“Bankruptcy Abuse
Prevention and Consumer
Protection Act of 2005Proponents Intentions and
the Effects of the Act”
Presented by:
Matthew F. Glarrow
PSC 499- Senior Capstone
Outline
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Overview/Brief Summary of Chapters 7, 11 &
13.
Historical Perspectives/ Inherited Traditions.
Major Changes in the U.S. Bankruptcy Code
over the last half century.
Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 and its proponents,
effects, and changes.
Did the legislation accomplish what its
authors and proponents thought it would?
Conclusion
Chapter 7- Liquidation
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Debtor files a petition for relief
Debtor surrenders all nonexempt assets to
Trustee
Trustee sells/auctions debtor’s assets
Creditors are paid from the money
generated from the sale of the debtor’s
assets
Creditors are paid by “priority-distribution
rules”
Chapter 11- (Corporate)
Reorganization
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Debtor files a petition for relief, listing all
creditors, and assets.
Creditors are stayed from collecting money from
the debtor until a Plan is implemented.
In most cases, the debtor operates as the
Trustee of the case and continues to run the
business (under court supervision).
Debtor is required to file monthly financial
reports with the court (allows court to
supervise).
Plan of Reorganization
Ch.13- Adjustment of Debts of an
Individual with Regular Income
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Debtor files a petition for relief.
Designed to help debtors develop a repayment
plan, learn how live financially stable lives and
repay their debt.
Debtors repay their debts over a 3 or 5-year
court supervised repayment plan.
Debtors repay more debt under Ch. 13 than they
would under Ch. 7. (2/3 don’t complete plansee “A”)
Historical PerspectiveThe Early English system and
traditions the US inherited
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1542- 1st known bankruptcy law in
England
1570Debtor’s Prisons
1869- Debtor’s Act
Major Changes in The United
States Bankruptcy Code
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1800- The First Act
Bankruptcy Act of 1876
1898- first relief for companies against
their creditors
1900-mid-1970s
Bankruptcy Reform Act of 1978
Bankruptcy Reform Act of 1994
Bankruptcy Reform Act of 1999
BAPCPA ’05- Proponents and
their expectations for the Act
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Lobbyists for credit card industryConsumer Credit Industry
House Report 109-031 on “Factors
Supporting Bankruptc Reform”
Senator Charles Grassley’s (Iowa,
Republican) comments on the bill
BAPCPA ’05- Legislative
Changes in the U.S.B.C. Code
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Ch. 7 “means test”
Ch. 11- mandatory pre-filing credit counseling
Ch. 13- mandatory completion of debtor
education class prior to receiving discharge
Lengthened amount of time allowed between
filings in all chapters (see notes)
Automatic Stay (see notes)
Additional Documents & SchedulesSTUDENT LOANS
Effects of the LegislationDid it accomplish what it was
“supposed to?”
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“About 95% of people who could have
filed before October 17, still qualify under
the new law” Barry Frost, NJ USBC
Trustee.
USBC, MDA Comparative Filings
Jan. 1999-Dec. 2006
Middle District of Alabama
Ch. 13 Sept. ‘04- Sept. ‘06
Middle District of Alabama
Pre and Post BAPCPA
Sept 2004 - Sept 2006
Ch. 13 Filings
800
700
600
500
400
300
200
100
0
Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06
Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05
Ch. 13 Filings
440
428
394
365
342
275
319
331
352
380
Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06
341
442
416
771
98
149
175
150
203
237
242
328
285
346
312
Middle District of Alabama
Ch. 13 Comparative Filings
Oct. ‘04- Sept. ‘05
Middle District of Alabama
Ch. 13 Filing Comparison
800
700
600
500
400
300
200
100
0
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
FY 2004
428
394
365
342
275
319
331
352
380
341
442
416
FY 2005
771
98
149
175
150
203
237
242
328
285
346
312
Middle District of Alabama
Ch. 7 Sept. ‘04- Sept. ‘06
Middle District of Alabama
Pre and Post BAPCPA
Sept 2004 - Sept 2006
Ch. 7 Filings
1800
1600
1400
1200
1000
800
600
400
200
0
Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06
Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06
Ch. 7 Filings
333
321
331
332
282
396
508
420
375
349
336
440
625
1629
32
37
48
87
123
139
103
126
91
103
93
Middle District of Alabama
Ch. 7 Comparative Filings
Oct. ‘04- Sept. ‘05
Middle District of Alabama
Ch. 7 Filing Comparison
1800
1600
1400
1200
1000
800
600
400
200
0
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
FY 2004
321
331
332
282
396
508
420
375
349
336
440
625
FY 2005
1629
32
37
48
87
123
139
103
126
91
103
93
Lowest Bankruptcy Rates in 2005
(Households per consumer bankruptcy filing)
*According to the American Bankruptcy Institute
*National Average is 60.16
* “The American Bankruptcy Institute survey ranked all 50 states and the District of Columbia.”
Rank
State
Households per
consumer filing
1
2
3
4
5
Indiana
Ohio
Utah
Tennessee
Oklahoma
34.41
37.19
39.52
39.7
40.86
Highest Bankruptcy Rates in 2005
(Households per consumer bankruptcy filing)
*According to the American Bankruptcy Institute
*National Average is 60.16
* “The American Bankruptcy Institute survey ranked all 50 states and the District of Columbia.”
Rank
State
Households per
consumer filing
51
South Carolina
123.16
50
Alaska
122.64
49
Vermont
119.61
48
District of Columbia
115.93
47
Hawaii
109.54
Bankruptcy Filings By StateHighest in 2005
(Contents from derived from Table F, provided by the United States
Bankruptcy Courts)
# of filings
State/ District
Circuit
60,533
CA/ C
9
56,591
IL/ N
7
52,189
FL/ M
11
51,222
OH/ N
6
50,409
MI/ W
6
*26,411
AL/ N
11
*8,871
AL/ M
11
Bankruptcy Filings By StateHighest in 2006
(Contents from derived from Table F, provided by the United States
Bankruptcy Courts)
# of Filings
State/ District
Circuit
58,594
CA/ E
9
54,268
OH/ N
6
52,251
IL/ N
7
50,125
MI/ E
6
44,507
OH/ S
6
*22,354
AL/ N
11
**7,310
AL/ M
11
Conclusion
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The United States Bankruptcy process and Code are
unique and unlike any other system of debt relief in the
world. The U.S., on the whole, has a problem with
excessive individual/ consumer, and corporate insolvency
problems. Credit card companies spent a lot of money to
push the BAPCPA of 2005 through Congress and its
effects were minimal, as compared to those painted by
lobbyists of the consumer credit industry. Statistics
prove the filing numbers across the country are back on
the rise. However, the BAPCPA of 2005 is not the
answer to the debt issues of individuals and companies
(or small businesses) in America.