How In the World Did We Get Here? – The Making of Our Present Bankruptcy Law

In the late 1990’s and into the early 2000’s, the finance industry ( Visa, MasterCard, the major National Banks, the major automotive loan finance companies, the mortgage industry) complained to Congress about Americans who were filing bankruptcy. Why were they complaining?

“We are losing money”,  whined the companies-that-charge-you-outrageous-interest-on-your-credit-cards.  “You people are getting away with murder by filing bankruptcy when you really don’t need to”.  These “needless” bankruptcies supposedly were bad for the bottom line of the finance industry.

Indeed!!! I have been practicing for more than 37 years and I have NEVER had a client file a bankruptcy without there being an actual need to do so.

” Plus, these bankruptcy filers – they are all liars. They are hiding gobs of money and assets that they never tell anyone about.”

“And….. and….. and ….. you know what else?” said the whiny industry. ” It is way too easy to file a bankrutpcy. We need to make it harder”.

And so they did.

Millions of dollars were spent lobbying Congress and after years of lobbying efforts in Washington, a new bankruptcy law was voted into being by Congress. Welcome to BAPCPA, the Bankruptcy Abuse Prevention and Consumer Protection Act, enacted in April, 2005 and Effective October 17, 2005.  (See what I mean? Congress used the word “abuse prevention”. ) As a bankruptcy attorney, my life became much more complicated once the new law went into effect. In fact, I know quite a number of attorneys who stopped handling bankruptcy cases once the new law went into effect. They found the learning curve too steep. What our Senators and Representatives did with the enactment of the current law which governs the bankruptcy process was to create a paper monster. I wish I owned the trees from which the paper is created for all the documents that are needed in order to properly prepare a bankruptcy petition.

Stay tuned. There is more to come.