BAPCA, or the Bankruptcy Abuse Prevention and Consumer Protection Act, was passed by the federal government and made effective on October 17, 2005. The purpose of the act was to reduce the number of Chapter 7 bankruptcy filings and increase the number of Chapter 13 filings.
This legislation was sought by creditors because Chapter 13 debtors have to partially repay their debts, whereas, with Chapter 7, most debts are not repaid and are discharged.
Critics of BAPCA included consumer advocates, bankruptcy judges and legal scholars who argued that the bill’s sponsors exaggerated claims of bankruptcy fraud and that a number of BAPCPA’s provisions favored the credit card companies who lobbied heavily for passage of the bill.
The passage of BAPCPA resulted in dramatically reduced bankruptcy filings across the nation. In the Western District of Washington, which includes the bankruptcy courts in Tacoma and Seattle, bankruptcy filings went from 35,360 cases filed in 2005 to 8,459 cases filed in 2006.
This decrease was due in large part to public misconceptions about the continued availability of bankruptcy relief, implementation of the new laws in the bankruptcy court system, and increases costs now associated with filing for bankruptcy. There was also a great rush to file for bankruptcy relief in 2005 before the effective date of the new laws.
As the years have passed, bankruptcy filings have increased to pre-BAPCA and historic levels.
For 2010, there were 26,875 bankruptcy cases filed in the Western District of Washington. It is clear now that BAPCPA has preserved for working people the relief that the Bankruptcy Code affords as honest people do make regrettable decisions, get sick, lose jobs, get divorced and have other bad things happen to them.
As the U.S. Supreme Court stated regarding the purpose of the bankruptcy law: “It gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”