Bankruptcy Abuse Prevention And Consumer Protection Act - BAPCPA

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DEFINITION of 'Bankruptcy Abuse Prevention And Consumer Protection Act - BAPCPA'

Legislation enacted by President George W. Bush in 2005 that revised the bankruptcy code for cases filed on or after October 17, 2005. The act created a means test that determines whether individuals filing for bankruptcy can file for chapter 7 bankruptcy, which discharges many debts in full, or whether they must opt for chapter 13 bankruptcy, which requires at least partial repayment of debts. Further, the act increased the waiting period from when an individual last filed chapter 7 bankruptcy to when they may file again.

INVESTOPEDIA EXPLAINS 'Bankruptcy Abuse Prevention And Consumer Protection Act - BAPCPA'

Essentially, the purpose of the act was to make it more difficult to qualify for chapter 7 bankruptcy by more closely examining the filer's ability to repay their debts. The means test compares the debtor's monthly income to the median income in his or her state of residence and provides an allowance for assumed monthly expenses, at rates determined by the IRS, as well as an allowance for actual monthly expenses. If the individual exceeds the median income and has too much money left over after accounting for living expenses, he or she will usually not qualify for chapter 7 bankruptcy.



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