By: Donald L Swanson

Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) on April 14, 2005.  It was signed into law on April 20, 2005.  And it applied to all bankruptcy cases filed after October 17, 2005.

So, the year 2025 is the 20^th anniversary of all such dates.

Regressive Law

BAPCPA is a regressive bankruptcy law designed by Congress to assure that middle class consumers are not able to find effective bankruptcy relief when facing financial crises. 

And BAPCPA succeeded, dramatically, in accomplishing that purpose.

Here’s how BAPCPA effectuated that purpose:

• it created an irrebuttable presumption that a Chapter 7 bankruptcy filing by any middle class consumer is an “abuse” of the bankruptcy system;
• it forced all such debtors out of Chapter 7 and into Chapter 13; and
• it made Chapter 13 as difficult for them as possible—e.g., by requiring that a Chapter 13 debtor get a plan confirmed that (i) lasts for five years, (ii) provides for paying all of debtor’s projected disposable income to creditors for all five years of the plan, and (iii) allows for a discharge only after all five years of plan payments are completed.

The result is this:

• many debtors who achieve a confirmed Chapter 13 plan cannot perform for the entire five-years . . . and, therefore, do not receive a bankruptcy discharge.

Failure Statistics

Statistics on the failures of middle class debtors to perform under their confirmed Chapter 13 plans are startling . . . and disappointing. 

According to a nation-wide study of Chapter 13 cases with confirmed plans that concluded in 2022: nearly half failed!  

Here are some details from a data table in that study:

• 197,699 is the number of Chapter 13 cases with confirmed plans that concluded, one way or another, in 2022 throughout the entire country;
• 86,222 (44% of 197,699) is the number of such cases with confirmed Chapter 13 plans that are concluded by dismissal (e.g., for failure to make plan payments) before the plan is completed and before a discharge can be granted; and
• 111,365 (56% of 197,699) is the number of Chapter 13 plans that were “completed” in 2022 (but the study’s Footnote 14 says that, in some of the “completed” cases, the debtor still does not receive a discharge—but the number of such debtors is not provided).

So . . . there you have it.  Failure rates are very high for debtors in Chapter 13 cases with confirmed plans.

Conclusion

Congress wanted to make bankruptcy relief difficult to achieve for middle class debtors, when Congress enacted BAPCPA. 

And Congress succeeded dramatically.  A bankruptcy failure rate of nearly 50% for our consumer debtors, who commit themselves to a five-years plan, is something that Congress must be truly proud of?!

The practical, day-to-day effect of BAPCPA, therefore, has been this:

• we’ve all, over the past couple decades, been bombarded (nearly daily, it seems) with credit card solicitations offering easy credit; and
• the creditors who send such solicitations are assured, in advance, that Congress has their back . . . by providing only ineffective bankruptcy relief for consumers who accept such solicitations and then suffer financial crises.

20th Anniversary!

NOTE: The year 2025 is the twenty-years anniversary of the enactment of BAPCPA.  This article is the first in a series of seven articles looking back over what BAPCPA has wrought.

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