Warning To All!!!!

Creditnetters,

I hate to be the chicken running around yelling "the sky is faling, the sky is falling!" but the Bankruptcy Reform Act is going to happen. Just because it got a reprieve when senate republicans broke ranks over the abortion clinic protestors provision compromise doesn't mean that this bill does not have adequate support in all other provisions to pass.

You are all going along trying to "repair" your credit scores...but for what reason? So that you can acquire more credit, of course. This is not a bad thing...credit is a good thing as everyone wants to be able to have a home, car and the nice things in life for themselves and their families. But what happens if something occurs in your lives i.e. a job loss, an illness, a bad investment that wipes out your savings...all of us have either had an occurence such as this or know somebody else that has.

When this bk reform act passes I will assure you that obtaining credit will no longer come without some attendant responsibilities. These responisibilities will include some sort of insurance that will cover you if something untoward in your financial and personal life happens. Also having a strategy in place that would give you options to survive in just that case.

Right now bk is a viable option for people who find their backs up against a wall but when bk reform hits this will not be true. What WILL be true is the only way you will be able to file a chapter 7 is if you're practically destitute. Of course who can interpret the living allowance "formulae"...if they actually use the IRS's formulae then bk 7 will go the way of our friendly prehistoric tyrannosauras rex...to the boneyard.

In the first paragraph of the act they lower the bar from "substantial abuse" to "simple abuse" which means if you're income exceeds this mysterious "formulae" then you are guilty of simple abuse. They give the creditors awesome powers to convert a debtor's 7 to a 13. Can you imagine what the 341a meeting of the creditors is going to turn into??? More like the showdown at the ok corral.

As for the 13 plans...if the irs allowances are the formulae they are referring to in order to complete a 13 you will have to lead the life of an ascetic and so will your family.

How in god's name can anyone under these reforms get a "fresh start". No one will be able to live under the stringent allowances of a 13 plan for a month much less 3-5 years.

Oh but they do throw in a couple of crumbs for the poor consumer...you can exempt payments made to care for an elderly relative or a sick family member...big woo. Retirement funds earmarked for children or grandchildren's education can be exempted. This is just common decency not merciful.

Right now all of you who have been successful using the FDCP and the FCRA are exhilarant over the consumer power it gives you. But after bk reform when the credit providing industry gets the big stick they have been lobbying for the past five years...those acts will lose alot of their firing power. The settlement on less than owed will go out the window...as why settle when you know the debtor can't bk it away. The only people who will be successful in using the above mentioned acts will be people who can PROVE they satisfied the debt. So as a creditees it will be incumbent upon yourselves to keep full and accurate records of your charges and payments.

So hear my warning and heed it well while you are travelling the path of credit repair and credit acquisition...become educated, read and try to understand the bk reform act (I am doing that in another thread "bk reform effects") and start thinking about future strategies to protect yourselves and your families from credit hell...as if anything unforseen happens you should be prepared to deal with the limited options available to you due to the bk reform act.

clc/ a.k.a. "paul revere of creditnet"

 

KHM-
After bk reform you will have to arrive at the 341a meeting with documentation to prove your income and expenses. I will post on the
"effects of bk reform" thread what the required documentation will consist of. If the documentation shows that your income exceeds the formulated income standards (see the above thread for these numbers) then your creditors can move to convert your 7 to a 13. When you see what you're allowed you will understand why I say that unless you're destitute you will not be able to get a 7 discharge.

As it stands right now if a creditor is a general unsecured creditor they have little if any rights...that is why they don't show up...it isn't worth the time, effort or money to them. But after bk reform I will guarantee that the major cc companies will be at ALL 341a meetings (in fact they will hire new employees just for this job) and inspect all documents of all debtors...and if they see that your income qualifies for "simple abuse" they will move right then and there to have your bk converted to a 13. This gives them as much power as the bk trustee.

In anticipation of the reform cc companies and ca's are drooling in anticipation. After it is passed the stories on this board will change dramatically. So be prepared! Also if you can negotiate settlements now-DO IT! because after bk reform it will be practically impossible.

clc

 

kozman-
Good points! As for changing law...judges can't do that...what they CAN do is interpret law. Yes bk attys as we speak are starting to load their arsenals with what they perceive as loopholes in this act. But let me warn you as someone on the inside...they are looking for loopholes for the well-heeled crowd and not for the regular for joe schmoe crowd.

