Bankruptcy Abuse Prevention and Consumer Protection Act

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 is a legislation that was imposed in the United States, altering the previous legislative act of the United States Bankruptcy Code. This act was established in order to make filing for bankruptcy a difficult process for individuals, therefore reducing the abuse of the previous system.

BAPCPA explained

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed in the 109th United States Congress in 2005 and was signed by the former President George W. Bush. The act brought significant changes to the previously followed US Bankruptcy Code as it made the process of declaring bankruptcy more complicated.

The main purpose of this legislative act was to improve the bankruptcy law and practice in the United States, shifting the focus onto the individuals and corporations by restoring personal responsibility into the bankruptcy system. This act came as a result of the increase in bankruptcies that was essentially leading to creditors experiencing significant losses as consumers were finding loopholes to avoid paying their debts. The BAPCPA was implemented to ensure that all bankruptcies filed were in line with the new regulations and that the consumers were accountable for their finances.

Under the BAPCPA regulation, individuals with consumer debt were not able to file for Chapter 7 bankruptcy as the requirements were considerably altered. The “Means Test” was developed in order to force some debtors who are able to pay off their debts by Chapter 13 bankruptcy rather than completely liquidating under Chapter 7. Therefore, debtors who have the ability to pay off even a small amount of their debt would have to do so before they liquidate, reducing debtors to take advantage of Chapter 7 bankruptcy – under which debtors are able to completely wipe out the debt they have accumulated.