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What the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) Means for You

Wednesday, September 14, 2011 by David R. Black

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, also known as the BAPCPA, was devised to make it more difficult for consumers to file for Chapter 7 bankruptcy. Under Chapter 7, assets are liquidated to pay-off creditors, and most unsecured debts, such as credit card and medical bills, are discharged.

But this new bankruptcy law, enacted on April 20, 2005 by the 109^th United States Congress, prevents consumers with the means to repay some or all of their debts from filing for Chapter 7 bankruptcy. If debtors file for Chapter 7 bankruptcy, but have disposable income that could repay debts, there is a presumption of abuse and their Chapter 7 case is dismissed.

To evaluate their financial circumstances, the BAPCPA law imposes a Means Test. This formula compares their Current Monthly Income (CMI), or how much money they make monthly from certain income sources in the six months prior to filing, to the Median Family Income (MFI) for your state. The MFI is adjusted by the size of the household.

If debtors do not have disposable income left after they pay for food, shelter, and other necessities, they may file for Chapter 7. But if there is some money left over, debtors must file for Chapter 13 bankruptcy. Chapter 13 requires them to repay some or all debts according to a structured repayment plan over a three to five year period before any unsecured debts can be discharged.

The BAPCPA also requires those who wish to file for Chapter 7 or Chapter 13 bankruptcy to attend credit counseling on personal financial management within 180 days prior to filing. The credit counseling must be provided by a nonprofit budget and credit-counseling agency approved by the US Trustee or bankruptcy administrator.

While the rules and requirements of the new BAPCPA bankruptcy law are complicated and fraught with exceptions, a bankruptcy attorney in Delaware County, Pennsylvania can tell you what to expect in your particular case and guide you through the bankruptcy filing process.

Contact us today

If you are looking for bankruptcy law firms in Media, Pennsylvania, or anywhere in Chester or Delaware counties, please call the David R. Black’s Bankruptcy Legal Group or contact us to schedule a free consultation today.

David R. Black, Esq.

327 West Front Street
Media, PA 19063
(610) 566-8500

Posted at 17:29 PM

Topic: Bankruptcy