The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is a Bush-era piece of legislation designed to curb abuses of the bankruptcy system.  Its two primary purposes were to develop restrictions on individuals’ ability to file for bankruptcy—especially under Chapter 7—and to create consumer education requirements that are intended to prevent multiple bankruptcies by the same debtor.

In order to file under Chapter 7, individuals are now required to complete an income-based assessment to determine whether the elimination of most debts is warranted based on the facts.  All debtors are now also required to complete certain education classes in order to obtain a discharge of indebtedness through bankruptcy. If an individual wants to know more about the Bankruptcy Abuse Prevention and Consumer Protection Act, they should consult a knowledgeable bankruptcy lawyer that could answer their questions.

New BAPCPA Filing Requirements

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) now requires that debtors submit to a means test in order to determine whether they qualify to file for Chapter 7 bankruptcy.  Individuals with monthly income that exceeds the state median are now required to complete a detailed assessment of their income and permitted expenses before filing.

The individual must provide his or her filed federal tax return from the prior tax year as proof of income, and a bankruptcy case will not be able to proceed until this document has been provided.  As a result, filing may be delayed for individuals who had not yet filed the prior years’ return or paid the associated tax liability. Generally, if the individual has sufficient disposable income to repay a portion of his or her debt, filing under Chapter 13 will be required.

Mandatory Education for Debtors

Beginning in October 2005, debtors are required to complete a mandatory credit counseling class under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).  This class must generally be completed within 180 days prior to filing for bankruptcy.  This course is designed to ensure that the individual has exhausted his or her other options before resorting to a bankruptcy filing.  This class can be completed online, in person or over the phone, and generally costs about $50, although a fee waiver can be requested.

After the bankruptcy case has ended, the debtor is required to complete a financial management education class before his or her debts can actually be discharged.  This class is designed to help a debtor learn to:

  • Create a budget and stick to that budget
  • Be more responsible with their use of credit
  • Manage their finances generally

Debtors should be sure to choose an education provider that has been approved by the federal government.

Additional Changes

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) made several additional changes to the bankruptcy system, as follows:

  • Child support and alimony. BAPCPA made unpaid child support and alimony obligations a priority debt, so that these debts are prioritized over other debts, meaning that they are paid first.
  • Automatic stay. BAPCPA reduced some of the protections previously afforded by the automatic stay.  For example, the automatic stay no longer stops proceedings to collect child support or divorce actions and does not stop eviction actions.

Contacting a New Jersey Attorney for More Information About BAPCPA

A bankruptcy attorney can provide more detailed information on the changes made by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) so that you can understand how they may impact your particular case. Call today for a consultation so that an attorney can begin to advocate on your behalf.