There are several key changes to the new bankruptcy law, called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).  The three major changes to the law that will affect the most people are the ticket in, the means test, and the ticket out.  There are several other smaller changes that will also be discussed later.

Ticket In

The "ticket in" is simple a credit counseling session that the person wishing to file bankruptcy must attend.  You must attend this credit counseling session six months prior to applying for bankruptcy.  Also, the credit counseling session must be done by a non-profit agency that has been approved by the United States Trustees office. 

Means Test

Right now, the bankruptcy court determines whether or not you can qualify for chapter 7 bankruptcy.  Under the new law, your income will be tested by a two-part "means test."  The first test is a formula that exempts certain expenses (rent, food, etc.) to determine if you can afford to pay 25 percent of your unsecured debt, such as credit card bills.  Next, your income will be compared to your state's average income.

The court will not allow you to file chapter 7 bankruptcy if your income is above average for your state and you are able to pay 25 percent of your unsecured debt.  Under the new bankruptcy law, the court may allow you to file under chapter 13, though.

If your income falls below your state's average but you are able to pay 25 percent of your unsecured debt, you may be able to file chapter 7, but the bankruptcy court will still have the authority to require you to file chapter 13 instead if the court believes you would be abusing the system by filing under chapter 7.

The new bill also allows for special accommodations for active-duty military service members, for low-income veterans of the military, and those with serious medical conditions in the consideration of the new means test.

Ticket Out

The "ticket out" for the new bankruptcy law is attending a financial education class from an approved provider before your bankruptcy can be finalized.  The United States Trustees Office approves the class providers.  This class is commonly called a Debtor Education Class.

Also under the new law, the court will apply living standards derived by the IRS to determine what is reasonable to pay for food, rent, and other expenses to determine how much you have available to pay on your debts.

Other Changes

The new law will place more stringent restrictions on the homestead exemption.  One example is that if you have not lived in the state for at least two years, they may only take the state exemption of the state where they lived for the majority of the time for the 180 days before the two-year period.

Also under the new law, if some of the information about a client's case is found to be inaccurate, the bankruptcy attorney may be subject to various fees and fines.

This new bill also gives top priority to a spouse's claim for child support among creditors' claims on the debtor in bankruptcy.  Also, the new bill gives Wall Street investment firms the right to work for a company before and after it files for bankruptcy.