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The Bankruptcy Reform and Relief Act of 2005

The Bankruptcy Reform and Relief Act of 2005 is a law that was passed by Congress and signed into law by President Bush in April, 2005. It took effect on midnight of October 16, 2005. It had been debated and passed, vetoed by President Clinton twice, shepherded through House and Senate committee hi-jinks and finally passed after the credit card industry donated $455 million in campaign contributions to Congress over the eight years prior to its passage. It is all public record.cobra-website-sized-photo

The goal was to cut down on the number of bankruptcy filings and to cut down on all the purported fraud in the system. It set forth greater amounts of documentation for clients to have to bring to their attorneys and for their attorneys to review (the list of required documentation is attached as a pdf form for you to download). It established the requirement that all debtors must attend a credit counseling session before they file bankruptcy. It made numerous changes in the law which those familiar with the law can recognize as special interest legislation designed for the groups lobbying for various components in the new bankruptcy law and which involve circumstances which never occur in any bankruptcy practice. There were many other changes which I will not enumerate here.

However, those familiar with the system, from the bankruptcy judges, the bankruptcy trustees, the lawyers representing both creditors and debtors, as well as numerous esteemed law professors who have studied the causes and effects and patterns of bankruptcy filings seemed to agree that the problems the Act was designed to fix were not real and that the system was not really broken. Rather, it seems that it was more a function of the need for Congress actually to deliver something to the credit card and creditor industry in exchange for the $455 million in campaign contributions it had received.

I have read article after article and been to more than eleven seminars in various parts of the country in the year-and-a-half surrounding the law change to learn about the new bankruptcy law. It is pretty much agreed that most of it was an unnecessary change in the bankruptcy law and is terribly written. One speaker said that it is so poorly written grammatically, that the drafters of the law obviously needed his sixth grade English teacher there to guide them. Nevertheless, we are left with its confusing structure, unnecessary requirements, vague language, and dangling clauses which refer to nothing.

The problem for you, the client, and us, the bankruptcy attorneys, is that all of the sloppy language, new ideas, and misplaced modifiers have to be interpreted by the bankruptcy courts. Where there are two ways to interpret a new sentence in the bankruptcy law, creditors and debtors may disagree. It is inevitable that judges interpreting the disagreement bring their own bias to the table when they decide disputes. It may take years to clean up the law so that a bankruptcy lawyer could tell you what it really means.

That sounds like a cop-out, but it is true; there are things in this new bankruptcy law that no one really knows what they mean and until the Supreme Court of the United States determines what they mean after the different states and different parts of the country come up with different interpretations no one will know what they mean for sure. This will take years.

However, the good news is that most of the bankruptcy code did not change and neither did the state law with which we are to fill in the holes in the bankruptcy code. The information in this website has been drafted to include and explain the procedures established by the new law, as I understand the new bankruptcy law to be….until someone tells me otherwise.

  • Learn More About Bankruptcy

    If its time to start considering a step toward bankruptcy we're here to help. I have been helping people through the process of filing bankruptcy in South Carolina for over 20 years. We are here for you if you have questions.
  • Download Bankruptcy Guide

    This guide is full of useful information about bankruptcy. It's a large PDF so it may take a few seconds to download.
  • Can I go to Jail for not Paying my Bills?

    No, not unless you committed a crime in the creation of the debt (for example, fraud). Simply borrowing money and not being able to pay it back is not a crime. Many creditors representatives will tell you lies on the telephone and say that they will have you put in jail. Perhaps they are too ignorant to know they are wrong or that it is illegal for them even to say that. See More Bankruptcy Q&A