Understanding How The BAPCPA Affects Your Bankruptcy

Posted on: 20 February 2019

For those who've filed bankruptcies in the past, the rules have changed. The Bankruptcy Abuse Protection and Consumer Protection Act of 2005 (BAPCPA) marks the first major update to the federal bankruptcy code in many years. These code changes affect several large areas of requirements for filing, so read on to find out how the BAPCPA might influence your bankruptcy.

Protection for Creditors and Consumers

As you might have guessed from the title of the act, the code changes are meant to serve both consumers and those who the consumers owe money to. Though this act did provide some assistance to filers, it is the creditors who gained the most benefits. The BAPCPA constructed several walls to block and slow down the avalanche of consumer bankruptcy filings that had been steadily rising as we neared the year 2000. While a chapter 7 bankruptcy is still available to those who need it most, not everyone will qualify and those who do may have to take a few extra steps to do so. Here are a few major changes that will affect the way you file for bankruptcy.

Consumer Education

In an effort to stop or slow down repeated filings, the BAPCPA created two classes to be completed. The first must be done before you even file and is more of a test than a class. In the first course, the credit counseling class, you must submit a budget and the budget must show that you lack the financial means to pay your bills without a bankruptcy filing. The second class is the debtor education course and it contains useful information about rebuilding your credit in a wise manner.

Tax Troubles

You might want to file your tax return before you file your bankruptcy. The BAPCPA requires that you have a most recent year tax return on record with the IRS before your bankruptcy can be complete. Since your income is now a major factor for filing, the income you state on your taxes must match up with what you state on your bankruptcy paperwork. This brings up the next change, means testing.

Means Testing

To reduce the number of high-income filers, the BAPCPA created a test meant to block those who have higher than usual incomes. Your income is compared with the median income of your state. If you make too much money to file, you might be able to qualify by using certain deductions. It should be mentioned that a chapter 13 filing does not require means testing.

Speak to your bankruptcy attorney to find out more about any of the above.