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Bankruptcy Abuse Prevention and Consumer Protection Act

Lobbyists for banks and credit card companies had unsuccessfully pushed for bankruptcy reform for several years. Eventually, Congress passed and President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). From the perspective of the creditors, the legislation certainly did much to prevent supposedly rampant bankruptcy abuse. Unfortunately, the BAPCPA Act did very little to live up to the consumer protection aspect of the bill’s title.

BAPCPA made it much more difficult for debtors to file for Chapter 7 bankruptcy. It created several other obstacles for people struggling under enormous financial debt. Regardless of the unforeseen medical care or job loss that led to months or years of steadily increasing debt, BAPCPA has essentially forced every person filing for bankruptcy to prove that they are unable to pay their debts.

Get a Fresh Start Under BAPCPA with Help of Cincinnati Lawyer

If you are being harassed by creditors, your wages are being garnished, or you are facing the risk of foreclosure, you can and should take advantage of legal help getting the financial relief you need and deserve. Steiden Law Offices helps clients in Northern Kentucky and all over the greater Cincinnati area. This article is designed to provide an overview of some of the changes to the bankruptcy process following the enactment of BAPCPA.

Our firm has offices in Cincinnati and Maineville, Ohio, as well as Florence and Covington, Kentucky. You can call to schedule a free, confidential consultation that will allow us to review your case. We may be able to make emergency filings within hours in certain urgent situations.


Northern Kentucky BAPCPA Information Center


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BAPCPA Means Test Requirements

One of the biggest changes to bankruptcy filings under BAPCPA was the creation of a means test for all people attempting to file for Chapter 7. Because Chapter 7 allows debtors to discharge most of their debts, the means test was implemented to force debtors with more sizeable incomes to file for Chapter 13 bankruptcy. Thus, the means test requirement forced higher income people to repay at least a portion of their debts.

In order to qualify for Chapter 7 under the means test, a debtor’s monthly income must be less than the median income. This figure varies by state, but the United States Census Bureau established the following median income levels for Ohio and Kentucky for bankruptcy cases filed after April 1, 2015:

 

FAMILY SIZE

STATE

1 Earner

2 People

3 People

4 People

Ohio

$43,978

$54,420

$63,142

$78,622

Kentucky

$42,000

$49,139

$58,552

$69,794

If a debtor’s monthly income exceeds the median income limit, he or she may still be able to file Chapter 7 if his or her disposable income is calculated to be negative. This figure is largely dependent on your number of applicable deductions.


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Credit Counseling Requirement Under BAPCPA

A Bankruptcy Court will not approve a discharge if the debtor has not completed an instructional course concerning personal financial management. This requirement applies to both Chapter 7 and Chapter 13 cases, and the credit counseling agency must be approved by the United States Trustee Program under 11 U.S.C. §111.

The purpose of credit counseling is to help debtors determine whether they really need to file for bankruptcy, but it is still required even if when it is clear that an alternative repayment plan would not work. These agencies can charge fees for their services, but they must provide the services for free or at reduced rates for debtors who cannot otherwise afford the costs.

During counseling, an agency will typically prepare a budget based on the debtor’s income and expenses, and it may recommend a repayment plan instead of bankruptcy. This does not mean the debtor necessarily has to abide by the recommendation, but it may cause the Bankruptcy Court to question whether a person filing for Chapter 7 could afford to enter Chapter 13 instead.


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Impact of BAPCPA on Automatic Stay Protections

One of the immediate benefits of filing bankruptcy is the injunction known as an automatic stay. In the past, this took effect as soon as a debtor filed his or bankruptcy petition, and the automatic stay prevented all creditors from further collection actions.

BAPCPA eliminated certain types of automatic stay protections. For example, the stay no longer automatically stops eviction proceedings. The duration of an automatic stay was affected by BAPCPA, and certain repeat bankruptcy filers may not be ineligible for automatic stay protection.


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Other Effects of BAPCPA on Bankruptcy Filings

Several other important provisions of BAPCPA that have enormous impact on certain debtors. The other provisions of the BAPCPA that cause problems include:

  • Increased Presumption of Fraud — Whereas a creditor only used to be able invoke exceptions in cases in which debtors made purchases of more than $1,125 within 60 days of the filing, BAPCPA now allows for purchases of $500 or cash advances of $750 within as much as 90 days to be considered fraudulent transactions exempt from discharge;
  • Student Loans — Most educational loans have always been difficult to discharge in bankruptcy filings, but BAPCPA expanded the class of protected lenders to include for-profit and other non-governmental institutions; and
  • Household Goods — Many items that were once broadly protected are not subject to liens under BAPCPA, including motor vehicles, jewelry valued at more than $500 (excluding wedding rings), and second or subsequent televisions, computers, or other electronic goods.

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BAPCPA Resources

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 — This PDF from the United States Department of Justice details the history of the act, but it also includes information about means testing, consumer provisions, and the automatic stay. You can also learn about BAPCPA’s impact on federal taxes and additional provisions.

BAPCPA Report - U.S. Courts — This website contains links to the annual BAPCPA reports that the Director of the Administrative Office of the United States Courts is required to submit to Congress. There reports have various data about Chapter 7, Chapter 11, and Chapter 13 bankruptcy filings in the United States, including assets, liabilities, income, and expenses reported by debtors as well as time intervals between filing to closing. There are also several different downloadable statistical data tables.

Office of the Attorney General of Kentucky: Information for Consumers — Several so-called credit repair companies prey upon people in bad situations and frequently make problems much worse. This website of the Kentucky Attorney General provides a valuable overview discussing the differences between credit counseling, debt management, and debt settlement. It also discusses the maximum fees that can be charged for these services.


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Find a Bankruptcy Lawyer Knowledgeable with BAPCPA Laws

Are you currently overwhelmed with debt? Have you been struggling to keep up with bills every month because of a job that pays less than what you used to make? It is in your best interest to seek the help of an experienced bankruptcy attorney in Cincinnati, Ohio, and throughout Hamilton County.

With offices in Cincinnati and Mainesville in Ohio and Florence and Covington in Kentucky, we are ready to help you with your bankruptcy case.

Steiden Law Offices has been serving clients in Hamilton County, Boone County, and Kenton County for more than two decades. We have helped more than 10,000 people file Chapter 7 and Chapter 13 bankruptcy as well as explore possible alternatives to bankruptcy. Our firm can review your own case and help you understand all of your legal options as soon as you call today to take advantage of a free initial consultation.

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