MMI: The Bankruptcy Abuse Prevention and Consumer Protection Act; Indebted Consumers Are in for a Change

HOUSTON--(BUSINESS WIRE)--Sept. 30, 2005--Beginning on October 17, many bankruptcy filers will find it more difficult to discharge their debts. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the Act) makes some sweeping changes to the former bankruptcy law.

The Act was created to address the problem of consumers' skyrocketing debt. Over the past decade, the number of Americans filing for bankruptcy has doubled and at least $40 billion in debt is now forgiven annually.

“The bill's financial literacy provisions represent a positive and significant consumer benefit”

Most significantly, consumers will now need to demonstrate that it is necessary for them to file for Chapter 7 relief, which generally discharges unsecured debts. Through the use of a "means test," the Trustee or any creditor can now bring a motion to dismiss a Chapter 7 bankruptcy if the debtor's income is greater than the state median income. Certain debtors who meet a new standard would be shifted from a Chapter 7 bankruptcy to five-year repayment plan in Chapter 13. Other changes include:

-- In the absence of undue hardship, regardless of the nature of the lender, student loans can not be discharged. This covers loans from non-governmental and profit-making organizations.

-- Debts owed to a single creditor totaling more than $500 for luxury goods incurred within 90 days of filing are presumed non-dischargeable; cash advances of $750 within 70 days cannot be discharged.

-- Under the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, consumers can file for Chapter 7 only once every eight years.

The bill also includes two provisions mandating financial counseling and education. Before filing for bankruptcy, consumers would be required to have a briefing on the alternatives to bankruptcy; and before receiving a bankruptcy discharge a debtor would be required to complete an instructional course concerning personal financial management. These provisions were included to provide debtors in bankruptcy with the skills and tools needed to avoid future financial problems.

The experts at Money Management International (MMI) support Congress' efforts to ensure that consumers will be better informed about the alternatives to filing bankruptcy. "The bill's financial literacy provisions represent a positive and significant consumer benefit," said Kelly Rote, communications manager for MMI. "This bill ensures that consumers will be given tools to help avoid future financial trouble. With counseling and education components, the hope is that consumers can avoid filing for bankruptcy again," added Rote.

MMI is preparing to deliver the educational services mandated by the Act. MMI has been selected as an approved Credit Counseling Agency by the Executive Office of the United States Trustee (EOUST). For more information, consumers can visit www.bankruptcy.org.

For more information about the alternatives to bankruptcy, visit www.moneymanagement.org.

About Money Management International

Money Management International (MMI) is a non-profit, full-service credit counseling agency, providing confidential financial guidance, financial education, counseling and debt management assistance to consumers for over 47 years. MMI helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To learn more, call 800-762-2271 or visit www.moneymanagement.org.