On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). BAPCPA was hailed by some as a sensible overhaul of the bankruptcy code aimed towards decreasing repeat bankruptcy filing rates. In this article, the authors consider specific changes that BAPCPA made to the Bankruptcy Code. Some of these changes were specifically targeted at the congressional view that repeat bankruptcy filings are largely the result of strategic and irresponsible behavior. This article considers whether, in actuality, BAPCPA decreased repeat filings. The authors' statistics show that while BAPCPA did increase the time between filings, it did not change the rate of repeat filings. Moreover, the financial description of repeat filers remained the same before and after BAPCPA. BAPCPA may have prolonged the inevitable, but it did not lower the rate of repeat filing or affect who repeatedly files for bankruptcy.
The statistical and economic analysis in this article is based on a random sample of bankruptcy petitions filed in the Northern District of Texas in 2004 and 2006. The sample was restricted to the Northern District of Texas because extensive financial data had already been collected for a previous study. For each debtor, the authors extracted information from individual Statements of Financial Affairs and Bankruptcy Schedules and analyzed that information to consider impacts of BAPCPA on repeat filings.
Part II of this article discusses the legislative history of BAPCPA to show the assumptions underlying BAPCPA and the Congressional intent behind the provisions discussed herein. Part II also considers BAPCPA’s legislative intent as described by scholars and courts interpreting BAPCPA soon after its enactment. Finally, Part II describes the state of economic research and literature discussing bankruptcy and repeat filing, and describe our data in more detail.
Part III of this article discusses three specific changes to the Bankruptcy Code implemented by BAPCPA, which were aimed in particular at curbing "abusive" repeat filing. Section 362(c) was amended to limit the automatic stay for repeat cases filed within a year of earlier dismissed cases. BAPCPA amended section 707(a)(8) to increase the time debtors must wait between discharges, and added section 109(h) to require that all individual debtors obtain credit counseling before filing for bankruptcy.
In addition to discussing these changes from a legal and historical perspective, Part III also discusses whether and how each change had an impact on repeat filings.
Part IV of this article discusses the more general themes that can be observed from the data. The authors detail the financial description of debtors who filed repeat cases before and after BAPCPA, and they discuss whether BAPCPA had any broad impact on those filers.
In discussing repeat filers, this paper interestingly points back to the 1989 study As We Forgive Our Debtors by Teresa Sullivan, Elizabeth Warren, and Jay Westbrook, which included an illustrative anecdote-
[Martha and James] filed a Chapter 13 in September 1980 that was dismissed in November 1980 because they were unable to make their payments. They gave up on the idea of partial repayment and filed a Chapter 7 in January 1981. Thus they are listed as repeaters, although, in fact, their first filing had no effect on their debts. They simply took two tries to find a solution to their financial problems. (I have removed these Debtors’ last name, since surely after more than 30 years their bankruptcy should not still haunt them.)
That both As We Forgive Our Debtors and the instant article both consider the initial Chapter 13 filing in conjunction with the subsequent Chapter 7 as essentially a two-part attempt an ultimately successful solution to financial distress, calls into question the common evaluation of the "success rates" of Chapter 13 cases, without consideration of subsequent bankruptcies.
This paper recognizes that the majority of courts follow In re Paschal, 337 B.R. 274 (Bankr.E.D.N.C.2006), and In re Jones, 339 B.R. 360 (Bankr.E.D.N.C.2006), giving 11 U.S.C. § 362(c)(3) a very strict and narrow interpretation that the stay terminates only for creditors that have taken an action and even then only as to the debtor and not as to assets of the estate, in effect minimizing the impact of this restriction on refiling. The study, however, draws its cases from the Northern District of Texas, which appears to take the broader minority position that the stay terminates after 30 days in all respects, making it necessary to either wait a year to refile or seek an extension of the automatic stay. It would be a useful contrast to evaluate Debtor behavior in refiling cases in jurisdictions that follow Paschal and Jones.
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