BAPCPA Trends

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New York, NY 10017

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According to a new paper on consumer bankruptcy trends and indicators, bankruptcy filings will soon be back at the levels they were before the Bankruptcy Protection Act (BAPCPA) of 2005. Although passage of BAPCPA caused a sharp spike in bankruptcy filings before it went into effect on October 17, 2005 and a dramatic fall-off thereafter, research by University of Illinois College of Law Professor Charles Tabb suggests that filings are about to return to pre-BAPCPA filing levels.

"The data indicate that BAPCPA was based on a canard," claims Tabb. "It does not appear that consumers have made a quantum shift to Chapter 13 from Chapter 7, as Congress had hoped would happen under BAPCPA. More importantly, the data suggest that BAPCPA was predicated on (to be generous) a false hope, that making the law 'tougher' would discourage consumer debtors from filing bankruptcy. The evidence shows that debtors file bankruptcy in very predictable numbers, depending not on what the bankruptcy law provides, but on how burdened they are with debt."

Tabb also found that Chapter 13 filings fell after BAPCPA went into effect (though not as much as Chapter 7 filings) and Chapter 13 filings didn't increase pre-BAPCPA. In Chapter 7 bankruptcy, a debtor can discharge (or liquidate) most of his or her debts. To file a Chapter 13 bankruptcy, a debtor may not have any more than $807,750 in secured debts and $269,250 in unsecured debts. A debtor must also have regular income that's sufficient to pay for basic needs (i.e. food, shelter, clothing, etc.) and fund payments to a plan (over three to five years) to repay creditors.

An abstract of "Consumer Bankruptcy Filings: Trends and Indicators" is available at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931172

James Shenwick
Shenwick & Associates
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