Tuesday, November 17, 2020


Over the years, laws change. New laws can come into play and have a substantial impact on people and important issues. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was enacted. This important piece of legislation made major revisions to the U.S. Bankruptcy Code and applies to cases that were filed on or after October 17, 2005. What exactly is the BAPCPA and what does it involve? That is what we will discuss in more detail here.

What is the BAPCPA?

The BAPCPA presented a substantial reform of the personal bankruptcy process in the U.S. Here, we will talk about a few of the key provisions included in the BAPCPA, such as the requirement for consumers to participate in credit counseling and education before any discharge can happen incident to bankruptcy. Under the BAPCPA, a person filing personal bankruptcy is required to participate in, as well as get a certification proving completion of pre-bankruptcy credit counseling by an approved nonprofit or credit counseling agency within 180 days prior to filing for bankruptcy. The individual must also participate in and have evidence of completion of a pre-discharge education course before debt being discharged in Chapter 7 or Chapter 13 bankruptcy filing.

Another important element of the BAPCPA addressed federal protection of certain retirement assets in bankruptcy. The BAPCPA granted federal bankruptcy protection for certain retirement assets, such as traditional and Roth IRAs. Prior to the BAPCPA, these protections only existed at the state level, or not at all. Now, thanks to the BAPCA, individuals in every state are offered protection for certain retirement assets.

One of the biggest things accomplished by the BAPCPA was making Chapter 7 bankruptcy more difficult to qualify for. This is because a central purpose of the BAPCPA was preventing the abuse of bankruptcy and encouraging more Chapter 13 filings as opposed to the more forgiving Chapter 7 bankruptcy. Most unsecured debts are dischargeable in Chapter 7 bankruptcy whereas Chapter 13 bankruptcy will restructure a person’s debt and a three or 5-year repayment plan will be established to satisfy outstanding debt obligations.

Most notably, the BAPCPA is responsible for the Chapter 7 means test which is used to determine if an individual qualifies for Chapter 7 bankruptcy or must file for Chapter 13 bankruptcy. The means test is used to determine a bankruptcy filer’s ability to repay outstanding debt obligations. The filer’s monthly income is compared to the median income in his or her state of residency. It provides an allowance for basic monthly expenses at rates established by the IRS. When a filer exceeds the median income of his or her state of residence and has money left over once living expenses have been accounted for, this will likely mean that he or she will not qualify for Chapter 7 bankruptcy.

Miami Valley Bankruptcy Attorneys

If you are considering bankruptcy, talk to the knowledgeable attorneys at Miami Valley Bankruptcy. We can discuss your options and what bankruptcy can do for you and your family. Contact us today.

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Miami Valley Bankruptcy, Brian Lusardi, Esq., assists clients with Bankruptcy matters including but not limited to: Common Myths, Cost of Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, The New Bankruptcy Law and Personal Bankruptcy in Xenia, Ohio, and the cities of: Wilberforce, Alpha, Spring Valley, Dayton, Bellbrook, Yellow Springs, Cedarville, Fairborn and Clifton; and the counties of Greene and Montgomery.

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