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Encyclopedia > Bankruptcy Abuse Prevention and Consumer Protection Act

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (April 20, 2005), providing for significant changes in Bankruptcy in the United States, was passed by the 109th United States Congress on April 14, and signed into law by President George W. Bush on April 20. Most provisions apply to cases commenced on or after October 17, 2005. The Act of Congress attempts to make it more difficult for consumers to erase debt by forcing more people to file under Chapter 13 bankruptcy rather than Chapter 7 bankruptcy. Bankruptcy in the United States is a matter placed under Federal jurisdiction by the United States Constitution (in Article 1, Section 8), which allows Congress to enact uniform laws on the subject of Bankruptcy throughout the United States. ... The 109th United States Congress is the current meeting of the United States legislature, comprised of the United States House of Representatives and the United States Senate. ... April 14 is the 104th day of the year in the Gregorian calendar (105th in leap years). ... For the pop band, see Presidents of the United States of America. ... George Walker Bush (born July 6, 1946) is the 43rd and current President of the United States and former governor of Texas. ... April 20 is the 110th day of the year in the Gregorian calendar (111th in leap years). ... October 17 is the 290th (in leap years the 291st) day of the year according to the Gregorian calendar. ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ... This is a partial list of notable United States federal legislation. ... Chapter 13 bankruptcy filing is a way for individuals in the United States to undergo a financial reorganization supervised by a federal bankruptcy court. ... Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, administration - see text) in the UK. Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. ... Chapter 7 of the Bankruptcy Code governs the process of liquidation under the bankruptcy laws of the United States. ...


Some of the more significant (and controversial) changes introduced to bankruptcy doctrine include: Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, administration - see text) in the UK. Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. ...

