On April 20, 2005, sweeping amendments were made to the Bankruptcy Code via enactment the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The BAPCPA, which came to be known as the "New Bankruptcy Law" (not so new any more), made important changes to the existing bankruptcy laws.
The BAPCPA can have a huge effect on your available filing options and decision to file bankruptcy. The BAPCPA is particularly important in San Diego, California with regard to income (how much money you can make and still file) and determining exemptions and what assets you can keep. Among the most notable, and critical changes, brought about by the BAPCPA are:
(A) Establishment of the Credit Counseling requirement;
(B) Creation of the Means Test;
(C) The addition of a residency requirement affecting exemptions;
(D) Drastic curtailing of your ability to eliminate student loans.
The BAPCPA created a Credit Counseling requirement: In order to file a consumer case (that is, a non-business case), you must complete a 2-Step Credit Counseling process:
Step 1: Before your case is filed, you must complete a pre-filing course; and
Step 2: After your case is filed, you must timely complete a post-filing course.
The class must be completed for the particular district that you live in. For example, if you live in San Diego, California, then you must complete credit counseling for the Southern District of California, which is the district that covers San Diego County.
The BAPCPA created a Means Test that will be applied to your individual situation. If you pass the Means Test, you can file for Chapter 7. If you do not pass, you are not allowed to file under Chapter 7 and will be forced to file under a different "Chapter," that is, one of the other bankruptcy filing options.
Whether or not you can pass the Means Test will depend upon your individual situation, and, depending upon your circumstances, you may fit under an exception to the Means Test.
Although there are Means Test calculators and other tools publicly available on the internet, proper analysis requires that a lawyer perform the Means Test. An internet Means Test calculator is never a substitute for thorough analysis and application of the Means Test by a lawyer.
The BAPCPA attempted to eliminate “forum shopping” into states such as California, which has generous exemptions, by creating a residency requirement that determines which state’s exemption laws you get to use when you file. "Exemptions" refer to what property you keep when you file bankruptcy.
In California, your exemptions are usually provided for under California law, however under the BAPCPA, if you have not resided continuously in California for the required statutory period the laws of a different state may apply to your case. No longer can a resident of Arizona, which has ungenerous exemptions, move to San Diego, California, and use California's generous exemptions.
Prior to enactment of the BAPCPA, private student loans, that is, educational loans that are not made or guaranteed by the Federal Government, were dischargeable (you could eliminate them). The BAPCPA drastically changed that law.
With the enactment of the BAPCPA, all educational loans, including privately funded educational loans, are nondischargeable unless you can show that nondischargeability would post an “undue hardship” upon you and your dependents. "Undue hardship" has a very specific legal meaning and is determined under a special test applied by the Courts. Learn more about the undue hardship test for discharging student loans. For more detailed analysis, you will need to talk to a bankruptcy lawyer.
In San Diego, California, unless you are so physically or mentally disabled that you are incapable of working again, the judges in the San Diego Bankruptcy Court are not likely to let you discharge your student loans.