10 Years Later: What Have We Learned from BAPCPA?

Terri Haley

It has been almost ten years since the full implementation of the Bankruptcy Abuse and Consumer Protection Act (BAPCPA) in October 2005. Since that time we have seen reductions in the number of filings of consumer bankruptcies, or small business debt guaranteed with personal assets. The law, with its accompanying requirements for credit counseling (cf Sec. 106 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005), the exploration of non-bankruptcy alternatives and the requirement to explore Chapter 13 repayment plans as opposed to Chapter 7, was believed to be a fix to the steady rise in what was considered abuse of the system.

Unfortunately, those abusing the system were in the minority of filers. Most filings can be tied to a finite number of issues: Overextension or misuse of credit, unemployment or income that has been reduced, accident or long term illness, and divorce or separation. While the new law did put some controls around consumers seeking to use a bankruptcy filing “strategically”, most consumers fell into one of the “life event” scenario filings and may have been further harmed with the changes. The requirements and increase in costs hit the most economically disadvantaged consumers.

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