If you have already established your debt management program and are making your monthly payments according to schedule, give yourself a pat on the back. You are on the road to recovery. Your choice to make the sacrifice necessary to repay your debts was a much better choice than a bankruptcy alternative.

If you are struggling to make that monthly payment, keep up the fight. Your consumer credit counselor understands how difficult it can be and is there to offer encouragement and help every step of the way.

There are three things you should be sure you do every month:

• Make your full scheduled payment and make it on time.
• Check your monthly statements from your creditors to make sure they are showing your payment was received.
• Contact your credit counselor right away if you will be unable to make your scheduled payment.

When the going gets tough and you feel tempted to consider bankruptcy, there is a new law you should be aware of. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed by Congress and signed by President George W. Bush on April 20, 2005, and took effect on October 17, 2005. It is one of the most comprehensive overhauls of the Bankruptcy Code in more than 25 years, particularly as it applies to consumer bankruptcy reform. The United States Trustee Program, under the Department of Justice, was instituted to help protect the integrity of America’s bankruptcy system. The new law assigns the Trustee Program with new responsibilities, including:

• Applying a new income standard for deciding whether an individual qualifies for a chapter 7 or chapter 13 bankruptcy
• Conducting audits to ascertain the accuracy of an individual’s chapter 7 bankruptcy documents
• Certifying credit counseling organizations to provide an individual with counseling before bankruptcy can be filed
• Certifying credit counseling organizations to provide financial education to the individual before his or her debts can be discharged

As you can see, this new law requires individuals to complete steps you have already taken—seek the help of a credit counselor, establish whether or not there is enough income to support a payment program, and accept financial education to prevent future bankruptcy filings. A bankruptcy should always be considered as the last resort for resolving financial problems because the long-term results of a bankruptcy exceed any other solution. Your credit report will show a bankruptcy for ten years and make it very difficult to do many of the things you would like to do.

It is, however, a legal procedure that can be used when individuals find themselves under extreme circumstances they can no longer survive. Ask your FFEF credit counselor about the options that may still be available to you before taking this legal action.

The income charts shown here expand on some facts about the new law that you might find helpful in determining your plan of action for continuing to improve your financial health.

Standard living expenses determined by the IRS according to monthly income level. It is used to help determine the amount an individual should have left for monthly debt payments. You might find this table helpful in determining how well you are doing at living within your means compared to other American households.

Changes to Personal Bankruptcy Law

The following changes are not intended to be inclusive but to describe some of the more significant changes consumers should understand before considering bankruptcy under the new law.

1. Means Test
If the debtor’s income, less allowable living expense amounts determined by the IRS, is greater than indicated on the means test for his or her state, the debtor will be required to fulfill a five-year Chapter 13 repayment plan instead of being able to file for Chapter 7. This can only be overruled if the individual can show “special circumstances that justify additional expenses or adjustments of current monthly income.”

2. Duration
If the Chapter 13 debtor’s income is greater than the means test for his or her state, the repayment plan must be for five years. On the anniversary date of the repayment plan, the debtor must file a new statement of income and expenses.

3. Mandatory Credit Counseling
Individuals cannot qualify for bankruptcy unless, within 180 days of filing, they receive credit counseling from a nonprofit, approved agency. This counseling must include a budget analysis. The individual must then file a certificate from the credit counseling agency certifying the services have been provided and showing any debt repayment plan that was developed.

4. Mandatory Financial Education
The debtor must complete approved personal financial management education before any debts can be discharged. If the debtor fails to get this education, discharge of the debts can be denied.

5. Automobiles
Chapter 13 plans allow a secured creditor to retain the lien on an automobile until the entire debt is paid if the vehicle was purchased within 910 days of filing.

6. Debts to be Discharged
Debts totaling more than $500 owed to a single creditor for luxury items that were acquired within 90 days of filing are presumed nondischargeable; cash advances of $750 or more taken within 70 days of filing are also presumed nondischargeable.

7. Time between Chapter 7 Filings
Chapter 7 debtors cannot receive a second discharge of debts if a prior discharge of debts was given within eight years or less of the new filing. (Previously, this was six years.)

8. Filing of Required Documents
The new law requires an individual to submit a number of documents to verify qualification for the bankruptcy filing. If these documents are not submitted within the given time frame, the filing will be dismissed. The documents to be filed include:

• List of creditors
• Schedules of assets and liabilities
• Declaration of income and expenses
• Certificate of credit counseling
• Evidence of all paid employment for 60 days before filing
• Evidence of monthly net income and any anticipated income increase
• Tax returns for the most recent tax year and previous years as required
• Photo ID

9. Attorney Inquiry
Attorneys hired by debtors must make their own inquiry to verify that the information provided by the debtor is correct. The attorney’s signature on the petition indicates this inquiry has been made.

10. Student Loans
The nondischargeability of student loans is now extended to include for-profit and nongovernmental lenders.

For more information about the new bankruptcy law, visit www.ftc.gov or meet with your FFEF credit counselor. Call toll free (877) 789-4174, or visit www.ffef.org.