2005 BAPCPA Bankruptcy Act- What Changes were Made to the Law?

Filing for bankruptcy in New York City has become more complicated with the adoption of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. New requirements were created including the bankruptcy means test, credit counseling and debtor education classes that significantly increased the difficulty of filing for bankruptcy without an attorney (pro se).  The law was actually created to intentionally reduce the number of bankruptcies filed in America by making a complicated process even trickier.  Some of the changes to the law can trap a consumer trying to file on their own or even trip up an experienced attorney unfamiliar with the new process.  A small mistake could lead to the dismissal of the case or denial of your discharge.  Many attorneys even switched to other areas of law that are easier to practice.

But after 8 years there is some good news.  The attorneys who have embraced the new laws and rededicated themselves to understanding the changes have found ways to provide as much debt relief for their clients today as before 2005.  It just takes a little more work for your attorney these days.  We have to admit it took some time to become proficient with the complex new Bankruptcy Code, but rest assured you can still get the fresh financial start bankruptcy promises.  In fact we have never had a case dismissed and maintain a 100% Chapter 7 discharge record for our clients in New York City as of 12/30/2013.

The biggest and most controversial change to the law was the creation of the “means test” for Chapter 7 Bankruptcy eligibility.  The test compares a debtor’s income against the median household income of New York.  If the income is above the median and it is determined the debtor is capable of paying their creditors at least some portion of their debt every month, then the debtor could fail the “means test,” and would be ineligible for Chapter 7 relief.  Failing the means test might limit a debtor to filing for Chapter 13 only which requires a portion of their debt to be repaid though a 3-5 year repayment plan.  The means test was designed to prevent people that could repay even a portion of their debt from filing for Chapter 7.  However the test includes provisions for calculating and deducting the debtor’s necessary monthly living expenses from their gross income making it easier to pass.  Use of available bankruptcy exemptions under New York State law and the Federal Bankruptcy Code will also help your attorney overcome the challenges created by the means test to get you the debt relief you are entitled to under the law while protecting your valuable assets, bank accounts and retirement funds.

The new law also calls for a debtor to engage in a “good faith” effort to obtain debt counseling and to complete some debtor education courses.  These requirements are actually no big deal and can be very helpful to getting the most out of your bankruptcy, but the burden of recordkeeping and documenting this good faith effort falls on you or your attorney.  While taking these required classes can be done quite simply in our office, on-line, or even over the phone, the documentation and filing can be significantly more complicated.  For example, we have had to implement a process in our office to ensure that the timing of these courses and the filing of the Form 23 affidavit is done in the proper bankruptcy time line.  The timing between your credit counseling, debtor education and filing date is one of the intentionally tricky areas meant to trip people up.  By not filing a simple form at the right time your case could be closed without a discharge.

The implementation of the BAPCPA was a blow to the bankruptcy legal community and did make it more difficult for people to find the same relief as before 2005.  After 8 years however many attorneys in New York City have mastered the changes and can protect their clients as powerfully as before.  It took some time, but the changes to the law just required new legal strategies to combat them.  If you live in New York City and have questions about the new bankruptcy laws, or filed under the old laws and are now eligible to file again please contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free debt relief consultation today.

This article is intended for educational purposes.  By reading no attorney-client privilege has been created.