  • Increasing the amount of paperwork which must be filed by every debtor, requiring pre-filing Credit counseling and post-filing financial education for debtors whose debts are primarily consumer debts, and increasing attorney obligations in a manner that, collectively, will increase the cost of filing for bankruptcy significantly. On the other hand, filing fees can now be waived for indigent debtors below 150% poverty level. However, it should be noted that if there is no qualifying Credit counseling agency in a debtor's area, the bankruptcy trustee can waive this requirement.
  • Making it more difficult for individuals to receive a Chapter 7 discharge. A means test is to be imposed on would-be filers. Debtors whose income (based on the six month period prior to filing), is above the median income in the state (ranging from $72,451 in Massachusetts to $42,290 in West Virginia, as of 2005). Debtors whose debts are not primarily consumer debts are not subject to this test. This will affect roughly 20% of people who currently file under Chapter 7. Others debtors must make calculations of their net income after deducting priority debt payments, secured debt payments, IRS determined expense allowances and certain other expenses specified in the Act. If this net income is less than $100 per month, a Chapter 7 discharge (which does not involve a payment plan) is permitted. If the net income is $166.67 or more per month, the debtor cannot file under Chapter 7. If the net income is between those two figures, then a debtor may file under Chapter 7 only if he or she is incapable of paying at least 25% of his or her unsecured, nonpriority debt over sixty months based on this net income figure. This formula has the effect of rewarding debtors with many assets which are heavily mortgaged and debtors with larger amounts of unsecured debt. Since alimony and child support payments are "priority debts" it also has the effect of making it easier for people who owe back domestic support obligations (such as "deadbeat dads") to file under Chapter 7 than other debtors (but the child support is not dischargable). Even if a debtor does not pass the means test he can still file under chapter 7 with a "presumption of abuse".
  • Making Chapter 13 far less attractive by, amongst other things, requiring five year payment plans (from a debtors income) rather than the three year plans that were previously the norm, for debtors who are not permitted to file under Chapter 7, greatly narrowing the "super discharge" (most notably for many non-penalty tax debts), narrowing the ability of debtors to "cram down" secured personal property (such a cars whose loans are less than two and a half years old, and other personal property whose loans are less than one year old)- under old law the debtor only had to pay an amount equal to the value of the property to retain it. Under the new law the full payments on the covered property must be paid to retain it; however, the debtor can submit a 13 plan using he old rules and proposing any payment. It then will be up to the creditor to decide if they would prefer to allow this or have the debtor surrender the property. Debtor attorneys refer to this as forcing the creditor to "eat steel".
  • Allowing creditors to pursue collection remedies without court permission in various circumstances such as offsetting tax refunds, pursuing tax and domestic relations litigation in all respects except the final turnover of assets from the estate, establishing wage assignments in domestic relations actions, repossessing vehicles and personal property subject to loans or leases 45 days after the first meeting of creditors in cases where no court action has been taken regarding that property, and allowing evictions that completed the court process prior to the filing of the petition or involve endangerment to property or drug use to proceed.
  • Requiring that debtor counsel conducts an investigation of their clients' filings and be personally liable for them, not present under prior law. In addition, bankruptcy filings will now be subject to audit in a manner similar to tax returns.
  • Tightening the standards under which debts which could be discharged in bankruptcy are "reaffirmed" in light of abuses practices involving reaffirmation under the prior law.
  • Limiting state homestead exemptions to $125,000 in equity for homesteads owned for less than 1,215 days (3 years, 4 months). In some fact patterns, mostly patterns involving some fraud (constructive or overt), the homestead equity is always limited to $125,000 regardless of the length of ownership. These provisions were effective immediately upon the Act's signing.
  • Requring a 730 day (2 year) waiting period before a debtor may use his state's exemptions. Where a debtor failed to live continously in one state for 730 days, the debtor must select the exemptions for the state where he lived the greatest part of the 180 days preceding the 730 day period before filing. Definitions of federal exempt property and the valuation rules for that property are also more precisely defined in a manner favorable to creditors compared to current law.
  • The 3.3 year homestead requirement combined with the 2 year in state provision intended to prevent consumer debtors from forum shopping, i.e. moving assets and domicile to a state with more favorable exemptions and filing. An example of this is when O.J. Simpson moved to Florida and bought a multimillion dollar home. Florida has an unlimited homestead exemptions. Alas, the 1215 day limitation is on Florida and at least one other state (Arizona) is not clear because the BAPCPA amendments were so poorly drafted that they left an ambiguity concerning whether they applied to states where federal exemptions were not available (such as Florida and Arizona).
  • Making it easier for creditors who received preferential payments of less than $5,000 from the debtor before bankruptcy to avoid repaying such payments for the benefit of all creditors.
  • Increasing the bureaucratic compliance obligations in and shorting deadline for Chapter 11 reorganizations involving small businesses.
  • Improving the ability of the bankruptcy estate to reclaim assets placed in asset protection trusts within ten years of filing or paid as employment bonuses to insiders within two years prior to filing.
  • In less controversial provisions, the Act makes Chapter 12 bankruptcy (farm reorganization) permanent while adding family fishermen, overhauls the treatment of complex financial contracts including many derivative contracts used by hedge funds, and overhauls the treatment of ancillary foreign bankruptcy proceedings.
  • Extending protection to non-ERISA pension plans like private sector 403(b)s and some IRAs that ERISA plans had enjoyed thereby making these plans more similar to ERISA plans.

