After eight years of wrangling, the most sweeping and controversial overhaul of federal bankruptcy rules in nearly three decades was signed into law last week.

		Online graphics A chart shows an increase in personal bankruptcy filings in the past decade. A chart shows the percentage of Chapter 13 filings. First of a series This is the first of a three-part series on the new bankruptcy law. Part Two New law's 'means' test just mean, bankruptcy experts say Part Three Ripe for abuse? Critics of federal bankruptcy law worry about counseling requirement

Now comes the fallout.

Although proponents and opponents remain deeply divided on the law's merits, both agree that the changes, most of which take effect in six months, will have widespread consequences for consumers.

Supporters say the legislation will staunch an avalanche of personal bankruptcies, which have nearly doubled nationwide over the last decade to 1.56 million in 2004. They say the new rules will help catch abusers who can afford to pay their debts and will clean up a system that is often used as a handy fallback by gamblers, shopaholics and scoundrels who run up bills they know they never will pay.

The stiffer rules, the supporters say, will deter excessive spending the way the threat of fines and jail time can steer individuals away from crime.

But opponents argue that the new regulations are misguided and will do more harm than good. They insist the law will put needless strain on an already overstretched court system and unfairly saddle all filers, including the most needy and deserving of a fresh start, with excessive costs and burdens.

The law mandates, for example, that consumers pay for credit counseling within six months prior to filing bankruptcy and complete a financial management course before a judge could erase any debts.

It also will raise certain filing fees and require more documentation and trips to court, driving up legal costs.

Moreover, a provision that makes lawyers liable for their clients' mistakes or cheating also is expected to boost legal expenses as attorneys seek compensation for more time spent verifying petitions and for higher malpractice insurance premiums.

Overall, the Congressional Budget Office projects that attorney fees will jump by $150 to $500 per case, on average, under the new law.

Legal costs for the more expensive and lengthy type of bankruptcy filing, a Chapter 13, could surge locally from about $2,000 to $3,000 per case, said Paul McElrath, head of the bankruptcy practice at Moody, McElrath & Johnston, Downtown. He's advising clients considering bankruptcy to act now before the new rules take effect.

It is certain that the tougher rules will deny some debtors the option of filing bankruptcy under Chapter 7, the most lenient and popular type of filing that essentially allows them to walk away from their bills.

That's because at the heart of the new law is a provision that requires filers earning more than their state's median income (adjusted for household size and inflation) to undergo a so-called "means test."

Those who flunk will be allowed to file under Chapter 7 and erase their debts. Those who pass the test will be deemed to have the means to pay a certain portion of their bills and will be limited to filing under Chapter 13, which requires that debtors live under a court-ordered spending and repayment plan.

Currently, judges have the discretion to determine which chapter is most suitable.

Under the new law, the court must use a combination of state and IRS standards to determine what are reasonable costs for housing, food and other living expenses. Debtors who have enough left over to pay creditors at least $6,000 over five years ($100 per month) will be required to file under Chapter 13.

The means test has been criticized for its one-size-fits-all set of guidelines that opponents say will deny deserving people needed relief. They say determining how much debtors can afford to pay is better left up to the judges reviewing the cases.

"The problem with the means test is the calculation is an artificial one, both on the income and expense side," said Jeff Morris, an attorney and resident scholar at the nonpartisan American Bankruptcy Institute (ABI).

For example, a debtor's current monthly income is figured by averaging income from the previous six months. "Let's say you work for five months at $6,000 a month, and then are laid off for a month and file bankruptcy," Morris said. Under the means test, " you have a monthly income of $5,000, when essentially it's zero."

Bankruptcy attorneys also warn that the provision forcing them to vouch for the accuracy of clients' petitions also could backfire by making legal help less available for those who need it most.

McElrath, of Moody, McElrath & Johnston, predicts liability issues will force some small bankruptcy lawyers, including those that do free and low-cost legal work for community groups, such as Neighborhood Legal Services, to drop out of the business.

"Attorneys will have to verify the accuracy of petitions or be subject to penalties. That's a big burden for someone just trying to help out," McElrath said.

As with many new laws, it will take time to sort out the boundaries, the ABI's Morris said. "The bill has a lot of things in it that are relatively unclear," he said.

Consumer groups have blasted the legislation overall for targeting debtors while overlooking free-wheeling lenders that extend credit to anyone, then keep them in debt by charging crushing interest rates and fees.

"There's not a single restriction of any kind, on any kind of abuse or aggressive lending practice [in the new law]," said Travis Plunkett, legislative director at the Consumer Federation of America in Washington.

If lenders and credit card issuers were choosier, he said, consumers wouldn't be as likely to go belly-up when hit by the usual triggers for bankruptcy, such as job loss, divorce and unexpected medical bills.

Besides means testing, mandatory credit counseling and increased liability for bankruptcy attorneys, other key provisions of the law include:

Stricter limits on how often debtors can file bankruptcy. Debtors will be limited to using Chapter 7 once every eight years. To qualify for Chapter 13, filers will have to wait at least two years after a previous Chapter 13 filing, or four years following a Chapter 7 case and the less common Chapter 11 and 12 filings.

Under the old law, Chapter 7 was available every six years, while there was no restriction on Chapter 13 filings.

Tougher restrictions on dismissing auto loans. Currently, Chapter 13 filers who want to keep their cars can elect to pay back the depreciated value of a vehicle, which often is much less than what they owe, and "cram down" the rest, converting it to unsecured debt, which has a lower repayment priority.

The new rules say filers must repay the entire loan if it was purchased within 2 1/_{2 years preceding the bankruptcy filing.}

_{The CFA's Plunkett calls the measure a gift to car lenders at the expense of other creditors. "If you pay more to an auto lender, you will have less for your mortgage lender and others, and less to complete your repayment plan."}

_{Designation of more debts that must be paid. The new rules say credit card charges made within three months of filing must be paid off. Currently, only credit card bills for luxury items or cash incurred within 60 days of filing are non-dischargeable.}

_{Extension of a creditor's right to contest a case. Under the old law, creditors that were shut out from getting any payments could contest the case if it was a Chapter 7 filing. The new law extends that right to Chapter 13 filings.}

_{Limits on states' homestead exemptions. A handful of states, including Florida and Texas, allow bankruptcy filers to protect the full value of their homes from creditors, no matter what they are worth.}

_{A provision in the new law caps the amount a filer can shield at $125,000 if the homeowner has been a resident of the state for less than three years and four months. The measure is aimed at stopping millionaires in bankruptcy from flocking to lenient states to buy mansions and avoid foreclosure.}

_{Critics say the new homestead rule is a giveaway for the rich because it still allows people who have lived in a state for a short time to claim their state's full homestead exemption. (In Pennsylvania, married couples generally can shield roughly $40,000 worth of equity in their homes.)}

_{The homestead cap is one of the few provisions that became effective immediately after the bill was signed into law.}

_{The legislation also preserves asset protection trusts, which are used by the wealthy to shelter assets in bankruptcy.}

_{Ken Steinberg of Steidl & Steinberg, Downtown, said that failing to limit exemptions for such trusts is an example of how the new law panders to the rich.}

_{"People should ask their legislators why rich people get exemptions and normal everyday people don't get the same consideration," Steinberg said.}