New US Bankruptcy Code Expected To Have Major Impact

by Glen Shapiro, LawAndTax-News.com, New York

12 September 2005

Observers have warned that the new US Bankruptcy Abuse Prevention and Consumer Protection Act, set to come into force next month, is likely to create some confusion, necessitating court proceedings to iron out some of the inconsistencies.

Among the key provisions of the bill for individuals are that a debtor's state median income will be assessed, with the amount affecting the type of bankruptcy filing that they can make, and the ability to shelter assets through trusts will be limited. The state homestead exemption will also be limited to $125,000 if the residence was purchased less than three years and four months before filing for bankruptcy.

For businesses, the new legislation imposes an 18 month cap on the corporate debtor's exclusivity period for filing a reorganization plan, ensures that goods purchased in the ordinary course of business and delivered within 20 days of the filing will be counted as administrative expense claims, and obliges filing for Chapter 15 bankruptcy in cross-border insolvency cases.

Speaking to the National Law Journal last week, bankruptcy expert and New York law professor, Alan Resnick observed that:

"I don't think there's any doubt that we will see a lot of litigation in the year to come over interpreting many ambiguities in these provisions. It needs a technical amendments bill to clean it up."

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