Three Years Later: The 2005 Bankruptcy Act No Clearer Than Before

30 Oct Three Years Later: The 2005 Bankruptcy Act No Clearer Than Before

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act has now been in effect for three years.  Is it any clearer than before?

Let’s examine a few of the hotly litigated problem area topics and how those topics have “played out” admidst the various circuits around the country.

One topic is the income issue and what kind of case folks must file and if they must file a chapter 13 bankruptcy, what kind of plan should be filed?  For how long?    The thinking was that above-median debtors must file a Chapter 13 plan which provides for 60 months of payments, the maximum allowed.

After inputting the previous six months of income into a complex formula and deducting a stated series of expenses along with secured debt payments, the formula produces an answer.   If the number is negative, the result is that the debtor could file a chapter 7 rather than a Chapter 13.  If the number is positive, depending on the size of the number, the debtor may be still allowed in a Chapter 7, or could file a Chapter 13.

Sometimes, the number left at the end of the formula results in the debtor having to file a Chapter 13 and pay that number to their unsecured creditors.   Judges are split as to whether there is a time committment or a amount of pay to pay committment.

However, things got “slightly”  more confusing in recent months.   As reported by Michael Doan, my California colleague, above median debtors in the 9th Circuit can finish their plan in less than 60 months thanks to the Kagenveama decision.   However, as Craig Andresen recently reported,  in the 8th Circuit, in the Coop v. Frederickson decision, above median debtors must complete a 60 month plan.

This decision comes more than a year after the 8th Circuit Bankruptcy Appellate Panel decision concluding the exact opposite, as blogged by Wendell Sherk, my Missouri colleague.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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