BAPCPA The “New” Bankruptcy Law: A Mean Law

Two years ago, the Bankruptcy Abuse Prevention And Consumer Protection Act (”BAPCPA”) went into effect, but it does little to prevent abuse, nor does it protect consumers. What is does do is harm consumers who are honest, hardworking and seeking help from the Bankruptcy Court - a court of equity and fairness. In my opinion, the biggest problem with BAPCPA is the “Means Test”, which makes very little sense and is a big headache to deal with. The Means Test works with false figures and adds no information that wasn’t revealed under the old laws.

Prior to the 2005 changes in the bankruptcy laws, debtors revealed 3 years historic income including their year to date. They also had to reveal their true projected income for the future, and whether or not they knew of any reason that their income would increase in the next year. They listed their actual expenses. Experienced judges and trustees could look at the information to make a determination if the person seeking help was in a position to repay their debts in Chapter 13 or whether Chapter 7 was an appropriate measure.

All of the old requirements from pre-2005 changes are still there. I tell my clients that that is the “real” information. For the “Means Test”, debtors supply past information which combines with some actual and some standardized expenses to come up with “fake” income and expenses.

To calculate the “fake” income and expenses contained in the Means Test, bankruptcy debtors have to provide a lot of paperwork and pay stubs to calculate an income figure that may or may not reflect their situation. Coming up with every single pay stub can be quite difficult for many people, especially if they have moved or changed jobs. Every single pay stub needs to be added up and all the deductions have to be itemized too. The calculation of the means test sometimes results in a correct income figure, but quite often it results in a lower or a high income than really exists.

The Means Test also imposes certain standardized deductions which often don’t reflect what the debtor really needs to spend to support themselves and their family. For example, someone who lives 1 mile from work gets the same allowance for automobile gasoline and maintenance as the debtor who lives thirty miles away. There is no consideration for any of the routine circumstance and differences that exist for most people.

The Means Test doesn’t give the Court or creditors any more accurate information than the old law did. It does add substantial time for both the debtor and their attorney in calculating a debtor’s ability to pay debt based upon information which may not hold any relevance to the debtor’s current or future situation. It does give results based upon false information. The Means Test doesn’t make sense and needs to be repealed.