Chapter 13 Consequences

Most debtors file for chapter 7 bankruptcy, but chapter 13 is an option under special circumstances. Many debtors including the poor, have to turn to chapter 13 because they cannot qualify for a chapter 7 bankruptcy. In chapter 13, a payment plan is created for the debtor through which he pays back only a portion of his unsecured debt. It also allows him to keep more assets and still file for bankruptcy.

One panelist argued that since the introduction of the BAPCPA, it has become more difficult to get a chapter 13 payment plan approved by bankruptcy trustees. He claimed that debtors are now forced to make more concessions to creditors, and the payment plans that are allowed by trustees are extremely difficult for debtors to afford. Additionally, he claims it is more difficult to get a chapter 13 plan confirmed for a poor bankruptcy filer than it is for a wealthy individual.

Some Creditors Have Suffered as Well

Protecting unsecured creditors (those that have no collateral or special legal right to get paid), was the main intent behind the BAPCPA. But unsecured creditors in both chapter 7 and chapter 13 bankruptcy now receive less money through the bankruptcy process than they did prior to the implementation of the BAPCPA.

A Matter of Opinion

So far, it appears the BAPCPA has failed on every level. It made it more difficult for the poor to afford to file while costing unsecured creditors money it was designed to protect. However, others on the panel argue that it has been effective in preventing those who have significant money and/or assets from filing. They also contest the idea that the poor can no longer file for bankruptcy, arguing that anyone who legitimately needs to file is still able to do so.

It’s no surprise that those on the panel who represent debtors feel that the BAPCPA has failed, while those who represent creditors feel that it has succeeded. Either way, it’s the current law, and it’s likely not going to change – at least not in the near future.