12 Oct For Bankruptcy Law, Another Anniversary Approaches
Anniversaries mark significant milestones, but not all are causes forcelebration. Forbankruptcy lawyers, particularly ones who have been around a while, when October 16th approaches we can’t help butacknowledgethis oddanniversary ofB.A.P.C.P.A.,which is the official acronymofthe Act: Bankruptcy Abuse Prevention And Consumer Protection Actof 2005.
Unofficially, the Act is referred to asB.A.R.F. Slang for getting sick (ie. vomit) and a term commonly used by bankruptcylawyers as a nickname for the bankruptcylaw act of 2005. B.A.R.F.stands for “Bankruptcy Abuse Reform Fiasco”, which many feel is a more appropriate name for the bankruptcylaw passed in 2005.
The 2005 Act was promoted to stop abuse, but abuse was only rarely present. Mostbankruptcydebtors are honest people who got into trouble, so many feel the law was really passed to make bankruptcy more difficult to file. In other words, to make creditors happy.
I have said it in previous articles:BAPCPA is a Mean Law. In that article written on anotheranniversary, and it actually doesn’t matter which one, I said:
What the law does is harm consumers who are honest, hardworking, and seeking help from the Bankruptcy Court â€“ traditionally a court of equity and fairness.
BAPCPA made it harder to file bankruptcy, but not impossible. It is important to understand that there is still substantial protections still available for people in financial trouble in the Bankruptcy Court.
- Why was BAPCPA passed?
I believe that creditors figured out that if they could make bankruptcy harder, maybe some people just wouldn’t file. Even if unable to pay off the debts in full, if the creditors could get even a few more payments out of each borrower, their profits would increase.
The creditors convinced Congress that there were many people filing for bankruptcywho could afford to repay debt. This simply wasn’t true, at least not in my experience.
While I am sure that there are some individuals who scammed the system, I have rarely encountered them. On the contrary, people who come to me for help have done everything they could to avoid even talking to a bankruptcy attorney. Most people seeking help are good people, and regardless there was little need to change the law since the bankruptcy law was already quite unfriendly to dishonest people.
By naming the Bill the Bankruptcy Abuse Prevention and Consumer Protection Act, it was an easy bill of goods to sell even though it wasn’t accurate. Most of the people who were filing bankruptcy were good, honest and hardworking individuals who were not abusing the system, and there was little consumer protection in it.
Ironically, many of the people who were go through bankruptcy think that while they are honest, that there are other folks who file for bankruptcy who aren’t!
They know that they are in trouble because of a bad economy, a job layoff, divorce or medical issue …. but still have been convinced that ‘the other’ people who file bankruptcy are crooks!
After 25 years as a NC bankruptcy attorney, I am still amazed at how wonderful many of my clients are, how much they have sacrificed for their families, and how hard they have tried to pay their debts.
One reason it was easy to convince Congress to change the law is that people abusing the system make the front page, but the honest folks going through don’t. Think about it: if you were in financial trouble (or if you are), would you tell everyone you know? No! You would want it to be as discreet as possible. And thankfully, for most people, it is.
- So exactly what is BAPCPA?
BAPCPA, is the name 2005 Act that changed the bankruptcy laws. Changed, but really just altered. The majority of the old law is still there, but the changes added some restrictions and requirements that are absurd, ridiculous, and ineffective.
Bankruptcy’s purpose is to give relief and a fresh start to people unable to repay their debt, and it still does that. You just have to jump through some stupid hoops to get there, and it is more difficult to get through the process because it is more difficult to understand and also to prepare the documents.
- How did the bankruptcy laws change from the old law, to the new?
Chapter 13 was a good program for many borrowers and it still is. It allows people to repay what they can afford to pay, catch up on house and car payments, and protect property.
Contrary to popular belief, it isn’t the end of the world to have to file Chapter 13 instead of Chapter 7. In fact most of the people I recommend it to today would have gotten the same recommendation from me before 2005.
The most visible difference is that the new law requires an absurd test, called the â€œMeans Testâ€œ.
There is a lot more reporting that is required, and there are some other provisions like requiring those that are above median income and filing Chapter 13, to have to stay in for five years, instead of the previous three.
Credit counseling is required before filing, but that doesn’t mean that you have to go to a counselor before you can talk to a lawyer, and I would recommend that you don’t. (For more reasons why, see this article I wrote: Consider Non-Bankruptcy Alternatives for Debts)
Consideringbankruptcy should not be the last resort. You don’t have to file if it isn’t right for you, but you should learn what it can do for you before you write it off. There are many worse options than bankruptcy, and for many people, bankruptcy is an excellent option.
If you are in financial trouble, talk to a bankruptcy lawyer. Bankruptcy still helps many people get out of debt, balance their budget, and get rid of the stress of collections and unpaid bills.
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