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2005 Bankruptcy Law Changes
by: Montana Legal Services Association (MLSA)
I need a bankruptcy, but I heard about a new law. Is there a new law?
Yes, there is a new bankruptcy law. It went into effect on October 17, 2005.
What changes in the new bankruptcy law are important to people with low incomes?
There are many changes. First, the most important change.
More people will need to pay back money that they owe. You will have to pay some of the money that you owe if your income is more than the median income in your state and you have excess income.
The median income for a 4-person family in Montana is $49,124 per year or $4,093.67 per month.
You will need to file a Chapter 13 bankruptcy.
My yearly income is less than the Montana median income. What about me?
You will still be able to file Chapter 7 bankruptcy.
Is that all?
No. There are other changes to the bankruptcy law.
- If you file a Chapter 7 bankruptcy, you must wait eight years before you can file a Chapter 7 bankruptcy again.
- You must get credit counseling. You must get this counseling less than 180 days before you file for bankruptcy. The credit counselor must be approved by the Court.
- You must take a money management class after you file for bankruptcy. The Court won't get rid of your debts until you take this class.
- You can give up to 15% of your income to charity. (This may allow you to qualify for Chapter 7 instead of Chapter 13.)
- You must pay the child support and maintenance (alimony) that you owe first. Child support and maintenance must be paid before taxes and any other unsecured consumer debt.
- You must pay any property settlement debts.
- You must give the Court a copy of your most recent tax returns. This must be done at least 7 days before the meeting of the creditors.
- You may not be able to get rid of some debts for luxuries and cash advances. Luxuries are goods that are not necessary for supporting your or your family. Luxuries are included if they cost more than $500 and are bought less than 90 days before you file for bankruptcy. Cash advances are included if they are for more than $750 and happen less than 70 days before you file for bankruptcy.
- You can ask the Court to "waive" the filing fee. This means that you may not have to pay the filing fee. The Court will only waive the filing fee if:
- you cannot make monthly payments and
- if you and your family make less than 150% of the Federal Poverty Level
The following chart shows the most that your family can earn each year and still be eligible for the filing fee to be waived.
| Number of Persons in Your Family |
150% of the Federal Poverty Level |
| 1 |
$14,355.60 |
| 2 |
$19,245.60 |
| 3 |
$24,135.60 |
| 4 |
$29,025.60 |
| 5 |
$33,915.60 |
| 6 |
$38,805.60 |
| 7 |
$43,695.60 |
| 8 |
$48,585.60 |
| For each additional person, add |
$4,890.00 |
- You must live in Montana for two years before you can use Montana exemptions.
- If you bought your vehicle within 2.5 years of filing for bankruptcy and want to keep it, you must pay back all of the money that you owe.
- Your landlord can still evict you if
- he gets a judgment of possession before you file for bankruptcy,
- you put the property at risk in the 30 days before you filed for bankruptcy, or
- you used illegal drugs or alcohol on the property in the 30 days before you filed for bankruptcy.
- You may still need to pay all of your student loans. This includes student loans from private lenders.
This sounds hard. Who can help me? The following resources can provide you with more bankruptcy information and/or assistance in filing for bankruptcy:
- Montana Legal Services Association HelpLine provides free legal advice and referrals to people who are low income: (800) 666-6899, (800) 926-3144, or (800) 999-4941.
- Consumer Credit Counseling of Montana provides professional financial counseling and education: (877) ASK-CCCS or http://www.cccsmt.org/.
- State Law Library provides legal information to judges, attorneys, and the general public by providing reference and research assistance: (406) 444-3660 or http://www.courts.mt.gov/library/default.asp
- Lawyer Referral and Information Service provides referrals and information to people seeking legal representation: (406) 449-6577.
Revised 7/05
Call the MLSA HelpLine for legal assistance:
(800) 666-6899
Montana Legal Services Association
616 Helena Avenue, Suite 100
Helena, MT 59601
(406) 442-9830
(800) 666-6124
www.mtlsa.org
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