Major Bankruptcy Reform Means Changes for Many Professionals, CCH Says

Update, April 20, 2005: President Bush Has Signed the Act Into Law

(RIVERWOODS , ILL., April 14, 2005) – The most sweeping overhaul of the Bankruptcy Code since its enactment in 1978 will bring big changes not only for debtors seeking protection, but also for a wide array of legal and business professionals, credit providers, credit counselors and others, according to CCH INCORPORATED (, a leading provider of business law information and publisher of the authoritative Bankruptcy Law Reporter. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, cleared by Congress on April 14, is expected to be signed into law shortly by President Bush, with most provisions of the Act going into effect 180 days after enactment. To aid professionals affected by the new law, CCH offers a new book resource: Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 : Law and Explanation (approximately 400 pages, $57 ).

For additional special CCH coverage of the new bankruptcy law, including a CCH Tax Briefing on the taxation provisions of the Act, visit The site will also be updated in the coming days to include a Special CCH Briefing on the overall bill.

Bankruptcy Act Overview

At the heart of the Act is the creation of a needs-based “means” test that requires an individual’s assets and income to be considered when deciding whether the applicant is abusing the system by seeking to obtain a “fresh start” through Chapter 7 liquidation, instead of repaying debts under a Chapter 13 repayment plan.

“Bankruptcy judges currently make that decision at their discretion, and debtors are not required to prove insolvency to wipe out most debts,” noted Sheila Williams, CCH banking law writer/analyst.

The Act contains special accommodations for active duty military personnel, low-income veterans and those with serious medical conditions. In addition, bankruptcy courts are given discretion to reduce unsecured consumer debts, typically credit card debts, by up to 20 percent if a creditor refuses to negotiate a reasonable alternative repayment schedule proposed by an approved credit-counseling agency. Domestic support obligations will be accorded first priority among unsecured debt. Additional protections also are provided for retirement funds and savings for postsecondary education.

Provisions Discourage Abuses

Some of the major provisions are designed to discourage abuses under the current system. These provisions will increase secured creditors’ protections during the bankruptcy process; require prompt filings of schedules and other information; change the presumption of nondischargeability for luxury goods; ensure that creditors receive notice of bankruptcy filings; require Chapter 13 payment plans to extend to five years for debtors with income above the statutory threshold; and limit the extent to which real estate assets can be sheltered through homestead exemptions.

The law also includes heightened oversight of small business bankruptcy, new provisions relating to tax claims, a new bankruptcy chapter for transnational bankruptcy cases, modified treatment of certain financial contracts in bankruptcy, expanded eligibility for farm bankruptcy protection and special rules governing the bankruptcy of health care businesses .

Credit providers will have to comply with new disclosures in credit card statements relating to minimum payments, introductory rates, late fees, tax consequences of home equity loans and Internet-based credit card solicitations.

To prevent abuse in corporate bankruptcies, greater restrictions will be put on fraudulent transfers to insiders, protections for insurance benefits for retired employees would be increased and discharge of debts incurred in violation of securities laws will be prohibited. The Act also contains a number of significant provisions related to taxation and bankruptcy.

“This means that a wide range of legal and business professionals – not just bankruptcy attorneys – will have to become familiar with the new law,” noted CCH Principal Tax Analyst Mark Luscombe, JD, CPA.

CCH Offers Law and Explanation Book

To help professionals cope with the largest overhaul of the Bankruptcy Code since its enactment in 1978, CCH is offering Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: Law & Explanation. It includes the full text of the legislation, a table of statutes added or amended by the Act, table of effective dates, invaluable CCH explanation of the provisions in the Act, selected committee reports and other legislative history. The 14 explanatory chapters provide detailed discussion of all of the changes to the Bankruptcy Code, including specialized treatment of the legislation’s tax provisions in a chapter authored by bankruptcy tax expert, Kenneth C. Weil.

For more information or to order the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: Law & Explanation, call 800-248-3248 or visi t the CCH Online Store at Single copy price is $57; quantity discounts are available.


CCH INCORPORATED (, headquartered in Riverwoods, Ill., was founded in 1913 and has served more than four generations of business professionals and their clients. The company produces more than 700 electronic and print products for the tax, legal, securities, human resources, health care and small business markets. CCH is part of the Wolters Kluwer Legal unit.

Wolters Kluwer is a leading multinational publisher and information services company. Wolters Kluwer has annual revenues (2004) of €3.3 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands ( Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

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EDITOR'S NOTE: Editorial review copies of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: Law and Explanation, are available upon request for members of the press. Contact Leslie Bonacum, 847-267-7153 or or Neil Allen, 847-267-2179 or