In October 2005, the bankruptcy laws in the United States changed significantly. For the first year or two after this new law (called the BAPCPA revisions) went into effect, bankruptcy lawyers and judges had to struggle to understand these changes, leading to a great deal of uncertainty for bankruptcy filers. As a result, the number of cases filed in the Northern District of Georgia dropped by more than half in 2006 as opposed to 2005.
Now, almost ten years has passed since the “new law” went into effect and much of the confusion and uncertainty has gone away. Lawyers know what trustees and judges are expecting and judges can refer to appellate decisions to address day to day issues. Personal bankruptcy is once again a predictable process.
That being said, you need to understand that the main purpose of the 2005 BAPCPA law is to make Chapter 7 more difficult to file and to push people into 5 year Chapter 13 plans that pay back most or all unsecured debt. The law now requires you to provide more documentation in the form of pay stubs, tax returns and proof of expenses and an income based “means test” has been added to disqualify people from filing Chapter 7 if the means test calculations show that they have sufficient disposable income to fund a Chapter 13 plan.
So, what has been the practical effect of BAPCPA?
In our experience, there have been a few changes to our day-to-day practice, but less than we had anticipated.
- Chapter 7 has been minimally affected. Most of our Chapter 7 clients satisfy the means test anyway and our Chapter 7 practice has not changed much at all.
- Chapter 13 has become somewhat more difficult because we have less flexibility when creating a repayment plan. The means test calculations tell us how much we have to pay back unsecured creditors and sometimes there is a disconnect between what the calculations says you have available as “disposable income” and what your checkbook says.
- Chapter 13 requires a lot more work for our clients whose household income ranges between $70,000 and $100,000. These are the toughest cases because the trustee will usually demand more per month than what our clients can comfortably pay. As long as we can document expenses, however, we have found that judges are often receptive to our arguments.
- We have to gather and analyze a lot more documentation than we did in pre-BAPCPA days. It takes longer for our clients to gather this information and we have to spend significant time putting our petitions together. BAPCPA has thus driven up the cost of filing for bankruptcy.
- BAPCPA has created a hostile environment for repeat filers. It really makes sense to do everything in your power to make your first casework.
- Many lawyers who used to dabble in the area of personal bankruptcy has left the practice area. We are left with a few high volume filers that file hundreds of cases per month and several smaller firms like Ginsberg Law Offices that file 10 to 20 cases per month with a smaller staff and lower overhead. At Ginsberg Law Offices we focus on on-going direct contact with your lawyer and we do not use paralegals to answer phone calls, or contract lawyers to appear with you in court.
Can You Still File Bankruptcy?
Yes, we continue to see a great deal of misinformation about personal bankruptcy on the Internet, but bankruptcy remains a viable option for most people facing debt they cannot manage. The process is more complicated and filing has become more expensive, but debt relief remains available.
If you would like a confidential and thorough review of your bankruptcy and non-bankruptcy options, please call Susan or Jonathan at 770-393-4985.