The Bankruptcy Code, enacted in 1978 as title 11 of the United States Code, provides a uniform federal law to govern all bankruptcy cases. The procedural aspects of the bankruptcy process are established by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”). There are also local laws and rules that apply to each bankruptcy proceeding. A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a fresh financial start. Each bankruptcy chapter is named after the section of the bankruptcy code that contains the laws for that particular type of bankruptcy.
The New Bankruptcy Law – BAPCPA
In 2005, changes were made to the bankruptcy law, which was known as the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). The goal of these changes were to cut down on the number of chapter 7 bankruptcy filings and require debtors to repay at least some of their debts. The BAPCPA was supported by credit card companies and banking institutions because it makes it harder for some people to file for bankruptcy without paying at least some of their debts.
The main change to the bankruptcy law was a “means test” that determines the debtor’s disposable income and potential ability to repay debts. The test compares a filer’s income with the median income in their state and if their income is too high, they are not eligible to file chapter 7 bankruptcy. Since the new law went into effect, most filers have still been able to file chapter 7 because most of them have very little income to spare. Other requirements of the new bankruptcy law include mandatory credit counseling, higher lawyer costs (more work and headaches for attorneys), and extra paperwork. Check our our page on changes to the bankruptcy law for more information on what BAPCPA means for those filing for bankruptcy.
