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Things to Know about the Bankruptcy Reform Law of 2005
The Bankruptcy Reform Law of 2005 vastly changes how bankruptcy can be declared by individuals and limits what many can do to eliminate debt. Some of the biggest changes include a rule that requires consumers to get credit counseling before they file a bankruptcy case. After filing, consumers must complete a financial management class designed to help them identify and correct what led to bankruptcy in the first place. Fewer filers will be able to use Chapter 7and will have to “reorganize” instead and pay back debt under Chapter 13. The reform law requires close regulation of attorneys as well as non attorney bankruptcy petition preparers, both of whom are required to give consumers detailed contracts about what they will do and charge. Fees for services cost more than before October 17.

Major changes are described below in a before-and-after comparison.
Bankruptcy Law before October 17, 2005 Bankruptcy Law after October 17, 2005
There was no income or expense test to determine if someone could file for Chapter 7 bankruptcy. A means test is applied to determine if people can file for Chapter 7. More people will go into repayment plans under Chapter 13 and cannot file under Chapter 7 because their incomes are too high. Debts that used to be wiped clean under Chapter 7 are instead repaid according to a different formula over a 5-year time frame.
Consumers did not have to contact a credit counselor before filing for bankruptcy, and after filing, did not have to finish a financial management course. Before consumers file, they must receive a briefing from a credit counseling agency that is approved by the bankruptcy court. After filing for bankruptcy, consumers must complete a financial management class that is supposed to help them identify and correct what led to bankruptcy in the first place.
It was easier for consumers to file a bankruptcy themselves...