What is the Bankruptcy Abuse Prevention And Consumer Protection Act (BAPCPA)?

Bankruptcy abuse prevention and consumer protection act, also known by the acronym BAPCPA, refers to legislation that made a significant revision to the United States Bankruptcy Code. BAPCPA was passed by Congress in April 2005 and signed into law by President George W. Bush, who was then the president of the United States. The move was to make reforms in the bankruptcy system with a major focus on abuse prevention.

The BAPCPA implemented the Means Test, pre-bankruptcy credit counseling, and pre-discharge education course requirements.

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What is the Bankruptcy Means Test?

Chapter 13 Bankruptcy allows the debtor to reorganize her debts. Secured creditors must be paid in full. Unsecured creditors are paid based upon priority. The creditor is able to retain assets effectively reorganized under the plan. Chapter 7 allows for the liquidation (sale) of all of the debtors assets to pay creditors based upon priority. 

So, to block businesses and individuals from filing chapter 7 bankruptcy (instead of reorganizing under Chapter 13, the BAPCPA created a bankruptcy means test. The test is to help determine whether the individual qualifies for Chapter 7 bankruptcy. 

The test compares the debtor's monthly median income of households in the region with her total montly debts payable. The debts must be essential debts, known as "allowable debts". These include reasonable rent/mortgage, utilities, groceries, etc. 

If the individual has remaining income after paying their allowable expenses, they are not eligible to file for liquidation. If they choose to pursue bankruptcy protection, they must do so under Chapter 13.

What is Pre-bankruptcy credit counseling? 

This is a group or an individual briefing that those consumers or businesses that want to file for bankruptcy must undergo at least 180 days ahead of the bankruptcy filing. 

What is a pre-discharge education course?

Debtors must complete an education course on the process and effect of bankruptcy before becoming eligible for discharge under Chapter 13 or 7 bankruptcy. A consumer (a debtor) must first submit either form 22C for Chapter 13 or 22A for chapter 7 to the bankruptcy court before the hearing of the case.

Academics research on Bankruptcy Abuse Prevention And Consumer Protection Act

• A legislative history of theBankruptcy Abuse Prevention and Consumer Protection Actof 2005, Jensen, S. (2005). A legislative history of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.Am. Bankr. LJ,79, 485.
• Trying to Make Sense Out of Nonsense: Representing Consumers Under theBankruptcy Abuse Prevention and Consumer Protection Actof 2005, Sommer, H. J. (2005). Trying to Make Sense Out of Nonsense: Representing Consumers Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.Am. Bankr. LJ,79, 191. 
• Constituional Issues Posed in theBankruptcy Abuse Prevention and Consumer Protection Actof 2005, Chemerinsky, E. (2005). Constituional Issues Posed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.Am. Bankr. LJ,79, 571. 
• The Creeping Repeal of Chapter 11: The Significant Business Provisions of theBankruptcy Abuse Prevention and Consumer Protection Actof 2005, Levin, R., & Ranney-Marinelli, A. (2005). The Creeping Repeal of Chapter 11: The Significant Business Provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.Am. Bankr. LJ,79, 603.
• Impact of theBankruptcy Abuse Prevention and Consumer Protection Actof 2005 on Chapter 13 Trustees, Hildebrand III, H. E. (2005). Impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 on Chapter 13 Trustees.Am. Bankr. LJ,79, 373.