The Bankruptcy Abuse and Consumer Protection Act, signed into law by President Bush last April, promises changes to Federal bankruptcy law that have been long sought by the lending industry. The bill promises sweeping changes to Federal law, and will make it much harder for the average consumer in financial trouble to have their debts wiped out by filing for bankruptcy. Recent trends suggest that those considering a bankruptcy filing should do so now, as the line to do so is already getting rather long.

The bill will make it harder for the average consumer to file under Chapter 7 of the Federal code, which allows the courts to wipe away consumer debt and give the debtor a fresh start. Filings after the October 15 deadline will be subject to a means test and those that pass a rather generous income gauge will have to file under the more strenuous Chapter 13, which requires a repayment plan and the assistance of an attorney. Indications are that with the deadline looming, bankruptcy filings are not only higher than they were last year, but they are also higher than anticipated. Nationwide, filings are 20-25% higher than last year, and some bankruptcy attorneys say that their business has nearly doubled.

Complicating matters is another law, passed in 2003, that requires credit card companies to establish a payment schedule that allows consumers to repay their debts in a reasonable amount of time. Since the beginning of this year, the major credit card companies have doubled their minimum payments from 2% of the balance to 4% of the balance. For the average household with $10,000 in credit card debt, this doubles the minimum monthly payment from $200 to $400, an increase that many consumers cannot afford.

The dramatic increase in bankruptcy filings has overwhelmed bankruptcy attorneys, who will face the additional burden of being liable for false information filed by their clients once the new law takes effect. This additional pending liability, combined with the additional workload, has prompted many attorneys to raise their fees by an average of nearly 20% over the same time last year.

What does this mean for those with problem debt? The deadline for filing under existing law remains October 14, 2005. After that, bankruptcy filings will be more complicated and expensive. The courts and law offices are already becoming clogged with bankruptcy cases. Anyone who may be considering filing for bankruptcy to overcome his or her problem debt should do so now. Waiting even another day could be too late.