When The New Bankruptcy Laws Became Effective

The new bankruptcy laws, referred to erroneously yet cleverly by Congress as the “Bankruptcy Abuse Prevention and Consumer Protection Act” or, “BAPCPA” went into effect in 2005.  The passage of this law resulted from many years of intense lobbying by banks and financial institutions.  The new laws were passed and signed into law by President Bush.  The provisions of the new laws became effective for cases filed on or after October 17, 2005.  This page provides a brief history of the bill that went into law, as well as which Congresspersons voted for or against it.

Changes in the Bankruptcy Laws per BAPCPA

Among the many changes to the bankruptcy code, the new bankruptcy laws added a means test to the existing eligibility requirements for filing a bankruptcy case.   The means test is a very complicated (and in many parts completely ambiguous) financial analysis which consists of taking one’s current monthly income (defined as anything received in the six months prior to filing the bankruptcy case, excepting certain specific types such as social security income) and then subtracting out certain pre-set expenses set forth by the Internal Revenue Service for living expenses.  As one might imagine, this doesn’t always equate with one’s ACTUAL living expenses (although admittedly, in many cases, it is better).    There are over 50 parts to the means test and almost every one of them is subject to a lot of legal interpretation.  Some so ambiguous that even judges can’t seem to make a decision on what they mean.

However, the new bankruptcy laws did not eliminate bankruptcy, nor did it do many of the negative things that rumors suggested.   The new laws are indeed tricky, with lots of traps and pitfalls, but with the assistance of an experienced bankruptcy attorney, you can still accomplish most, if not all, of the same things as you previously could under the “old” laws. In some cases you can accomplish more!  There are just simply more “hoops” to jump through and more documentation required.


“In my 40 years of dealing with Congress on bankruptcy legislation, this is the worst I’ve ever seen. It’s the kind of bill that makes you want to point your fingers at individual congressmen and say, ‘Shame on you.’”
- the late Prof. Lawrence P. King, NYU Law School, concerning the
new bankruptcy law bill then being considered by the United States Senate; quoted in The New
York Times, March 14, 2001

by, Mark Markus