Repeat Filers Under the BAPCPA: A Legal and Economic Analysis

Abstract

On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). BAPCPA was hailed by some as a sensible overhaul of the bankruptcy code aimed towards decreasing repeat bankruptcy filing rates. In this article, we consider specific changes that BAPCPA made to the Bankruptcy Code. Some of these changes were specifically targeted at the congressional view that repeat bankruptcy filings are largely the result of strategic and irresponsible behavior. This article considers whether, in actuality, BAPCPA decreased repeat filings. Our statistics show that while BAPCPA did increase the time between filings, it did not change the rate of repeat filings. Moreover, the financial description of repeat filers remained the same before and after BAPCPA. BAPCPA may have prolonged the inevitable, but it did not lower the rate of repeat filing or affect who repeatedly files for bankruptcy.

The statistical and economic analysis in this article is based on a random sample of bankruptcy petitions filed in the Northern District of Texas in 2004 and 2006. The sample was restricted to the Northern District of Texas because extensive financial data had already been collected for a previous study. For each debtor, we extracted information from individual Statements of Financial Affairs and Bankruptcy Schedules and analyzed that information to consider impacts of BAPCPA on repeat filings.

Part II of this article will discuss the legislative history of BAPCPA to show the assumptions underlying BAPCPA and the Congressional intent behind the provisions discussed herein. Part II will also consider BAPCPA’s legislative intent as described by scholars and courts interpreting BAPCPA soon after its enactment. Finally, Part II will describe the state of economic research and literature discussing bankruptcy and repeat filing, and describe our data in more detail.

Part III of this article will discuss three specific changes to the Bankruptcy Code implemented by BAPCPA, which were aimed in particular at curbing “abusive” repeat filing. Section 362(c) was amended to limit the automatic stay for repeat cases filed within a year of earlier dismissed cases. BAPCPA amended section 707(a)(8) to increase the time debtors must wait between discharges, and added section 109(h) to require that all individual debtors obtain credit counseling before filing for bankruptcy.

In addition to discussing these changes from a legal and historical perspective, Part III will also discuss whether and how each change had an impact on repeat filings.

Part IV of this article will discuss the more general themes that can be observed from the data. We will detail the financial description of debtors who filed repeat cases before and after BAPCPA, and we will discuss whether BAPCPA had any broad impact on those filers.