New legislation will soon make it harder for people to file for Chapter 7 bankruptcy

• But faced with the prospect of new bankruptcy rules - approved by the Senate late yesterday in a 74-to-25 vote - that would make it harder for someone in his situation to erase debts, Mr. Haynes met with a lawyer last night to consider a bankruptcy filing.
• The rules would make it harder for individuals to walk away from their obligations if they can pay off at least some of their credit card bills or other debts.
• "I will be sending out letters to clients saying if you have relatives or friends who are struggling, tell them not to wait," said Norma Hammes, a consumer bankruptcy lawyer in San Jose, Calif.
• Supporters of the legislation, which include credit unions, banks and retailers, say that the tougher qualifying rules will curb abusive bankruptcy filings.
• The new legislation would make it difficult for individuals to file for Chapter 7 if their household income is greater than the median for their state.
• As a result, more individuals are expected to file for Chapter 13, which under the new law will require debtors to pay off at least a portion of their debts over at least five years, making it more difficult to get a fresh start.
• Some 3.5 percent of creditors who filed for Chapter 7 would be forced to shift their case to a Chapter 13 filing based on the new income standards imposed by the bill, according to a 1998 study sponsored by the American Bankruptcy Institute, a research group.
• To qualify for Chapter 7, an individual's income would have to be less than his state's median household income.
• An older car that works fine but is already paid off, he said, does not qualify.