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Presented by: Matthew F. Glarrow PSC 499- Senior Capstone

“Bankruptcy Abuse Prevention and Consumer Protection Act of 2005- 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. Historical Perspectives/ Inherited Traditions.

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Presented by: Matthew F. Glarrow PSC 499- Senior Capstone

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  1. “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005- Proponents Intentions and the Effects of the Act” Presented by: Matthew F. Glarrow PSC 499- Senior Capstone

  2. Outline • Overview/Brief Summary of Chapters 7, 11 & 13. • Historical Perspectives/ Inherited Traditions. • 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. • Did the legislation accomplish what its authors and proponents thought it would? • Conclusion

  3. Chapter 7- Liquidation • Debtor files a petition for relief • Debtor surrenders all nonexempt assets to Trustee • Trustee sells/auctions 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”

  4. Chapter 11- (Corporate) Reorganization • 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. • 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). • Plan of Reorganization

  5. Ch.13- Adjustment of Debts of an Individual with Regular Income • Debtor files a petition for relief. • 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 more debt under Ch. 13 than they would under Ch. 7. (2/3 don’t complete plan- see “A”)

  6. Historical Perspective- The Early English system and traditions the US inherited • 1542- 1st known bankruptcy law in England • 1570- • Debtor’s Prisons • 1869- Debtor’s Act

  7. Major Changes in The United States Bankruptcy Code • 1800- The First Act • Bankruptcy Act of 1876 • 1898- first relief for companies against their creditors • 1900-mid-1970s • Bankruptcy Reform Act of 1978 • Bankruptcy Reform Act of 1994 • Bankruptcy Reform Act of 1999

  8. BAPCPA ’05- Proponents and their expectations for the Act • Lobbyists for credit card industry- • Consumer Credit Industry • House Report 109-031 on “Factors Supporting Bankruptc Reform” • Senator Charles Grassley’s (Iowa, Republican) comments on the bill

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

  10. 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.

  11. USBC, MDA Comparative FilingsJan. 1999-Dec. 2006

  12. Middle District of AlabamaCh. 13 Sept. ‘04- Sept. ‘06

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

  14. Middle District of AlabamaCh. 7 Sept. ‘04- Sept. ‘06

  15. Middle District of AlabamaCh. 7 Comparative Filings Oct. ‘04- Sept. ‘05

  16. Lowest Bankruptcy Rates in 2005(Households per consumer bankruptcy filing)*According to the American Bankruptcy Institute*National Average is 60.16* “The American Bankruptcy Institute survey ranked all 50 states and the District of Columbia.”

  17. Highest Bankruptcy Rates in 2005(Households per consumer bankruptcy filing)*According to the American Bankruptcy Institute*National Average is 60.16* “The American Bankruptcy Institute survey ranked all 50 states and the District of Columbia.”

  18. Bankruptcy Filings By State-Highest in 2005 (Contents from derived from Table F, provided by the United States Bankruptcy Courts)

  19. Bankruptcy Filings By State-Highest in 2006 (Contents from derived from Table F, provided by the United States Bankruptcy Courts)

  20. 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.

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