Sunday, October 16, 2005

Last Call for Bankruptcy...

...Not really, but only few hours left to file under the current law. I'm sure every attorney who practices BK laws has been as busy as our office this week. From a couple of newspaper articles put the number of new cases filed YTD is about 20% over the same time last year. A bankruptcy assistant at another firm commented that we should get t-shirts made up with "I survived the Bankruptcy Reform Act of 2005". I don't know about other firms, but, we have continued to meet with potential clients and advise them about filing under the new law, and we have our first person set to hire us at 8:00 am Monday morning. We actually have about 20 people scheduled to hire us over the next two weeks, so there is still demand out there for bankruptcies after today.

In most cases, 85-90% of people will be able to file the same chapters of bankruptcy that they would have under the current law, and the disposable income test actually leads to lower chapter 13 plan payments when disposable income is the main issue (i.e. very little equity). I think the toughest issues are going to be chapter 7 debtors over the median, chapter 7 debtors who either pass the means test, or are under the median, but have trouble making "I&J" work(income and expenses). The other major issue is going to trying to comply with the Courts requirement of providing 6 months worth of pay stubs. Most of these people ( and me included) would be hard pressed to come up with 1-2 weeks worth. The code mandates 60 days worth ending at the end of the month prior to the filing, that is not easy, but it is reasonable. Generally about 60 days elapses between first meeting a potential client and the filing of the case, so we can have them keep all of them during that time. But, emergency peitions filed on the eve of a forclosure will become very rare.

For debtors over the median we will be charging significantly higher fees in both CH7 & CH13. Since the Means test/Disposable income test must be filed with the petition a great deal of information and supporting documents will be needed to even complete these tests. As a matter of fact, you almost need to have a complete set of schedules and statements completed before you even start to calculate the tests. Then we can expect to spend some amount of time, probably the next 6 months agruing with trustees, creditors, and the UST about what is an acceptable "Necessary Expense". Depending on the complexity of the case this may add an additional $500-$1,000 to a case. For example; A maried couple with only one spouse filing, the filing spouse has a regular job and a side business that he runs, also some investments that provide some income, the non-filing spouse has regular income, child support, and sells stuff on e-bay. Just trying to determine the average monthly income will take time, then trying to determine the amount of the non-filing spouses income that is not contributed to the household income.... and that's just the first page (of four). Very costly.


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