As I have said repeatedly...be "PROACTIVE and not REACTIVE" to these changes.

clc

 

YES! We WILL need to change our strategies. I am trying to make the call to arms now...so the "experts" on this board can anticipate this and we can work together to devise strategies for ALL. As soon as this law passes I challenge everyone here to contribute a posting as to what they interpret the strategies to be.

It is an effort like this that makes creditnet the leading edge in credit acquisition, maintenance and repair!

clc

 

<bumping> to keep it on page one...any comments, thought...???

clc

 

Here are the provisions that have to do with the documentation required for a 7 & 13 filer:

Expands debtor's duties to require filing with the bankruptcy court of: (1) Federal tax returns; (2) evidence of employer payments received; (3) monthly net income projections; and (4) anticipated income or expenditure increases. Permits a Chapter 7 or chapter 13 creditor to request the debtor's petition, schedules, and statement of affairs, including the debt adjustment plan filed by the debtor.

Requires dismissal of a Chapter 7 or 13 case upon debtor's failure to provide to the bankruptcy trustee not later than seven days before the date first set for the first meeting of creditors a tax return for the latest taxable period prior to filing.

Mandates that, at the time of filing with the taxing authority, a Chapter 7 or 13 debtor file with the bankruptcy court specified tax documentation pertaining to the period from case commencement until case termination.

Requires a Chapter 13 debtor to file with the court a statement of income and expenditures in the preceding tax year, and monthly net income, showing how calculated.

Makes debtor's mandatory documentation available for inspection and copying to certain bankruptcy officers and any party in interest. Requires debtors to furnish driver's license, passport, or other photograph-containing documentation establishing debtor identification.

(Sec. 316) Provides for automatic dismissal if a Chapter 7 or 13 debtor fails within 45 days of filing a petition to furnish all mandatory information, or fails to timely file the requisite schedules. Requires the court to order dismissal within five days of a request by a party in interest for debtor's failure to timely submit requisite documentation.

These provisions are self explanatory. But DO NOTE your creditors can request and you MUST supply this information to them. Also notice reference to "future" income. This means if you are out of work at time of filing but know you will be getting a new job later...you will have to dislcose. These provisions also provide for the reporting of income throughout the 13 plan. Gone will be the days of the bk trustee not caring about your income after the 13 plan is confirmed.

clc

 

WhyChat!!!!,
Did you enjoy your vacation????

In answer to your question bankruptcy laws are federal there are no state bk laws. I am sure you are referring to the state exemptions versus the federal exemptions.

So assuming that my answer is that the bk reform act is effectively taking the oomph out of the states' who have liberal exemptions such as Florida and Texas homestead exemptions.

One of the ways there are doing this is by increasing the residency requirements from 91 days to 366 days. Another is outlined in the following provision:

Sec. 303) Directs the court to grant two-year relief from the automatic stay upon request of a party in interest with respect to certain real property actions if the court finds that filing the bankruptcy petition was part of a scheme to delay, hinder, and defraud creditors.

which basically states if you go to Florida or Texas and buy a property just to avoid paying your creditors you will not get an automatic stay.

There is one more that has to do with capping the increased value of a property over a 2 year period to $125K.

Most of the rest of the states have less generous exemptions than the federal exemptions and some of those states have an "opt out" clause which means you can choose between the federal or state exemptions.

I hope this answers your question as you have answered so many of mine in another forum!

clc

 

Dani & longhair,

First let me address Dani's questions/comments. While it is nice in a perfect world to utilize your credit wisely and to pay down balances regularly...as evidenced by the # of posts and # of members at this forum we do not live in a perfect world. In the thousand or so posts I have read since finding creditnet the stories as to how they got into credit trouble are as varied as the personalities behind the nicks. I am also not promoting in any way fiscal irresponsibility but rather fiscal strategy. Not a strategy for charging and saying "hmm if I can't pay this I can always bk" but one of knowing what all your options are when you are enjoying good times so that in the event your life gets upheaved so to speak you will be prepared to go to contingency plan B.

IRAs in most states (and the exemptions for IRAs are on a state by state basis unless you live in a state where you can "opt in" to the federal exemptions) are presently protected with NO cap...1MM, 2MM, 1,000,000MM...all protected. How do you think Mr. O.J. can afford to live and play in Florida? So the 1MM cap is not a good thing but a rather not good thing. There are many people in this country in their late 50s early 60s who have 1MM plus retirement portfolios...refer to some of the poor vicitims of the Enron scandal. Regular employees who had huge IRAs and 401s. Also it is against the bk law to transfer assets b4 filing for bk to anything including an IRA. This is known as "fraudelent conveyance" and the bk reform act leaves that just as it is. So don't think you can transfer money in order to keep it away from your creditors unless that transfer meets the "time" test which HAS been changed by the act.

