We Need Commissions To Study The Reform Of BAPCPA!

On April 20, 2005 (that’s 20 years ago this Sunday), the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) is signed into law, after being passed by bi-partisan majorities in both the House and the Senate.

But BAPCPA has been tough on middle class debtors and on debtors with student loans. Here are links to some articles explaining that toughness:

BAPCPA: A Failure For Consumers . . . But A Success For Easy Credit And Ineffective Bankruptcy Relief! (A Study);
BAPCPA: A Radical Departure From Historical Bankruptcy Laws (A Report From May of 1900);
BAPCPA: What About Middle Class Families Facing Economic Catastrophes? (A Study);
BAPCPA: Did It Reduce Credit Card Interest Rates? (A Study);
BAPCPA: Extremely Harsh On Student Loans (Brunner & Briscoe); and
BAPCPA: Bankruptcy Filing Is Morally Equivalent To Shoplifting (So Says A Congressional Report).

What to Do?

–A Suggestion

So . . . what do we do about the problems created by BAPCPA for middle class debtors and for student loan debtors?

Here’s a suggestion: that Commissions be established by recognized bankruptcy organizations to study the reform of BAPCPA and to make recommendations thereon. The primary question for such Commissions to answer is this:

Do the limitations created by BAPCPA on bankruptcy relief for middle class debtors in financial crises and for debtors with oppressive student loans need to be reformed?

–A Model from Subchapter V

We already have a model for such an approach: it’s the creation of Subchapter V.

Here is how that model worked.

The recession that emerged from the deteriorating economy of 2007 resulted in a focus on small businesses. That focus resulted in a 2010 Report by the U.S. Small Business Administration, Office of Advocacy, finding that small businesses:

are the creators of most net new jobs;
are the employers of half of the nation’s private sector work force;
are the providers of half the U.S. nonfarm, private real gross domestic product;
lead the way when the economy is gaining jobs; but
also lead the way in shedding jobs, when the economy dips—in the first quarter of 2009, for example, small businesses accounted for almost 60 percent of the job losses.

Also in 2010 the Small Business Working Group of the National Bankruptcy Conference issued a Report, concluding that Chapter 11:

does not work well for smaller businesses;
generates exorbitant administrative costs;
requires a high voting threshold and elaborate disclosures; and
has “small business debtor” and “individual debtor” obstacles added by BAPCPA that present roadblocks to reorganization.

The American Bankruptcy Institute established a Commission to Study the Reform of Chapter 11, which issued in 2014 its “Final Report and Recommendations.”

Both the 2010 Report of the National Bankruptcy Conference and the 2014 Final Report of the ABI Commission recommended the creation of a bankruptcy system providing greater relief for small businesses.

Those recommendations resulted in the creation of Subchapter V for small businesses and its enactment into law.

Conclusion

And that’s what we need for a review and reform of BAPCPA:

the creation of commissions by recognized bankruptcy organizations to study the need for reforming BAPCPA and to make recommendations thereon.

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