On April 14, 2005, the House of Representatives passed S.256, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, sending the bill to President Bush, who is expected to sign it shortly.

The major credit card companies and banks have been lobbying hard for the past few years to pass a bankruptcy bill that will make it more difficult for debtors to escape from the payment of their unsecured loans by taking bankruptcy. The bill almost passed a number of times but was defeated by various consumer groups.

Fewer individuals will be able to have their debts totally erased through the Chapter 7 procedure. This would force them to use Chapter 13, which imposes a repayment plan.  The bill would limit the use of state homestead exemptions to $125,000 for many persons seeking bankruptcy protection. The bill would also mandate that those seeking bankruptcy relief seek credit counseling but apparently it does not indicate whether the cost of such services are given priority if bankruptcy is taken.

There are many predictions that general practitioner lawyers will quit doing bankruptcy work because of new liabilities that the reform act imposes on attorneys -- such as having to verify the accuracy of a debtor's bankruptcy pention and related schedules -- such as his financial statement and statement of income and expenses.

Asset Protection & The Bankruptcy Reform Act of 2005 by Vernon Jacobs is an extensive analysis of the impact of the new bankruptcy law on various methods of asset protection.

Copies are available for subscribers to the Offshore Press International Wealth Protection Library.