New Bankruptcy Law

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Rockford bankruptcy attorney Brian Hart says during the past few months, business has increased by more than 50 percent with a major influx of clients all trying to file bankruptcy before October 17.

"What the new law is designed to do is make it harder for people to file a Chapter 7 bankruptcy, and force more people into 13, which is a partial reorganization and repayment schedule. It also changes what we can do in the 13 to restrict some of the relief we can give to debtors," says Hart.

The new law slaps additional requirements and costs on filers. Every debtor will need to get credit counseling and complete a separate course on financial management. There will be an increase in court fees and due to additional requirements on attorneys, their fees will rise as well. Hart is estimating somewhere between $200 and $500 hundred dollars.

"The average person out there won't be helped by these laws...the laws were pretty much the result of lobbying efforts by credit card industry and other lenders," says Hart.

To qualify for a chapter 7 bankruptcy, the most popular type of filing because it can wipe out debts entirely, debtors must earn at or below a state average income. In Illinois, the average is about $40,000 for 1 person and $50,000 for a two earner household

"If their income is below the average, they can still file Chapter 7. And, luckily, based in whatever studies you're reading, somewhere between 95-98% of current Chapter 7 debtors would still qualify for a 7," says Hart.

Hart says if someone needs to file...try and do so before the new law takes effect.

"A lot of changes have been implemented. Even the so-called "experts" don't know what everything means. I've been to nationwide conferences with judges and professors..a lot of times the answer is I don't know what this means, and we won't know until the courts interpret it," says Hart.

Hart says there is a movement to delay the new law's implementation. Hart says many hurricane Katrina and Rita victims won't be able to meet the new requirements but he says it's unlikely the law will be delayed. In 2004, 1.5 million people filed for bankruptcy, a 300 percent increase from 2 decades ago.