New Bankruptcy Law Changes
California Bankruptcy Laws
Many Southern California
believe that filing for bankruptcy is no longer a viable option because of the new
laws. These laws
began on October 17,
Such belief is not true!
The truth be told, many people are now as able (or sometimes more easily able) to
7 bankruptcy and Chapter
13 bankruptcy under the new bankruptcy
as under the old set of laws! But
there is a lot more “red tape” which results in more time, energy, and
to file bankruptcy and obtain a discharge of debts.
Note: Some people are, however, negatively affected by the new laws.
changes to the new bankruptcy laws include:
Credit Counseling: 180 to 0 days BEFORE
filing any bankruptcy
case in Southern California,
you must complete
a credit counseling course online or over the phone. I generally refer
clients to a particular credit counselor who is approved by the federal
completion of the online or telephone
counseling session, the credit counselor issues a "Certificate of
certificate is filed with the bankruptcy
court along with your other bankruptcy petition documents.
Financial Management Course (Debtor Education):
Under the new law, Debt Management
is a required course. By
law, you must
complete it during the course of the bankruptcy but AFTER the date of filing the
I refer my clients to a
court approved course. The course is conducted by
a well-known, popular, and dynamic Christian financial
You can watch the course online or order a DVD. Clients
overwhelmingly positive feedback about the course. A bankruptcy debtor
is required to file with the court a "Certification of Completion of
Financial Management Course" within 60 days after the Meeting
of Creditors date.
The Means Test is a method to determine who
may and may
not be eligible to file Chapter 7 bankruptcy.
The test is typically applied people whose debts are
is not applied to people
whose debts are primarily business debts as well as several other
A Means Test formula
is used that evaluates whether or not a debtor has the financial
ability to pay back a substantial part of his or her debts
Chapter 13 bankruptcy repayment plan.
The formula uses your income based on your average
gross income during the
6 months immediately before the month that you file bankruptcy as well
as a multitude of other
Returns: In a Southern California Chapter 7
a debtor must typically provide the previous year’s tax
return to the bankruptcy trustee. In a Chapter 13 bankruptcy, the
submit the last 2 to 4 years’ tax returns, depending upon the facts of
The new laws now essentially
require your attorneys to presume that you are not being honest with
why we now must require that
you produce so many documents to us!
Fortunately, nearly all of my clients are honest people.
between Bankruptcies: Occasionally, a person
might need to file bankruptcy more than one time. The
mandatory waiting periods now apply
between bankruptcy filings (For making calculations, the start and ending dates are the date of
filing of each case and not
Bankruptcy to Current Bankruptcy (Use date of filing the case, not
Ch. 7 to Ch.
7 = 8 years: Prior Chapter 7 Bankruptcy to Current Chapter 7
you must wait 8 years.
Ch. 13 to Ch.
13 = 2 years: Prior Chapter Bankruptcy to Current Chapter 7
must wait 2 years.
Ch. 7 to Ch.
13 = 4 years: Prior Chapter 7 Bankruptcy to Current Chapter
you must wait 4 years.
Ch. 13 to Ch.
7 = 4 or 7 years: Prior Chapter Bankruptcy to Current Chapter
you must wait 4 or 7 years, depending on the circumstances.
There are exceptions to
certain of the the above rules, however.
Certain debts are
no longer forgiven under the new law but were dischargeable under the
old bankruptcy laws.
But, practically speaking, few cases have these issues arise.
By reaffirming a
debt, the debtor and a secured
agree in writing to continue under the terms of the existing loan or,
cases, modify one or more terms of the original loan.
The downside to signing such agreements is
that if you later default on the loan, the creditor can sue you for any
the old bankruptcy law, instead of reaffirming the debt, the bankruptcy
elect keep the secured property and repay by a method called “retain
or “ride through.” Utilizing
method, the debtor simply remained current on the loan obligation and
to make monthly payments but did not sign any
agreement. The advantage of the retain and pay
option was this: If a debtor later defaulted on a loan, the creditor
could only repossess the property; but the creditor could not sue the
debtor for money damages to pay any
deficiency. However, "retain
pay" is no longer a recognized option for personal
property (for example,
cars) under the new bankruptcy code.
some bankruptcy debtors
still attempt to “retain and pay” anyway. Further, many (but
creditors will voluntarily agree to allow this retain and pay option
though it is not officially permitted.
advise my client of the pros and cons of the
options concerning secured debts and reaffirmation agreements to help
them make a sound decision.
Exemptions are laws that protect
a debtor’s property from being sold during the bankruptcy in order to
the new bankruptcy
laws, one must use the exemptions used by the state where the debtor
during the entire past 730 days (2 years) before filing.
If the debtor resided in more than one state during the past
730 days, then one must use the bankruptcy
exemptions allowed to be used by the state where the debtor resided
the greatest amount of time from 731 to 911
days (a period of 180 days) before the time of filing the bankruptcy
petition. The purpose of this law is to
“forum shopping” so as to find the state with the best exemption
laws. For most people, this new law has no effect on their bankruptcy
case. It is
unlikely that this law will apply to
For a free and confidential consultation, contact Christian bankruptcy
His bankruptcy services are available to residents of Orange, Riverside and San Bernardino
counties, as well as Los Angeles County.
Under the new bankruptcy laws, attorney Mr. Tozer is a debt relief
because he helps people file for bankruptcy relief under the Bankruptcy
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