On April 20, 2005, President George W. Bush signed into law the biggest piece of special interest legislation to ever come out of the United States Congress. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (or BAPCPA) included a large number of significant changes to the United States Bankruptcy Code which were largely designed to make it harder for a person to qualify for Chapter 7 bankruptcy. Many individuals had been abusing the provisions of Chapter 7, so a move was made to limit the number of filings.
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When an individual files for Chapter 7 bankruptcy, most of their debts are discharged or forgiven, giving them a chance to "reset" their financial situation and get a fresh start. The BAPCPA was designed to force more people to file for bankruptcy under Chapter 13, which generally requires payment of at least portion of most of a person's debts. The heavy hand of the banking lobby was clear in the new bankruptcy condition.
Under the BAPCPA, sometimes casually called the "New Bankruptcy Law," Chapter 7 cases are subject to many new, strict provisions. One of the biggest changes is that a Chapter 7 filing may be converted or dismissed entirely if signs of "substantial abuse" are found in a debtor's case if they primarily suffer from consumer debt. The individual's filing may be considered bankruptcy abuse if they do not meet a "means test" that confirms the person's income is below the median.
Other provisions of the BAPCPA include a longer waiting period between Chapter 7 debt discharges (8 years), mandatory credit counseling, new discharge exceptions, and more difficult lien avoidance standards. There were also new rules for debtors notifying creditors of a bankruptcy filing and limits to the exemptions under which a debtor's property was protected through the U.S. Bankruptcy Code.
With these serious changes to the provisions for Chapter 7 bankruptcy filings explicitly making it "more difficult for people to file for bankruptcy," it is more important than ever for individuals considering bankruptcy to consult an experienced legal professional. While it is true that some people abuse the Bankruptcy Code, it is still the best option for many individuals stricken by financial crisis. As such, the BAPCPA has been subject to much criticism from consumer advocacy groups, bankruptcy judges, and financial law scholars.
For more information about Chapter 7 bankruptcy, visit the website of New Orleans bankruptcy lawyers Kervin & Young, LLC.
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