The Next Major Change of BAPCPA
In April of 2005, the United States Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, commonly known as BAPCPA. That law took effect in October of 2005. One of the important changes of BAPCPA was 11 U.S.C. §727(a)(8), which was amended to increase the number of years for which a person can refile a chapter 7. That increased the number of years to every eight years for filing a chapter 7 bankruptcy. This was an increase of two years from the prior bankruptcy act.
BAPCPA did not change the waiting period to file a chapter 13. The timeframe for receiving a discharge in a chapter 13 remains the same, which is a four year period of time for a prior chapter 7 filing.
The next major change of BAPCPA is what is known as the “Means Test”. The means test takes a fictitious calculation based on the Internal Revenue Service national standards and local standards for expenses, and compares that to an average of the debtor’s income for the six months immediately preceding the bankruptcy filing. For example, if a debtor were to file bankruptcy in July, the debtor would take all of the monies received from all sources from January through June, and average that on a monthly basis and multiply that times 12 so that they would have an average-to-current monthly income.
The next step is that the debtor subtracts all of the national standards for miscellaneous household and secured debt expenses, and, if there is funds left after all of these deductions, the debtor would be required to file a chapter 13 under the code.
BAPCPA also required debtors to complete credit counseling within the six months prior to the bankruptcy filing and post-bankruptcy counseling moving forward.
Another important change was BAPCPA required a debtor to live in a state for a period of two years prior to using that state’s exemptions. For example, Idaho has a $100,000 homestead exemption, but in order to take advantage of that homestead exemption, a debtor would have to live in Idaho for two years.
These changes to the bankruptcy resulted in an incredible upsurge in bankruptcies in October of 2005. In Boise, the year-over-year change for chapter 7 bankruptcy filings was a 350% increase. For all areas in Idaho, there was a 385% increase for bankruptcy filings.
Many people who filed bankruptcy in 2005 are now eligible to file bankruptcy pursuant to the new eight year timeframe under the Bankruptcy Abuse and Prevention Act.