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Suppose you were an idiot... And suppose you were a member of Congress... But I repeat myself.
Mark Twain

Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first.
Ronald Reagan

An honest politician is one who, when he is bought, will stay bought.
Simon Cameron

I am not a fan of the relatively new (2005) bankruptcy law, known as "BAPCPA". I think it is a disgraceful example of government at its worst.

But complaining about it does little good. I hope to provide some information and dispel some myths about BAPCPA. It is a bad law, but bankruptcy is still the most effective consumer protection law.

Some media reports continue to say that it is now nearly impossible for people to file for bankruptcy relief. That is wrong. Our experience is nearly as many people now qualify for Chapter 7 (usually the prefered type) as under the prior law. That means about 85% to 95% of people filing for bankruptcy relief in Iowa will qualify for Chapter 7. People with large incomes will have the most trouble.

There are some people who will qualify but may face serious problems. People who have not lived in this state continuously for the past two years many face problems, especially if they have purchased a home recently. Whether this is a problem depends on the facts of the case, and so detailed consultation with an attorney is a must.

Generally speaking, the biggest changes in the new law are:

1. To qualify and assess your ability to pay debt, the court looks at the average of the last six months of your income (and your spouse's income, unless you're separated) in addition to your actual current income. This means if you have recently suffered a major loss of income, you may not qualify until a few months pass and your income average drops.

2. Your income is not only compared to your actual expenses to determine your ability to pay debt, but also is compared to hypothetical expense levels published by the I.R.S.

While these new provisions appear to be harmful to consumers, in practice they are not harmful in most cases. In cases where these requirements are a problem, it is likely that good legal advice will allow the bankruptcy case to succeed.

Another big change in the law is that your lawyer is now required to personally verify the accuracy of tbe information on your bankruptcy forms. Failure to do so will likely result in your lawyer being required to pay a fine to the court. In the past the lawyer may have taken your word (and your sworn statement on your bankruptcy forms filed with the Court) that you received, for example, $791 per month of social security income. Now, your lawyer is required to verify that information, and so wants to see proof: bank statements showing the deposit, a statement from the social security administration, etc. A skeptic would say the law was intended to force your lawyer to devote a lot more time to each case, and therefore drive up the cost of even simple bankruptcy cases. Whatever the intent, that is the effect.

You should expect your attorney to require a certain number of monthly bank statements, billing statements, and similar documents.

New ways your bankruptcy case can be dismissed:

1. Failure to file your past-due tax returns before you file your bankruptcy case and the returns that come due during your case.

2. Failure to provide your latest tax return to your case trustee and any creditor who wants it.

3. Failure to file a certificate of completion of credit counseling (required before you can file your case).

4. Failure to file a certificate of completion of a course on personal financial management (required to be done during your case).

5. Failure to file all pay advices (pay stubs and other proof of income from employment) received in the 60 days before your case is filed.

Iowa City: (319) 338-9852  Muscatine: (563) 263-8801

email: steve@iclawfirm.com

Steve Klesner of Johnston, Stannard, Klesner, Burbidge & Fitzgerald, P.L.C.