The legislation, sponsored (introduced) by the chairman of the Finance Committee, Republican Senator Chuck Grassley of Iowa, was supported by President George W. Bush. Tom DeLay also championed the controversial Act. Many Democrats and the Green Party opposed to the law have noted that the credit card industry spent millions of dollars lobbying in support of the act. Opponents of the bill also argued that it makes the government "a bill collector for private companies", and could lead to criminal prosecutions over matters best left in civil courts, and theoretically even to life imprisonment under federal three-strikes laws.[1] Credit Counseling is a process of educating consumers about how to use credit appropriately to avoid incurring debts that cannot be repaid. ... A discharge in United States bankruptcy law, when referring to a debtors discharge, is a statutory injunction against the institution or continuation of all actions to enforce or collect on discharged debts (the discharge injunction). ... The term means test refers to an investigative process undertaken to determine whether or not an individual or family is eligible to receive certain types of benefits from the government. ... Official language(s) English Capital Boston Largest city Boston Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 44th 10,555 mi²; 27,360 km² 183 mi; 295 km 113 mi; 182 km 13. ... Official language(s) English Capital Charleston Largest city Charleston Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 41st 62,809 km² 210 km 385 km 0. ... 2005 is a common year starting on Saturday of the Gregorian calendar. ... The following, taken from http://www. ... A 403(b) plan is a tax advantaged retirement savings plan available for non-profit employers in the United States. ... The acronym IRA may refer to: Irish Republican Army See also List of IRAs Irish Republican Army, the self-proclaimed Army of the Irish Republic that fought the Irish War of Independence against British rule, 1916 - 1921 Irish Republican Army (1922-1969): Originally the Anti-Treaty or Republican side in... The Board of Finance (also called Budget Committee, Finance Committee and Ways and Means Committee in different parts of New England) is an elected or appointed body that reviews town or school government budgets in towns or school districts that have the town meeting form of government. ... The Republican Party was established in 1854 by a coalition of former Whigs, Northern Democrats, and Free-Soilers who opposed the expansion of slavery and held a Hamiltonian vision for modernizing the United States. ... Charles Ernest Chuck Grassley (born September 17, 1933) is the senior United States Senator from Iowa. ... Official language(s) English Capital Des Moines Largest city Des Moines Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 26th 145,743 km² 320 km 500 km 0. ... The presidential seal was used by president Hayes in 1880 and last modified in 1959 by adding the 50th star for Hawaii. ... George Walker Bush (born July 6, 1946) is the 43rd and current President of the United States and former governor of Texas. ... Thomas Dale DeLay (born April 8, 1947) is a politician from Sugar Land, Texas and a prominent Republican. ... The Democratic Party is one of two major political parties in the United States, the other one being the Republican Party. ... In United States politics, the Green Party has been active as a third party since the 1980s. ...


Although the original legislation was introduced during the Clinton Administration, and had more bi-partisan Congressional support at the time, the president vetoed it nonetheless. The bill languished for years due to disagreements in Congress as to the level of the means test, and whether anti-abortion groups could use bankruptcy to discharge fines levied against them by courts for actions that resulted in property damage or injury such as bombing abortion clinics.[2] Order: 42nd President Term of Office: January 20, 1993–January 20, 2001 Preceded by: George H. W. Bush Succeeded by: George W. Bush Date of birth: August 19, 1946 Place of birth: Hope, Arkansas Date of death: Place of death: First Lady: Hillary Rodham Clinton Political party: Democratic Vice President... A congress is a gathering of people, especially a gathering for a political purpose. ... The term means test refers to an investigative process undertaken to determine whether or not an individual or family is eligible to receive certain types of benefits from the government. ... Pro-life demonstrators at the March for Life in Washington, D.C. on January 22, 2002. ...


The legislation has come to be called colloquially "BARF (Bankruptcy Abuse Reform Fiasco)" by many consumer bankruptcy practicioners. [3] The credit industry reportedly spent $100,000,000 lobbying for passage of this legislation. [4] The Republicans returned the favor by voting unanimously on "party line vote without any debate" against bankruptcy relief for nation disaster victims.[5]


Hurricane Katrina Bankruptcies

The neutrality of this section is disputed.
Please see discussion on the talk page.

Although the devastation inflicted by Hurricane Katrina is expected to cause further economic misery for the poor residents of New Orleans and other affected areas, Jim Sensenbrenner, Republican chairman of the House Judiciary Committee noted "If someone in Katrina is down and out, and has no possibility of being able to repay 40 percent or more of their debts, then the new bankruptcy law doesn't apply"[6]. Image File history File links Stop_hand. ... Hurricane Katrina was the costliest and one of the deadliest hurricanes in American history. ... Frank James Sensenbrenner, Jr. ... U.S. House Committee on the Judiciary, or (more commonly) the House Judiciary Committee, is a standing committee of the United States House of Representatives. ...


The Justice Department's US Trustee program has since said it would relax the strict Chapter 7 rules for disaster victims, including those affected by Hurricane Katrina. The Justice Department trustees oversee the administration of bankruptcy cases, and have discretion in ruling over bankruptcy filings. They also said the trustees would not challenge debtors who couldn't meet paperwork requirements because documents were destroyed by the hurricane, and that victims of Hurricane Katrina may skip the credit counseling requirement before filing.


See also

Hurricane Katrina was the costliest and one of the deadliest hurricanes in American history. ...

External links


 
 

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