penn. "You
will probably see people who try to do it themselves end up having their case
dismissed, and by the time they come back for round two the terms won't be as
good." | 
