Vol. 32, No. 2, 2. Bankruptcy - a fresh start or a necessary evil.

• Author: By Randy L. Royal

Wyoming Bar Journal

2009.

Vol. 32, No. 2, 2.

Bankruptcy - a fresh start or a necessary evil

Wyoming Lawyer Issue: April, 2009 Bankruptcy - a fresh start or a necessary evil? By Randy L. Royal

It is no secret that, as the national economy continues its decline, bankruptcy becomes a viable option for many Americans. Most of those who find the need to file bankruptcy find it is a very unattractive option and one that they put off as long as possible. For many, the effect that bankruptcy has on their lives both financially and emotionally takes a heavy toll. Obviously, bankruptcy is a solution that should be avoided if at all possible, but if you have a client that needs to file bankruptcy, that client will find that the bankruptcy laws in combination with the Wyoming exemptions will often times offer a fresh start. Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)

By far, the most significant piece of legislation which has affected bankruptcy filings in the last decade is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). That act became effective October 17, 2005. Tim Ellis, the new Clerk of the U.S. Bankruptcy Court for the District of Wyoming, provided me with filing data. The five years just prior to BAPCPA (2000 - 2004) saw in the District of Wyoming an average annual filing of 2,344 cases. This includes the three primary chapters under Title 11 of the U.S. Code under which filings occur: 7, 13 and 11. In anticipation of BAPCPA enactment, Wyoming saw a dramatic increase in annual filings for all types of cases to 3,266 in 2005. Since the enactment of BAPCPA commencing with calendar year 2006 through calendar year 2008, bankruptcy filings in Wyoming have been and continue to remain flat. Wyoming has not experienced the increase seen in the eastern part of the country in bankruptcy filings and principally, bankruptcy filings under Chapter 7. For the calendar years 2006, 2007, and 2008, Wyoming has seen an average of 760 cases per year. Laramie County and Natrona County continue to lead the state in terms of those filings.

The Effect of BAPCPA

BAPCPA was enacted principally with an eye toward reducing those filings by debtors seeking to discharge or eliminate credit card debt. Thus, those types of debtors became the principal focus of the act. BAPCPA has become effective in its purpose, not only by its express terms, but also perhaps by its unanticipated consequences. My office routinely receives inquiries from both attorneys and debtors who have heard a "rumor" that one can no longer file against credit card debt. That is not the case.

What BAPCPA has done is to make filing much more difficult and much more expensive and, as a result, the filings are down. Most attorneys have found it necessary to increase their fees both as a result of the responsibilities placed on them by BAPCPA and also in response to the additional work required to get the case ready for filing.

Pre-filing Requirements

Each individual who wants to file bankruptcy must first undergo credit counseling and receive a certificate showing completion of that counseling. That counseling is to occur within 180 days preceding filing. (11 U.S.C. Section 109(h)). Beyond that, however, is the BAPCPA requirement that each individual is subjected to a "means test" by which his income must be assessed and determined to be either above or below median income as...