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"Bankruptcy Abuse Prevention and Consumer Protection Act"
October 17, 2005 is a date in the history of U.S. Bankruptcy Law to remember.
That is the day that the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) went into effect. BAPCPA has a lot of abuse protection but very little consumer protection. Because the general public was so afraid of the changes and worried that Chapter 7’s would become a thing of the past, leading up to the implementation date, there were a record number of bankruptcy Chapter 7 filings – so many that the court was overwhelmed. It has calmed down since then, but there are now, again, record numbers of filings because of the economic and mortgage foreclosure crisis.
To start off, you need to know that Chapter 7 bankruptcies are still a very viable choice for those who qualify. A Chapter 7 bankruptcy is called“liquidation” and the theory behind it is that you give up your assets to the BR court; the court sells them and pays some money to your creditors. In exchange for that the court forgives all your other debt. But – there are exceptions – some debt is never forgiven in bankruptcy (domestic support obligations, some taxes, some student loans, etc.) and you do not give up everything you own – some property is exempt. The exemptions vary and we will address some of those in future editions.
The main focus of BAPCPA is the addition of a “means test.” This is essentially a look back at your income for the last 6 months before filing a BR to see if you qualify. Most debtors are deathly afraid of this and think that they will not qualify for a Chapter 7 because they make too much money. That is true in some cases but not all. The Means Test is complicated and should be done by a qualified attorney because there are expenses you can deduct in the test in order to qualify that the lay person does not know about. In future editions, I will go more deeply into all of the bankruptcy chapters and get more detailed regarding the exceptions to discharge (those debts not discharged in BR) and the exemptions (those assets you can keep in BR). In the next edition, I will compare and contrast Chapter 7’s with Chapter 13’s (repayment plans).
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Law Office of Harvey J. Spinowitz, P.A. ~ Attorneys at Law ~ (727) 449-9929 (727) 781-5LAW
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