The (not so) new Bankruptcy Law is now 10 Years old – Has it Been Helpful? Part 1

Oct 13, 2015 | Bankruptcy

“Webinars are awesome!”

These three words have never been uttered in the history of the English language. But there are some very good lessons that can be learned from them, given the right people on the right topics.

Bloomberg recently reported on one such webinar that took place just this month. A panel of bankruptcy experts discussed whether or not the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) (spearheaded by Joe Biden) accomplished what it was intended to accomplish.

When created in 2005, it was hoped that the new federal legislation would prevent abuse of the bankruptcy law while allowing those with a legitimate need to file for bankruptcy the ability to do so. Let’s take a look at what the webinar panelists had to say about it. Keep in mind the panelists are all attorneys and judges, so you know there’s no chance for a consensus.

Why the Change?

The number of people filing for bankruptcy in the early 2000’s had gone up significantly. This was at a time when jobs were fairly plentiful and the economy was moving along at a great clip. Many lawmakers began to believe that the increase in filings was due in large part to people who had enough income and assets to afford to pay their debts, but instead chose to use bankruptcy as a tool of financial planning rather than an escape born of desperate financial necessity.

The BAPCPA was created in response to this problem. It made it more difficult for people with significant assets and/or income to file for bankruptcy. But, it added roadblocks for everyone to face, not just the wealthy. The question then became, in practice did the BAPCPA really weed out those who shouldn’t be filing for bankruptcy only, or did it make it more difficult for everyone?

In our legal system, only time can tell for sure if new laws are as effective as they were intended. Fortunately, (or unfortunately) the BAPCPA was passed just in time to face The Great Recession which began shortly thereafter.

In part 2 we will see how The Great Recession forced many to consider bankruptcy, and the effect the BAPCPA had on their ability to file.

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