BAPCPA For Your Viewing Pleasure

On Tuesday the House Committee on the Judiciary held a day long hearing on the second anniversary of the enactment of BAPCPA. Before I assumed the responsibilities of a blogger, I didn't know that Congressional hearings were given snappy titles. The title of this hearing asked the question (no, I'm not making this up) "Are Consumers Really Being Protected Under the Act?"

The real bankruptcy lawyers were separated from the poseurs when they stayed home to watch this event on CSPAN. Coming in a distant second were those who Tivo'ed the action. If you weren't even in this group, why would you be reading my blog? Anyway, you still have a chance to watch the hearings video online at the Committee website.

Not surprisingly, the witnesses gave differing explanations of the indisputable fact that consumer bankruptcy filings are down drastically so far in 2007, over a year removed from the effective date of BAPCPA. Steve Bartlett, President of the Financial Services Roundtable, testified that eligibility restrictions and credit counseling have resulted in lower filings. Yes, he really was serious about the credit counseling. Henry Sommer, President of the National Association of Consumer Bankruptcy Attorneys, testified that increased costs "and the widespread misperception that bankruptcy is no longer available (aggravated by collection agent misrepresentations to consumers) are the primary reasons that bankruptcy case filings have declined so precipitously. "

Well, we're going to see. If the decline in bankruptcy filings proves permanent over the next couple of years, during a period when the housing bust should be causing more filings, its going to be hard to maintain the NACBA position.

The real question that few seem interested in answering is "are less bankruptcy filings good for the economy?" I assume that "good for the economy" means the same as "good for the consumer." Is there an economist out there who has figured this out?

Doesn't matter, really. There is no politically potent pro-bankruptcy consitutency. Envision a Congress full of Democrats and its still hard to imagine most of BAPCPA being rolled back. The future of bankruptcy reform for the forseeable future is nibbling around the edges. And sorry, NACBA, that may mean plugging loopholes as much as relaxing BAPCPA's more silly provisions.

The only thing that we can all agree on was neglected at the hearings: When are the front line troops (the chapter 7 trustees) going to be taken care of? BAPCPA drastically increased their responsibilities and has cut their income. The compensation for no asset chapter 7 cases needs to go to $100 now. Could that bill possibly pass without becoming hostage to the political football of bankruptcy reform?

Copyright Dean T. Kirby 2007. All rights reserved.