By: Donald L Swanson
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) was signed into law on April 20, 2025, as “Public Law 109—8.” Here is a link to the text of that law.
By the time of BAPCPA’s 2005 enactment, I had already been practicing bankruptcy law for a quarter century. And I had already developed a deep-seated view that the provisions of BAPCPA, when taken as a whole, are:
- unduly harsh against debtors by such things as keeping middle class consumers out of Chapter 7, rendering student loans nearly impossible to discharge, and making Chapter 11 for entrepreneurs more difficult than before; and
- heavy on preventing “abuse” by consumer debtors but light on consumer debtor “protections.”
So, what follows are results from a research effort I made to see whether my perception of “light on debtor ‘protections’” is well-founded, by identifying and describing the “consumer protection” provisions in BAPCPA.
Conclusions from Research & Name
Here are my conclusions on BAPCPA’s “consumer protections”:
- some consumer creditors receive significant protections from BAPCPA—i.e., domestic support creditors, creditors injured by intoxicated drivers, and patients in hospitals and nursing homes; and
- although consumer debtors receive some illusory and ineffective protections, they receive little-to-no actual protection from BAPCPA, with one exception—an IRA exemption.
So, a more nearly accurate name for the “Consumer Protection” portion of BAPCPA would be this: the “Consumer-Creditor Protection” Act.
I’ll try to explain.
Three Consumer Protection Titles in BAPCPA
The BAPCPA index, appearing at the beginning of Public Law 109—8, is divided into 25 titles, including the following 3 titles that provide consumer protections:
- Title II—Enhanced Consumer Protections;
- Title XI—Health Care and Employee Benefits; and
- Title XIII—Consumer Credit Disclosure.
Protections for Consumer Creditors in BAPCPA
–Title II
Title II contains this significant protection for consumer creditors: Sec. 223 (codified in § 507(a)(1)) gives administrative claim status to “claims for death or personal injury” caused by an intoxicated driver.
–Title XI
Title XI provides the following bankruptcy benefits to consumer creditors.
Sec. 1104 (codified in § 333) provides for the appointment of a patient care ombudsman in a healthcare provider bankruptcy: e.g., a bankruptcy filed by a hospital or nursing care facility. This is, obviously, an important “consumer protection.” [Note: Each patient in a healthcare bankruptcy holds a “claim” (as defined in § 101(5)(B)).]
Sec. 1105 (codified in § 704(a)(12)) requires a healthcare bankruptcy trustee to “use all reasonable and best efforts” to transfer patients to another facility. This is, obviously, an an important “consumer protection” for patients in a hospital or nursing facility bankruptcy. [See “Note” in preceding paragraph.]
Illusory and Ineffective Protections for Consumer Debtors in BAPCPA
Nearly all consumer debtor protections in BAPCPA are illusory and ineffective. Here is a list.
–From Title II
Sec. 201 (codified in § 502(k) and § 547(h)) purports to promote alternative dispute resolution (“ADR”). Specifically, it allows a 20% reduction of a creditors claim in bankruptcy, (i) if that creditor “unreasonably refused to negotiate a reasonable alternative repayment schedule” in an ADR context, and (ii) if debtor made the offer “at least 60 days” before filing bankruptcy. But:
- debtor has a “clear and convincing” burden to prove the unreasonableness of creditor’s refusal;
- a search of bankruptcy court opinions for “502(k)” results in hits on only 8 opinions, 2 of which cite § 502(k) for the sole purpose of defining the phrase “consumer debt”; and
- a search of bankruptcy court opinions for “547(h)” results in hits on 9 opinions, 1 of which is a for a non-bankruptcy statute.
So . . . a 20 years-old law with less than 17 search hits across all 94 bankruptcy districts is not much of a protection.
Sec. 202 (codified in § 524(i)) prohibits a creditor’s “willful failure” to credit plan payments as required by the plan—but such prohibition does not generally apply to “the holder of a secured claim.” A search of bankruptcy court opinions for “524(i)” results in hits on 101 opinions. Of these hits:
- the first holds that § 524(i) language cannot be incorporated into a Chapter 13 plan because § 524(i) “merely provides debtors a potential remedy, post-discharge”;
- the next declares that the claim “alleged under § 524(i) fails as a matter of law and as implausible”; and
- the next dismisses § 524(i) claims with prejudice.
Without researching further, Sec. 202 appears to have had less than a stellar “consumer protection” effect over the past 20 years.
Sec. 203 (codified in § 524(k)-(m) and 18 U.S.C. § 158) is high in word-fat (3,276 words, by my computer’s count) and requires extensive creditor disclosures for reaffirmation agreements. My perception has always been that high word-fat disclosures in consumer credit contexts are merely box-checking protections for creditors that do little to actually protect consumers.
And so, I suggest, Sec. 203 has limited-to-no “consumer protection” effect in real life.
Sec. 204 (codified in § 363(o)) provides that, in a § 363 sale of a consumer loan that’s subject to claims under the Truth in Lending Act, the loan sale is subject to (and not free and clear) of the Truth in Lending claim. A search of bankruptcy court opinions for “§ 363(o)” results in hits on 147 opinions. Of these:
- only 77 are decided in 2005 or thereafter (i.e., the pre-2005 opinions involve a different § 363(o)); and
- 50 of those 77 opinions are from a single bankruptcy case.
Without researching further, Sec. 204 appears to have had a limited-to-no “consumer protection” effect.
–From Title XIII
Title XIII additions are mostly insignificant for consumer debtors. Here are examples.
Title XIII adds consumer credit disclosure requirements to the Truth in Lending Act. As noted above, I believe that high word-fat disclosures in consumer credit contexts are merely box-checking protections for creditors that do little to actually protect consumers.
Sec. 1306 prevents a credit card company from terminating a credit card, when the user pays off the balance each month without incurring a finance charge. While this is an important consumer protection generally, its relevance in bankruptcy is doubtful.
The Exception
Sec. 224 (codified in § 522(b)(3)(C) & (n)) makes a debtor’s individual retirement account exempt. This is a huge “protection” for consumer debtors—and it appears to be the sole one of its kind in BAPCPA.
However, the effect of this exemption is limited because something like 31 states have opted out of the federal bankruptcy exemptions contained in § 522(d). So this IRA exemption is often ignored in such states. But see this article: “IRA Exemption, Added By BAPCPA, Applies Everywhere—Even In States That Opt Out of § 522 Exemptions (In re Euse).”
Conclusion
My earlier impression that BAPCPA is heavy on “abuse prevention” and light on “protections” for consumer debtors is confirmed by the research results described above.
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