It has been eight years since the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), and some experts are questioning the effectiveness and costs brought on by the law, the Toledo (Ohio) Blade reported on Saturday. The anniversary is significant because when BAPCPA took effect on Oct. 17, 2005, it changed the countdown clock to eight years — from six years previously — before a debtor is eligible to file for bankruptcy again. The law also established a “means test” for consumer debtors, raised filing fees, required more documentation and mandated pre-bankruptcy credit counseling and post-bankruptcy money-management courses. ABI Resident Scholar Prof. Kara Bruce said that the reforms now seem more like a solution that was in search of a problem. “You have to ask now, was there abuse actually occurring and was anything really being fixed?” Bruce said. The net result of bankruptcy reform, Bruce said, was a law that gave creditors greater certainty at the expense of removing a lot of discretion by bankruptcy judges to give the debtor a fairer shake. Jeffrey Morris, a former University of Dayton law professor and a partner with the law firm of Porter Wright Morris & Arthur in Dayton, Ohio, said that the reforms were partly intended to decrease bankruptcy filings, and as predicted, filings have dropped. But Morris said that the decline in filings was more likely because of a general pullback by the credit markets to extend credit to risky clients, rather than changes in the law. “I just think that the tightening of credit generally has created a situation [where] high-risk individuals don’t get credit anymore,” Morris said. “That belt-tightening that is imposed by the larger financial industry means fewer people have credit to default on.” Read the full article here.
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