During the mid-2000s, the banking lobby held quite a bit of sway over Congress, and one of its achievements was helping it pass the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in April 2005. This law was the largest revision of the bankruptcy law since 1978. Although the law was changed nearly seven years ago, it has greatly affected Las Vegas bankruptcy given Nevada’s role in the housing bubble. Here are five ways the law changed bankruptcy in Las Vegas.
(1) The Chapter 7 “means test”: the means test is a mechanism that’s supposedly designed to prevent people from frivolously discharging unsecured debt in bankruptcy. Those whose average monthly incomes over the previous six months are below the state’s median income ($43,146 for single earners in Nevada, slightly above the national median [http://www.justice.gov/ust/eo/bapcpa/20111101/meanstesting.htm]) are free to file. Those whose incomes are above that then have their expenses compared to those of their city’s (according to the IRS) less any payments to secured debts that wouldn’t be included in the bankruptcy estate. If this number is still over the median, then the filing is presumed “abusive” (to creditors), and the debtor must refile in Chapter 13. Debtors with larger families face an easier burden.
(2) The waiting period between Chapter 7 filings was extended from six to eight years.
(3) Mandatory credit counseling: Those who wished to file in Chapter 7 or Chapter 13 must complete debtor education courses approved by the U.S. Trustee. It is unknown how effective these courses are in preventing bankruptcy.
(4) The automatic stay: If a debtor files bankruptcy three times within a year, in the third time, the automatic stay doesn’t go into effect absent a showing of good faith by the debtor. Debtors filing to stay an eviction can only do so if the landlord hasn’t already obtained a judgment against the tenant.
(5) Dischargeability of debts: Only $500 for charging “luxury goods” on credit cards is necessary to raise the presumption of credit card fraud. For cash advances from a credit card the limit was lowered to $750 within 90 days. Private student loans were also rendered effectively nondischargeable in bankruptcy.
There are more ways that the BAPCPA changed bankruptcy, but the changes to the law have made it more difficult for people to file Las Vegas bankruptcy. If you wish to do so, it helps to plan ahead by consulting with a Las Vegas bankruptcy lawyer before things get really difficult.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 702-880-5554 to set up your free consultation.