“Bankruptcy Abuse Prevention and Consumer Protection Act of Proponents Intentions and the Effects of the Act” Presented by: Matthew F. Glarrow PSC 499- Senior Capstone

Outline Overview/Brief Summary of Chapters 7, 11 & 13. Overview/Brief Summary of Chapters 7, 11 & 13. Historical Perspectives/ Inherited Traditions. Historical Perspectives/ Inherited Traditions. Major Changes in the U.S. Bankruptcy Code over the last half century. Major Changes in the U.S. Bankruptcy Code over the last half century. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and its proponents, effects, and changes. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and its proponents, effects, and changes. Did the legislation accomplish what its authors and proponents thought it would? Did the legislation accomplish what its authors and proponents thought it would? Conclusion Conclusion

Chapter 7- Liquidation Debtor files a petition for relief Debtor files a petition for relief Debtor surrenders all nonexempt assets to Trustee Debtor surrenders all nonexempt assets to Trustee Trustee sells/auctions debtor’s assets Trustee sells/auctions debtor’s assets Creditors are paid from the money generated from the sale of the debtor’s assets Creditors are paid from the money generated from the sale of the debtor’s assets Creditors are paid by “priority-distribution rules” Creditors are paid by “priority-distribution rules”

Chapter 11- (Corporate) Reorganization Debtor files a petition for relief, listing all creditors, and assets. Debtor files a petition for relief, listing all creditors, and assets. Creditors are stayed from collecting money from the debtor until a Plan is implemented. Creditors are stayed from collecting money from the debtor until a Plan is implemented. In most cases, the debtor operates as the Trustee of the case and continues to run the business (under court supervision). In most cases, the debtor operates as the Trustee of the case and continues to run the business (under court supervision). Debtor is required to file monthly financial reports with the court (allows court to supervise). Debtor is required to file monthly financial reports with the court (allows court to supervise). Plan of Reorganization Plan of Reorganization

Ch.13- Adjustment of Debts of an Individual with Regular Income Debtor files a petition for relief. Debtor files a petition for relief. Designed to help debtors develop a repayment plan, learn how live financially stable lives and repay their debt. Designed to help debtors develop a repayment plan, learn how live financially stable lives and repay their debt. Debtors repay their debts over a 3 or 5-year court supervised repayment plan. Debtors repay their debts over a 3 or 5-year court supervised repayment plan. Debtors repay more debt under Ch. 13 than they would under Ch. 7. (2/3 don’t complete plan- see “A”) Debtors repay more debt under Ch. 13 than they would under Ch. 7. (2/3 don’t complete plan- see “A”)

Historical Perspective- The Early English system and traditions the US inherited st known bankruptcy law in England st known bankruptcy law in England Debtor’s Prisons Debtor’s Prisons Debtor’s Act Debtor’s Act

Major Changes in The United States Bankruptcy Code The First Act The First Act Bankruptcy Act of 1876 Bankruptcy Act of first relief for companies against their creditors first relief for companies against their creditors 1900-mid-1970s 1900-mid-1970s Bankruptcy Reform Act of 1978 Bankruptcy Reform Act of 1978 Bankruptcy Reform Act of 1994 Bankruptcy Reform Act of 1994 Bankruptcy Reform Act of 1999 Bankruptcy Reform Act of 1999

BAPCPA ’05- Proponents and their expectations for the Act Lobbyists for credit card industry- Lobbyists for credit card industry- Consumer Credit Industry Consumer Credit Industry House Report on “Factors Supporting Bankruptc Reform” House Report on “Factors Supporting Bankruptc Reform” Senator Charles Grassley’s (Iowa, Republican) comments on the bill Senator Charles Grassley’s (Iowa, Republican) comments on the bill

BAPCPA ’05- Legislative Changes in the U.S.B.C. Code Ch. 7 “means test” Ch. 7 “means test” Ch. 11- mandatory pre-filing credit counseling Ch. 11- mandatory pre-filing credit counseling Ch. 13- mandatory completion of debtor education class prior to receiving discharge Ch. 13- mandatory completion of debtor education class prior to receiving discharge Lengthened amount of time allowed between filings in all chapters (see notes) Lengthened amount of time allowed between filings in all chapters (see notes) Automatic Stay (see notes) Automatic Stay (see notes) Additional Documents & Schedules- Additional Documents & Schedules- STUDENT LOANS STUDENT LOANS

Effects of the Legislation- Did it accomplish what it was “supposed to?” “About 95% of people who could have filed before October 17, still qualify under the new law” Barry Frost, NJ USBC Trustee. “About 95% of people who could have filed before October 17, still qualify under the new law” Barry Frost, NJ USBC Trustee.

USBC, MDA Comparative Filings Jan Dec. 2006

Middle District of Alabama Ch. 13 Sept. ‘04- Sept. ‘06

Middle District of Alabama Ch. 13 Comparative Filings Oct. ‘04- Sept. ‘05

Middle District of Alabama Ch. 7 Sept. ‘04- Sept. ‘06

Middle District of Alabama Ch. 7 Comparative Filings Oct. ‘04- Sept. ‘05

Lowest Bankruptcy Rates in 2005 ( Households per consumer bankruptcy filing) *According to the American Bankruptcy Institute *National Average is * “The American Bankruptcy Institute survey ranked all 50 states and the District of Columbia.” RankState Households per consumer filing 1Indiana Ohio Utah Tennessee39.7 5Oklahoma40.86

Highest Bankruptcy Rates in 2005 ( Households per consumer bankruptcy filing) *According to the American Bankruptcy Institute *National Average is * “The American Bankruptcy Institute survey ranked all 50 states and the District of Columbia.” RankState Households per consumer filing 51 South Carolina Alaska Vermont District of Columbia Hawaii109.54

Bankruptcy Filings By State- Highest in 2005 (Contents from derived from Table F, provided by the United States Bankruptcy Courts) # of filings State/ District Circuit 60,533 CA/ C 9 56,591 IL/ N 7 52,189 FL/ M 11 51,222 OH/ N 6 50,409 MI/ W 6 *26,411 AL/ N 11 *8,871 AL/ M 11

Bankruptcy Filings By State- Highest in 2006 (Contents from derived from Table F, provided by the United States Bankruptcy Courts) # of Filings State/ District Circuit 58,594 CA/ E 9 54,268 OH/ N 6 52,251 IL/ N 7 50,125 MI/ E 6 44,507 OH/ S 6 *22,354 AL/ N 11 **7,310 AL/ M 11

Conclusion The United States Bankruptcy process and Code are unique and unlike any other system of debt relief in the world. The U.S., on the whole, has a problem with excessive individual/ consumer, and corporate insolvency problems. Credit card companies spent a lot of money to push the BAPCPA of 2005 through Congress and its effects were minimal, as compared to those painted by lobbyists of the consumer credit industry. Statistics prove the filing numbers across the country are back on the rise. However, the BAPCPA of 2005 is not the answer to the debt issues of individuals and companies (or small businesses) in America. The United States Bankruptcy process and Code are unique and unlike any other system of debt relief in the world. The U.S., on the whole, has a problem with excessive individual/ consumer, and corporate insolvency problems. Credit card companies spent a lot of money to push the BAPCPA of 2005 through Congress and its effects were minimal, as compared to those painted by lobbyists of the consumer credit industry. Statistics prove the filing numbers across the country are back on the rise. However, the BAPCPA of 2005 is not the answer to the debt issues of individuals and companies (or small businesses) in America.