BAPCPA Backfires: Unsecured Creditor’s Returns Decrease in Post-BAPCPA Landscape

By: J. Ellsworth Summers, Jr. & Scott St. Amand

A new study published by the American Bankruptcy Institute has found that the aggregate effect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which was passed in part to improve creditor returns in consumer bankruptcy proceedings, has actually had the opposite effect since the Act’s sweeping changes to the consumer bankruptcy landscape were instituted.

Prof. Lois Lupica of the University of Maine School of Law recently published “The Consumer Bankruptcy Creditor Distribution Study,” which found that because of the significant rise in costs for consumers filing for chapter 7 or chapter 13 protection, unsecured creditor distributions have decreased for both chapter 7 and 13 cases after the enactment of BAPCPA.

Access costs to chapter 7 cases, which Lupica defined to include filing fees, consumer counseling fees, debtor education fees and attorney fees increased on average by $488 post-BAPCPA. For chapter 13 debtors, access costs increased by $667.