Call us

Bankruptcy Reform and Recent Changes

Connecticut Bankruptcy Reform Attorneys
203-666-8954

With two convenient locations in Wallingford and Stratford, Attorney Joseph J. D'Agostino, Jr., LLC, assist individuals and businesses throughout Connecticut with consumer bankruptcy and business bankruptcy matters.

We have successfully combined experience and service to ensure you are comfortable and confident with your legal representation and sound advice. Please visit our Firm Overview page for additional information about our qualifications and the level of attention we provide.

Summary of Key Provisions of the Bankruptcy Reform

The following is a summary of some of the recent changes to the Bankruptcy Code, including key provisions of consumer bankruptcy and business bankruptcy. For assistance with the affect the Bankruptcy Reform has on your ability to seek debt relief and obtain a fresh start, please contact us to schedule a free confidential consultation. We are here for you.

Consumer Provisions

Needs-Based Bankruptcy

Establishes a presumption that a debtor is abusing Chapter 7 when his monthly income, multiplied by 60, is not less than the lesser of (a) 25% of the debtor's nonpriority unsecured claims or $6,000 (whichever is greater); or (b) $10,000.

Allows a debtor to rebut the presumption of abuse by demonstrating special circumstances that justify additional expenses or adjustments to the debtor's income.

Allows the debtor to claim applicable monthly expenses under the IRS National and Local Standards, plus the following: (a) actual monthly expenses for categories specified by the IRS as Other Necessary Expenses; (b) reasonably necessary expenses to maintain safety of the debtor and his family from domestic violence; (c) an additional allowance (up to 5% of the IRS National Standards) for reasonable and necessary food and clothing; (d) reasonable and necessary actual expenses for the care and support of an elderly, chronically ill, or disabled member of the debtor's household or immediate family; (e) actual administrative expenses of a Chapter 13 case (up to 10% of plan payments) as determined by the Executive Office for United States Trustees; (f) actual expenses (up to $1,500 per year) for the debtor's child to attend a private elementary or secondary school; (g) payments to secured creditors, plus any additional necessary payments to enable continued possession of a primary residence, motor vehicle, or other collateral that is necessary for the support of the debtor and dependents.

Creates two debtor safe harbors: (a) Only the judge, U.S. Trustee, or bankruptcy administrator may seek dismissal of a Chapter 7 for abuse (as defined above) if the debtor's income is equal or less than the applicable state median income; (b) No party may seek dismissal of a Chapter 7 based on the debtor's ability to repay debts if the debtor's income is equal or less than the applicable state median income.

Requires the Executive Office for United States Trustees to review petitions and file motions for dismissal under the needs-based test. However, this requirement is discretionary if the debtor's income is between 100% and 150% of the applicable state median income, and the debtor's income does not exceed a specified monetary threshold. The U.S. Trustee must file the statement of review not later than 10 days after the first meeting of creditors.

Chapter 13

Makes the needs-based expense restrictions applicable to a Chapter 13 debtor over the repayment plan's duration (up to five years) if the debtor's income exceeds a specified monetary threshold.

The court must find that the Chapter 13 was filed in good faith as a condition of confirmation.

Truth-in-Lending Act Amendments

Requires consumer lenders to make new disclosures regarding minimum payments, introductory rates, tax consequences of home equity loans, and late payment deadlines and penalties; mandates availability of further information via a toll-free telephone number. Prohibits the imposition of retroactive finance charges on open-end credit card accounts. Requires any Internet-based credit card solicitation to be accompanied by or linked to Federal Trade Commission consumer credit information.

Secured Loans

Prohibits any "cramdown" of a debt secured by a purchase money security interest in a motor vehicle acquired for the debtor's personal use if the debt was incurred in the five-year period preceding the filing. Prohibits "cramdown" of debts secured by other property if incurred within one year prior to filing.

Specifies that the value of a claim secured by personal property is replacement value, without deduction for marketing or sales costs.

Reaffirmation Agreements

Requires debtors to receive extensive, standardized disclosures and explanations prior to committing to reaffirmation. Establishes a presumption of undue hardship (requiring judicial disapproval) if debtor has insufficient income to pay the debt. Exempts debts to credit unions from these new protections.

Tax Returns

Requires Chapter 7 or 13 debtors to submit either a tax return or transcript for the taxable period prior to case filing. Provides creditors with such documents upon request.

Credit Counseling

Conditions eligibility to file for bankruptcy on debtor's consultation with approved credit counselor within 180 days prior to filing. Counseling may occur via telephone or the Internet.

Retirement and Education Savings

IRS-qualified retirement funds are sheltered from creditors.

Education IRAs and tuition program credits are sheltered from creditors if for a family member and made at least one year prior to filing; contributions made between one and two years prior to filing are subject to a $5,000 cap.

Creditor Representation

Allows a creditor to be represented by a non-attorney at the first meeting of creditors.

Abusive Filings

Extends time between permissible Chapter 7 filings to eight years after prior discharge, and five years for Chapter 13 filings.

Anti-Loading Up

Establishes presumption of nondischargeability for charges for "luxury goods and services" made within 90 days prior to filing and exceeding $250, and for cash advances exceeding $750 and made within 70 days prior to filing. "Luxury goods and services" are defined as those not reasonably necessary for support of the debtor or dependents.

Secured Lender Protections

A Chapter 7 debtor is required to reaffirm or redeem a loan secured by personal property within 45 days of filing, or surrender the property.

A secured creditor in Chapter 13 retains its lien on the collateral until debt payment is completed or the debtor receives a discharge.

Commercial Provisions

Shopping Center Leases

Requires debtor or trustee to assume or reject a non-residential real property lease within 120 days or the date of plan confirmation, whichever comes earlier. The court may grant a one-time, 90-day extension for cause; additional extensions may only be granted with the lessor's written consent.

Chapter 12

Chapter 12 is made permanent. Monetary limits for eligibility are indexed to the Consumer Price Index going forward.

Exclusivity

Prevents judge from extending the Chapter 11 exclusivity period (during which only the debtor may propose a reorganization plan) for more than 18 months.

Small Business Bankruptcy

Establishes an expedited form of Chapter 11 reorganization for businesses with less than $3 million in aggregate debts.

Reclamation

Establishes a new, expanded federal reclamation right for trade creditors (shippers of goods) that permits them to take back goods from a debtor, and enlarges their administrative claim against the estate. However, goods providing collateral for secured lenders may not be reclaimed.

Employee Benefits

Excludes withheld employee benefit and health care contributions from property of the estate.

Financial Instruments

Amends the Bankruptcy Code and the Federal Deposit Insurance Act to ensure that the insolvency of any party to a swap or similar financial instrument does not disrupt financial markets.

Preferences

Makes technical improvements to 1994 language overturning the effect of the Deprizio decision.

Single Asset Real Estate

Expands protection against abusive commercial realty reorganizations by striking the $4 million debt cap contained in current law.

Administrative Provisions

Direct Appeal

Allows direct appeal of bankruptcy court decisions to the court of appeals if the district court fails to act within 30 days of the appeal's filing, unless the parties to the case agree that the district court shall hear the appeal

Contact an Experienced Connecticut Bankruptcy Lawyer

For answers to questions regarding bankruptcy or to discuss your ability to seek bankruptcy under the new Bankruptcy Reform, please schedule a free initial consultation by calling us at 203-666-8954, e-mailing us , or filling out our intake form on our Contact Us page.