(Editor's Note: Karl Topor is the Chairperson of the Bankruptcy Committee of the American Bar Association's Family Law Section.)

When did the new bankruptcy law take effect?

The new bankruptcy law, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, took effect on October 17, 2005.

What were the reasons for the changes in the law?

There had been attempts to revise the bankruptcy laws in previous years, but the legislation hit snags in Congress. Due to an increase in filings, losses incurred by creditors, a perception that bankruptcy is an easy out, and aggressive lobbying efforts by big banks, the revision passed last year and was signed into law.

Have bankruptcy filings remained steady under the new law?

There was a big march to file prior to the effective date of the new law, in an effort to qualify under the previous less restrictive provisions. There is probably a drop-off now.

What are the major changes from the previous law?

The bankruptcy trustee now plays a larger role and is more involved in the process. New requirements dictate a more thorough investigation of the financial situation of the bankruptcy applicant, such as appraisals and title rundowns. The trustee looks at the entire picture, and an applicant now must qualify through a “means test.” There is no exact formula – assets, liabilities, and income are plugged into a table to determine if the debts can ever be paid off.

Before debts can be eliminated, credit and budgeting counseling requirements must now be completed with an approved agency.

Also, there are stricter requirements for filing for a Chapter 7 discharge. A Chapter 7 bankruptcy as we knew it practically no longer exists for most filers. Most debtors must enter a Chapter 13 repayment plan, where a good percentage of the debt is repaid over time. The length of the repayment plan depends on the Bankruptcy Trustee assigned to the case.

Under the new law, some of the “automatic stay” provisions have been eliminated. For example, there is no longer protection against eviction actions, and an automatic stay will not apply to the collection of alimony and child support.

There is also an impact on bankruptcy attorneys. The new law requires more intensive work on behalf of the client and requires more certifications. Some attorneys now hesitate to accept bankruptcy business, as they are afraid of professional exposure under the new law. The number of attorneys practicing bankruptcy law has perhaps been cut in half. The new law is, in effect, making bankruptcy a very specialized bar. Because it will be harder to find an attorney to represent you, and because of more complex filing requirements under the new law, attorney’s fees and bankruptcy costs are likely to increase.

Another practical change is that bankruptcy filings have to be completed electronically now, which can be burdensome.

Are some debts nondischargeable?

Alimony and child support obligations are not dischargeable, and the discharge of student loans and tax debts is very limited.

Which property will have to be given up to creditors?

Again, unsecured debt will most likely be subject to a repayment plan under Chapter 13.

As far as the house is concerned, an important consideration is the homestead exemption, which still exists with some limitations by the new federal law. Homestead exemption amounts are different and vary widely from state to state.

What are some issues regarding bankruptcy in the context of family law?

At the outset, it is important to remember that the whole process is more costly and time-consuming.

The law now has more protection for spouses, in that there are very few divorce obligations that are dischargeable. Parties who are owed child support or alimony are given a high priority under the new law; alimony and child support obligations will not be discharged. Certain property settlements are not dischargeable. There is an examination as to whether a settlement payment is classified as non-dischargeable “support” – this really flowered with the new legislation, and is better defined now.

What is the effect of a bankruptcy on my credit?

This hasn’t changed much. It can still show up on your credit report for up to ten years. Limitations on creditor collection actions during the bankruptcy process are still in place.

What is the role of the Bankruptcy Committee of the American Bar Association’s Family Law Section?

The Committee examines changes in the law and was of course very busy as the new legislation was pending. The Committee is active in educating the public and professionals about bankruptcy issues.

It is important to note that the new law is still subject to interpretation by judges, so everything may take a while to settle down. The Bankruptcy Committee will keep abreast of these developments in the courts.