The Bankruptcy Abuse Prevention and Consumer Protect Act of 2005
On April 20, 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law by President George W. Bush, bringing significant changes to the United States Bankruptcy Code.
The changes made by the BAPCPA attempt to make it increasingly difficult for consumers to discharge debt under Chapter 7 of the bankruptcy code. To this end, the law adds a means test for chapter 7 bankruptcy filers.
The Means Test for Chapter 7 Bankruptcy was designed to determine if someone filing chapter 7 bankruptcy has sufficient income to pay some portion of their debts, thus requiring a chapter 13 bankruptcy filing. The means test is applied to filers whose gross income, based on the six months prior to filing, is above the median income in their state. Consumers filing bankruptcy with incomes below their state’s minimum automatically qualify for chapter 7.
Filers with incomes above the median are required to calculate their Disposable Monthly Income (DMI) to determine if they are able to make sufficient payments on their debts to qualify for Chapter 13 bankruptcy.
Many new requirements were additionally added. These include:
- Mandatory credit counseling and debtor education prior to filing bankruptcy
- Additional filing requirements (paperwork) and fees
- Increased attorney liability and costs
- Fewer automatic protections for filers
- Increased amount of debt repayment under Chapter 13
- Increased length of time between discharges
All of these changes make it much more difficult for the consumer to file personal bankruptcy. It also increases the burden of bankruptcy attorneys.
At Higgins & Associates, we are committed to providing our clients with the highest levels of professionalism, competence and trust. You can rest assured that we have the knowledge and expertise to navigate these new regulations and ensure your filing is successful and as pain free as possible.
If you would like to learn more, or if you need to speak to an attorney, please contact us or complete our online form.