In April 2005, Congress made extensive changes in U.S. bankruptcy law with effect from October 17, 2005. Called the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," it spells trouble for people struggling with debt problems.

This new bankruptcy law and thanks to those who abused the privilege, new bankruptcy laws are stricter and have more requirements than ever before.

Some Facts on Bankruptcy

1. Between 1995 and 2004, bankruptcy filings doubled, while in that same period, credit card industry profits tripled.

2. For people 60 or older, 85% of bankruptcies are caused by medical bills or loss of job.

3. The median income of bankruptcy filers is $27,000.

Here is a look at some of the changes within the new bankruptcy law and how these changes may affect your decision to file bankruptcy.

New Bankruptcy Law – Chapter 7 Filings

The requirements for filing a Chapter 7 bankruptcy have also changed. Now, thanks to the changes in the laws, you have to prove your income. If you have a higher income than stated by the median income within your state, you will likely have to file a Chapter 13 bankruptcy instead of a Chapter 7.

Bankruptcy Law – Chapter 13

Now, with the new bankruptcy law, you may find, if you have to file for Chapter 13 bankruptcy, that you are paying more than you can comfortably live with. There are specific guidelines to calculating how much you have in disposable income and assets. This will depend on your income for the last six months before you filed bankruptcy and not your current income.

The worst aspect of the new bill is the use of IRS "allowable" expense schedules for determining your monthly budget. In short, people attempting to file bankruptcy are in for an extremely rude shock. No more cell phones, cable TV, high-speed Internet access, movies, meals out with the family, and anything else beyond the minimum allowable expenses as determined by the IRS and the courts.