Tuesday, February 3, 2009

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005



By: Tsu-Han (Ina) Chang

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was signed into law by President Bush on April 20, 2005. The purpose of the act was to make it more difficult for consumers to easily clear their debt by filing for Chapter 7 Bankruptcy.

In the past, before the passing of the BAPCPA, any debtor could file for bankruptcy under Chapter 7. However, with the passing of the BAPCPA, debtors were now subject to test that calculated the debtor’s income and comparing it to that of the average in the debtor’s state. If the debtor was found to have the majority of their debt be based on consumer debt, his/her case would be dismissed. If not, the “means test” would be administered to determine if the debtor should continue to file for Chapter 7 Bankruptcy or move to file for Chapter 13.

The BAPCPA provides several services for debtors filing for bankruptcy. Debtors are to receive mandatory credit counseling to help them better micromanage their finances. Debtors also receive financial education to assist debtors in making better decisions regarding filing for bankruptcy and paying off debt in the future.

BAPCPA provides significant amendments to the Bankruptcy Code since its establishment in 1987.

References:
http://www.nacm.org/resource/Bankruptcy-Act_apr15-05.html
http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act
http://www.usdoj.gov/ust/eo/bapcpa/index.htm



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