What’s BAPCA And How Does It Affect My Bankruptcy?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is generally known as the bankruptcy reform law and it contains many sections affecting consumers who file for bankruptcy.

Key provisions include the requirements that consumers must participate in and obtain a certificate evidencing completion of:

1. Pre-bankruptcy credit counseling, individually or in a group briefing, provided by an approved nonprofit budget and credit counseling agency within 180 days prior to filing for bankruptcy

2. A pre-discharge education course before a Chapter 7 or Chapter 13 bankruptcy may be discharged

Clearpoint Credit Counseling Solutions is approved to issue these certificates in compliance with the Bankruptcy Code. We provide both the required pre-bankruptcy counseling and the pre-discharge debtor education to those who wish to file for Chapter 7 or 13 bankruptcy.

Other Notable Changes

Other changes to the bankruptcy law from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 include:

A means test: If the debtor’s income is greater than the state’s median income, he or she may not be eligible for Chapter 7.

Homestead exemption: A debtor may only be exempt up to $125,000 of interest (and in some cases less, based on state-specific caps) in a homestead that was acquired within the 1,215-day period prior to the filing. However, the calculation of that amount does not include any equity that has been rolled over during that period from one house to another within the same state.

Domestic support obligations: Domestic support obligations are a first priority in distribution. Support owed to a former or current spouse or child is given priority over support obligations that have been assigned or owed directly to a governmental entity.

Non-discharge of student loans: In addition to government student loans, student loans to for-profit and non-governmental agencies are not dischargeable.

Non-discharge of recent debt: Debts owed to a single creditor totaling more than $500 for luxury goods and incurred within 90 days of filing are presumed non-dischargeable; cash advances of $750 within 70 days are also non-dischargeable.

Treatment of auto liens: Under Chapter 13 bankruptcy, where the creditor holds a security interest in a motor vehicle purchased within 910 days of the filing, a secured creditor can retain their lien on a vehicle until receiving payment of the entire debt, not just the secured portion.

Time between bankruptcy filings: Chapter 7 debtors can file only once every 8 years (was 6 years previously).

Some consumers worry that BAPCA has made it more difficult or impossible to file for bankruptcy. While consumers are required to take more steps than before and the process may take a bit longer, bankruptcy is still a viable option for many.

Clearpoint is not permitted to provide legal advice. Consult your attorney for legal advice and direction.

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