As for your %s numbers...where you got these stats is not clear to me by your post but they are largely suspect as all the data I have refutes them quite nicely. So CNers never believe stats unless they cite a source. The eligibility test for a 7 in the new bk laws will make it practically impossible to discharge debts in a 7...so I stick by all my posts in this thread and other threads regarding this.

longhair...it is obvious you have not read the "effects of bk reform" thread because if you had you would have known that the changes are far more sweeping than what you have mentioned in your post.

I appreciate all comments and opinions. What I am attempting to do here is to shout out to one and all the far reaching effects this bk reform law will have on the lives of consumers. Don't shoot the messenger just because you don't like the message!

clc

 

dani,
The article in the Washington Post is naive at best and downright misleading at worst. If one studies the new provisions as I have which includes a close look at the "formulae" for a debtor's income and expense tests one could immediately see what effect a 13 will have. What the IRS formulae considers reasonable expenses are completely different than what the average debtor will consider resonable expenses. Even taking the number for car expense in the Moneycentral article...a family of four living in LA (an expensive place to live I might add...second only to NYC) can only expense $297/month for car expense. Now please tell me what kind of car with insurance and gas and maintenence can you drive for $297/month in LA? What if this family of 4 has 2 cars???!!!! As unrealisitic as this number is the new bk laws states that is it! any amount over that will be considered $$$s available to pay your creditors. Now I could go on and on down the list from utilities to food and prescription drugs, from clothing needs to miscellaneous...but on my other thread I cited the site where you could find the irs allowances on a county by county, state by state basis...and I highly recommended everyone to look for their own purposes to see if their families could exist on these allowances.

As for the ABI stats...there is no way you can take the first quarter stats and explode them by 4. The numbers for this quarter and next quarter will be substantially higher as people are rushing by the droves to file bk before the new bk act is signed into law. So once again I dispute the methodology you used to arrive at your numbers.

As for %s of people that will be forced to file 13 instead of 7s...one only needs to look at the stringent requirements for a 7 to clearly understand that 7s will be next to impossible unless your are practically destitute and are earning considerably less than the "median" (this is the irs's median, mind you) incomes to qualify. The allowances for expenses for a 13 are so stringent that in order to complete the plan you will have to live a barebones existence from day 1 to year 3 (at the minimum) or year 5 (to the maximum). Any future income you might fortunately fall into during the pendency of the 13 bk will go to the creditors. Now this will be a great incentive for people to better their income..."oh let me go get a higher paying job so I can give more to my bankruptcy plan". It is at best non-incenting and at worst non-productive.

Let me touch one more time on the "formulae" that will be used for determining these numbers. Now who do you think is the biggest, baddest, meanest, most stingy and vindictive collector of all? Well if you guessed the IRS you can go to the head of the class. The income and expense formulae can be found on their collections website. So if you think living under allowances set by the IRS is great I suggest you try doing it now when times are good just in case you will be forced to when times are bad.

As for you as a business owner...fortunately for you the new bk laws give you unprecedented power over the debtor. You will be able to get all of the documentation that the trustee gets...you can move to convert a 7 to a 13 as an interested party. And those are just a couple there are more which I am posting on the "effects of bk reform" thread.

And fine, well and good if you CAN pay 25% of your debts over a 3-5 year period...but what if you can't...what if you become disabled through no fault of your own? What if....I'm sure if you did a search on all the members here who posted the whys you could come up with a myriad of stories as to why they got behind the credit 8 ball.

En fin it is so easy to explain away facts with stats...but the new bk act will affect flesh and blood people who have serious financial problems. I don't know about you but as a practicing paralegal I see the faces and hear their stories and it tends to make one discount stats to define human suffering. Also there is more to credit repair than validation...what about debt negotiation, settlement negotiations and payment plans...how much incentive do you think the cc companies and ca's are going to have to do this??? While your 3 examples read well, Dani, they are a far cry from what is reality. I emphasize once again "caveat emptor" let the buyer beware as with this reform the sky will definitely be falling on consumers heads.

clc