President Bush signed into law the bankruptcy reform bill, giving the go-ahead to the most far-reaching revision of the bankruptcy code since its enactment in 1978.

The legislation, which recently passed Congress after years of intensive lobbying by banks, credit card companies and retailers, tightens the ability of consumers to dissolve their debts.

It sets up a flexible means test to assess individuals' ability to repay their debts. The formula takes into account whether the filer earns more than the state median income and can repay at least $100 a month of their unsecured debt over five years. Legitimate expenses such as food, shelter, clothing, medical, transportation, attorneys' fees and charitable contributions are taken into account in the analysis.

The bill contains 20 tax provisions, including measures that: modify the treatment of tax liens to provide greater protection to lien holders; prescribe the rate of interest to be paid on mandatory interest payments on tax claims; limit the automatic stay of US. Tax Court proceedings to prepetition taxes; and permit taxing authorities to petition to convert or dismiss a case if the debtor fails to timely file a tax return or obtain an extension, depending on which is in the best interests of creditors and the estate.

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