Congress implemented the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) to strengthen the integrity of the bankruptcy system and combat what was perceived to be fraud and abuse. The act implemented new standards to determine whether an individual was eligible for Chapter 7 or Chapter 13, allowed the trustees to target and supervise audits to determine the accuracy of a debtor’s Chapter 7 documents, provided for certification of credit counselors and financial educators, and enhanced the oversight of small business Chapter 11 reorganization.
One of the biggest changes made to the Bankruptcy Code by BAPCPA is the inclusion of the “means test” for consumer cases. The means test is used to determine whether a presumption of abuse exists in cases filed under Chapter 7. A Chapter 7 case can be dismissed for abuse. In other words, the means test is designated to identify debtors who can afford to make payments to creditors and prevent them from filing a Chapter 7 bankruptcy case. Thus, one of the primary reasons Congress enacted BAPCPA was to limit abuse by consumer debtors and reform the bankruptcy system.
BAPCPA also requires anyone filing for bankruptcy to seek professional credit counseling before filing and debtor’s education after filing. The Federal Trade Commission provides a review of issues to consider before signing with a counseling or education service. Primarily, the counseling and debtor education agency must be approved by the Department of Justice Trustees program. Fee waivers may be requested, and debtors must acquire a certificate of completion for both courses.