Life Goes on after Bankruptcy Reform Goes into Effect

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The new bankruptcy laws are not as drastic as first believed. Most consumer debtors are still able to get relief they need. The Chicago banruptcy attorneys at the law firm of Leeders & Associates, Ltd. have seen a recent rise in consumer interest in filing for bankruptcy relief in Chicago.

PRWEB) January 3, 2006 -- Many thought that the bankruptcy reform act that went into effect last October would spell an end to many bankruptcy filings. In fact, approximately 80-90% of consumers who seek to file Chapter 7 Bankruptcy will still qualify under the new laws. Only those with excess income at the end of the month will be pushed to file Chapter 13 bankruptcy. The new rules in effect are actually designed to help consumer bankruptcy filers.

In Chicago, Illinois, the law firm of Leeders & Associates, Ltd. (, has seen an increase of consumer interest in filing for bankruptcy after the initial dip just after the law change. They anticipate this increase to grow even more now that the holidays are over and the holiday bills start rolling in. Combine that with the many of us who make New Years resolutions to get our finances under control.

Prior to filing a case, the debtor must complete a credit counseling program. These programs are designed to make potential filers aware of all of their options they have available before rushing in to file bankruptcy. Once the case is filed, then the debtor needs to complete a debtor education program. This is designed to help the debtor avoid many of the pitfalls that may have drove them to filing bankruptcy in the first place.

Another big change that filers are now subject to is the means test. The means test compares the income and spending of a bankruptcy filer with the IRS standards for each geographical region. Should a consumer debtor ‘fail’ the means test, meaning they have enough disposable income left after allowable monthly expenses, then they would have to file under chapter 13 of the bankruptcy code. The fact is though, most consumers who are seeking Chapter 7 Bankruptcy protection, aren’t even subject to the means testing at all! The initial threshold to see if the means test applies for consumer debtors is if their income averaged over the last six months is above the local median income for their family size. For example, if a couple wants to file for bankruptcy in Chicago, and they have 2 kids, the median income level is $70,357.

Another hurdle to filing bankruptcy under the new laws now requires due diligence on the part of debtor’s attorneys. Debtor’s counsel has a heightened responsibility and is subject to sanctions should the documents the attorney prepares be false, inaccurate or incomplete. While most attorneys take the necessary precautions to ensure the accuracy of the bankruptcy schedules, this added risk may result in slightly higher fees for representation. To effectively process a bankruptcy case, a thorough review of all a debtors assets and financials is now required. You will need to turn over proof of assets like copies of car titles, copy of the deed to your home, bank statements, paycheck stubs and tax returns to your attorney. Your attorney must also file copies of these documents with the Bankruptcy Court or Trustee assigned to your case for further review and verification. One out of every 250 cases will now be audited by the US Trustee’s office as well.

While these new bankruptcy laws may seem strict, and make you feel like you are made to jump through hoops, they are important to protect the consumer. They filter out abusive and fraudulent filings. They are designed to educate the consumer by requiring counseling classes. They require debtors who can afford to pay back a portion of their debts to do so under Chapter 13. This helps keep lenders rates at a reasonable rate for all consumers, which in turn, helps consumers gain new credit at a reasonable rate after declaring bankruptcy.

Attorney Terrance S. Leeders, a consumer bankruptcy attorney in Chicago, Illinois. He is a founding partner at the law firm of Leeders & Associates, Ltd. Additional information can be found at their website, Mr. Leeders has been helping consumers file for bankruptcy in Chicago since 1998. He has personally advised thousands of consumers filing Chapter 7 and Chapter 13.


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Terrance Leeders