Under the old rules, people who filed under Chapter 13 had to devote all of their disposable income -- what they had left after paying their actual living expenses -- to their repayment plan. The new law adds a wrinkle to this equation: Although Chapter 13 filers still have to hand over all of their disposable income, they have to calculate their disposable income using allowed expense amounts dictated by the IRS -- not their actual expenses -- if their income is higher than the median in their state (see "Restricted Eligibility for Chapter 7," above). These expenses are often lower than actual costs.

What's worse, these allowed expense amounts must be subtracted not from the filer's actual earnings each month, but from the filer's average income during the six months before filing. This means that debtors may be required to pay a much larger amount of "disposable income" into their plan than they actually have to spare every month -- which, in turn, means that many more Chapter 13 plans will fail.

Property Must Be Valued at Replacement Cost

Under the old law, Chapter 7 filers could value their property at what they could sell it for in a "fire sale" or auction. This meant that used furniture, hobby items, cars, heirlooms, and other property a debtor might want to keep were typically assumed to have little value -- and, therefore, that it often fell well within the "exempt property" categories offered by most states. (Exempt property is property that cannot be taken by creditors or the trustee -- you are entitled to keep it.)

Under the new law, you must value your property at what it would cost to replace it from a retail vendor, taking into account the property's age and condition. This requirement is sure to jack up the value of property, which means more debtors stand to have their property taken and sold by the trustee.