Special Message from:

The new Bankruptcy Reform Act goes into effect on October 17, 2005, which is an option for seniors and disabled individuals who cannot pay their debts. 

DCSD is a legal service alternative to bankruptcy for seniors and disabled individuals who cannot afford a bankruptcy but, more importantly, may not need to file for bankruptcy.  In order to compare DCSD legal service and the new Bankruptcy Reform Act, you should review the following information about the new bankruptcy law:


  • The new bankruptcy Act sets up a new test for measuring a debtor’s ability to repay.  People with insufficient assets or income can still file a Chapter 7 bankruptcy, which if approved by a judge erases debts entirely after certain assets are forfeited.  But those with income above their stat’s median income who can pay at least $6,000 over five years - $100 a month - will be forced into Chapter 13, under which a judge orders a repayment plan.

  • In calculating income, people filing for bankruptcy may deduct various expenses as defined by the Internal Revenue Service, including food and clothing, and some health and disability insurance expenses.

  • People seeking bankruptcy protection are required to take credit counseling courses within 180 days of filing.

  • The law allows for special accommodations for active-duty service members, low-income veterans and those with serious medical conditions in the new income test for bankruptcy applicants.

  • It requires billing statements for credit-card accounts to include an example of how long it would take to pay off a balance at a specific interest rate if only minimum payments are made.

  • Creditors can seek to have a Chapter 7 liquidation filing dismissed or converted to a debt reorganization plan under Chapter 11.”

  • As indicated above, anyone seeking a Chapter 7 bankruptcy are required to take a credit counseling course within 180 days of filing.  The U.S. Trustee’s office has posted a list of approved credit counseling organizations.  However, recently, a bankruptcy attorney commented on this approved list by stating “All of the national providers approved to offer the bankruptcy credit counseling are debt management providers.  I guess the credit card companies got their way after all!  They are the very same companies who pay these debt management agencies to operate.  Now they have a federally sanctioned opportunity to convince debtors not to go bankrupt, whether it’s in their best interest or not.”

  • Furthermore, because the bankruptcy attorneys who will be employed by people seeking bankruptcy will now be personally liable if the petitions are inaccurate.  It is estimated that bankruptcy legal fees will skyrocket.  In addition, the court fees have been increased and the ability to file bankruptcy again has been raised from seven years to eight years.

  • Travis Plunkett, Legislator Director of the Consumers Federation of America, called the law “Harmful and mean-spirited….It will halt some abuse by high fliers who should not be filing for bankruptcy, but it will also trap people that got into financial trouble through little or no fault of their own and block people’s realistic chances at starting over."

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