This is NOT true.   While it was clearly the intent of  Congress to appease the credit card lobby and make it more difficult to eliminate credit card debt, the new bankruptcy laws which went into effect in 2005 made filing bankruptcy more complicated, but certainly did not eliminate the ability to do so.

Credit card debts are just as dischargeable as they were for at least 30 years prior to the recent law change.  They are not dischargeable if incurred through fraud or other exceptions to discharge (see http://www.bklaw.com/discharge.html for more information on this), but otherwise you can still file a Chapter 7 case (or a chapter 13 or Chapter 11) and eliminate credit card debt.

Income taxes may also me discharged under certain circumstances.   The law has not change on this in over 30 years.   It is a very complicated analysis, and dischargeability can only be determined after analysis by a professional of ACTUAL internal transcripts from the taxing agency, but the basic rule is that if the taxes are older than 3 years from the date the return was last due to be filed, and the return was filed more than 2 years ago, and not assessed  in the last 270 days, then they may be dischargeable.  To see more on tax discharge in bankruptcy,  visit http://www.bklaw.com/taxes_bankruptcy.html

The bottom line is, don’t believe rumors.  Talk to a bankruptcy attorney about your options.

For more interesting bankruptcy myths, visit http://www.bklaw.com/bankruptcy_myths.html

A bankruptcy attorney is an attorney (or lawyer), licensed to practice in the courts of whatever jurisdiction he is practicing, who handles bankruptcy related cases. (click here for an explanation of the differences–if any–between an attorney and lawyer)

A debt relief agency is a made-up designation that our Congress created as part of the 2005 Bankruptcy Reform Act and is defined in 11 U.S.C. 101(12A). It includes “any person who provides any bankruptcy assistance to an ‘assisted person’ in return for the payment of money or other valuable consideration, or who is a bankruptcy petition preparer…”. Without getting too detailed about who an assisted person is and other nuances, this basically includes a very wide variety of “people”, including credit counselors, unlicensed petition preparers, and it can be argued that it can extend to accountants or anyone else who provides any assistance in connection to the filing or possible filing of a bankruptcy case or even giving financial advice. It may be even broader than that.

Subject ultimately to rulings by the appellate courts in this country, all bankruptcy attorneys are debt relief agencies (although this is being appealed in many different circuits at this time). However, as you can see above, not all debt relief agencies are bankruptcy attorneys.

It has been argued that one of the reasons Congress added this definition was to cause the precise confusion experienced by my client. It was implemented to add additional disclosure and paperwork requirements, to add costs to the bankruptcy process and to cause confusion between who is licensed to practice bankruptcy and who is not, and (it has been argued) it was designed to take business away from licensed attorneys as a result of this confusion.

In any event, in order to represent you in a bankruptcy case (or any other legal proceeding, for that matter) an attorney must be licensed to practice law in whatever state your case is in. Whether or not he/she is also a “debt relief agency” depends on the rulings of the courts in that jurisdiction. Perhaps more importantly, it is virtually meaningless.

For those who don’t know, the bankruptcy laws were dramatically complicated in 2005 after years of lobbying by the credit card industry, and numerous vetoes (or at least threatened) by President Clinton. The laws made it more difficult to be eligible to file bankruptcy, and made all bankruptcy cases more expensive to file. Click here to see more about the new bankruptcy laws.

During his campaign, both in the primaries and now, Obama has repeated that he intends to change the current bankruptcy laws, at least by modifying it to allow more eligibility for those with medical debts. How much further he would go remains to be seen.

One interesting note is that while Obama consistently voted against the Bankruptcy Reform Bill that passed in 2005, his vice presidential running mate, Joseph Biden, voted in favor of it. Biden, who is a senator from Delaware where most of the major credit card companies are incorporated, apparently voted to curry favor from this longtime lobby.

John McCain, on the other hand, has mentioned nothing about the bankruptcy laws in his campaign, nor is it expected that modifying it would be on his agenda as president. McCain voted in favor of the 2005 law change.

The point of the above is not a political endorsement, but rather to let you know that if you think that the current bankruptcy laws are unfair, at least on that issue there is a clear choice.