7 years ago this week, the new Bankruptcy law, BAPCPA ? the Bankruptcy Abuse Prevention and Consumer Protection Act -went into effect.? We had all read about the differences the law would bring, and pondered the ultimate effect of such Bankruptcy reform.? Well, here we are 7 years later, and it?s interesting to take a look at the changes we have seen and dispel some of the myths promulgated by the new law.
The law was supposed to stop bankruptcy abuse.? And the first step in doing so was enacting the Means Test.? This mandatory part of bankruptcy filing requires debtors to ?prove? that they can?t afford to pay part of their monthly income to their unsecured creditors.? If a debtor ?flunks? the test; he or she doesn?t qualify for a chapter 7 bankruptcy, but can? file a Chapter 13 where part of their debts are re-paid.
So, how many filers were ?abusing? the system and forced to convert or change to a Chapter 13?? Well, the US Trustee gives some insight in their annual report from last year:
?In FY (fiscal year) 2011, approximately 13 percent of chapter 7 debtors had income above their respective states? medians.? Of the cases filed by debtors with income above the state median, 7 percent were presumed abusive under the means test.? However, after considering a debtor?s special circumstances, the Program exercised its statutory discretion to decline to seek dismissal in about 63 percent of the presumed abusive cases in which the debtor did not voluntarily convert or dismiss the case.?
Nice quote. But what does it mean?? Well, if you take 1000 bankruptcy filers, 130 of them
?flunked? the test.? Of those, about 9 were presumed abusive.? And, of the 9, the government went forward in 3 cases.? So, out of 1000 bankruptcy filers, our government found abuse in 3 cases!
Wow! This so-called Bankruptcy Reform sure took care of that problem!
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image credit:? lifeline92123
Source: http://www.bankruptcylawnetwork.com/bankruptcy-reform-7-years-ago-this-week/
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