History of BAPCPA: Special Interest Legislation at Its Worst

BAPCPA (Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005) has been characterized as among the best (or worst depending on point of view) examples of special interest federal legislation ever passed by Congress. The act’s history is important:

Under pressure from creditor lobbying efforts, Congress and the Clinton administration in 1994 funded a bi-partisan blue ribbon panel dubbed the Bankruptcy Review Commission. Its mission was a comprehensive study of the bankruptcy system in response to creditor interests’ complaints of widespread but undocumented abuses.

Democrats’ poor showings in 1992 and 1994 elections left Congress controlled by Republicans. President Clinton agreed to a commission to find the facts. The credit industry argued a significant number of Americans had the “ability to repay” their debts, but egged on by greedy bankruptcy attorneys, debtors were choosing instead to slough off debt. Debtors were cast as well-to-do credit card abusers who were financially irresponsible, increasing the cost of borrowing for others. Little or no evidence was ever offered to back up creditors’ arguments. [Read more…]

Debtor Audits Stopped (for Now)

The U.S. Trustee has stopped auditing debtors in bankruptcy cases. The Executive Office of the U.S. Trustee says Congress did not fund the budget for the audits in the 2008 appropriations bill. Alternate funding is being sought so the audits can resume, the EOUST reports.

This is good news for debtors whose advocates testified at a Congressional hearing in October 2007 that the audits were abusive to debtors because of overbearing auditors and erroneous reports of material misstatements in the bankruptcy papers.

See my post on the Bankruptcy Law Network for more details and the official statement by the U.S. Trustee.

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