§ 3.1     Understanding Chapter 13 after BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 3.1, at ¶ ____, LundinOnChapter13.com (last visited __________).

There are two kinds of bankruptcy folk about in the world today: those who remember the Good Old Days before the 109th Congress piddled in the bankruptcy pond1 and those who think the first group are dinosaurs who just need to get over it. A few words in defense of the first group will perhaps help newcomers to Chapter 13 find patience and understanding when passion erupts unexpectedly from opposing counsel or from a troglodyte who writes bankruptcy books.


The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)2 was signed by President Bush on April 20, 2005.3 The most comprehensive change to bankruptcy law since the Bankruptcy Reform Act of 1978, BAPCPA was effective in most respects for cases filed on or after October 17, 2005. Some provisions—most notably dealing with exemptions4—were effective on April 20, 2005.


For more than a quarter century before BAPCPA, bankruptcy practitioners were spoiled by a Bankruptcy Code that made sense. The folks who wrote the Bankruptcy Reform Act of 19785 were amazing both in their understanding of bankruptcy history and policy and in their technical skills as legislative draftsmen. The Bankruptcy Reform Act of 1978 completely replaced the prior Bankruptcy Act, permitting its drafters to comprehensively and consistently define and use words and concepts throughout a complex but fully integrated Code. No one ever claimed the 1978 Code was perfect, but it has been praised by scholars and practitioners for nearly three decades for its accurate and careful treatment of difficult subject matter.


BAPCPA was fundamentally different. Notwithstanding years of study,6 and claims by its drafters that it was perfect,7 BAPCPA was a mess—almost beyond the worst nightmares of those who followed its progress from the outside.8 A handful of lobbyists working for a coalition of consumer lenders wrote BAPCPA in the dark of smoke-filled rooms and back alleyways. The consistent use of words and careful phrasing that characterized the 1978 Code disappeared. There are places in BAPCPA where the intent of the creditor coalition seems relatively clear, but the words just don’t get there,9 and there are at least as many places where the words seem perfectly clear, but the purpose or intent of the provision defies deduction.10 The thoughtful balancing of debtor and creditor interests that was pervasive in the Code was replaced by a hodgepodge of wish-list items collected from the creditor coalition and crammed into the Code, often without discernible logic or respect for the ordinary needs and limitations of those who use bankruptcy law. The result was a fundamental corruption of bankruptcy law that is difficult to understand, very difficult to explain and frightening for its potential to wreak havoc for all who use the bankruptcy system.


More than eight years of reported decisions since the effective date of BAPCPA confirm that early impressions were, if anything, underestimations of the challenges of this statute. In some months, the volume of decisions addressing provisions of Chapter 13 that were changed by BAPCPA has exceeded the balance of reported decisions dealing with the whole of the rest of the Bankruptcy Code. Startling and contradictory decisions interpreting new provisions of Chapter 13 are still an almost daily occurrence.


The appellate courts, including the Supreme Court of the United States, have been pelted with repeated appeals—sometimes dealing with the same few words of the same few sections of Chapter 13. And each new appellate decision seems only to generate more questions about what Congress “really” intended by the new terms of art it grafted onto old statutory stock.11


Early empirical research confirms that BAPCPA has not produced what its criers promised and it has produced a basket of bad outcomes for consumer bankruptcy players of all stripes. The cost of consumer bankruptcy in general and Chapter 13 in particular has gone up significantly for debtors.12 Dividends to priority, secured and general unsecured creditors have been reduced by BAPCPA.13 The “fraud” and “abuse” trumpeted by the proponents of BAPCPA have not been found.14 BAPCPA has sentenced consumer bankruptcy practitioners to years of unproductive litigation that has sapped resources from the pockets of debtors and creditors alike. There is no end in sight to this injury. The daily lives of consumer bankruptcy practitioners are confounded by the frustrations of BAPCPA. Older practitioners remember when it wasn’t so.


One suggestion still trumps all others as our encounter with BAPCPA matures: READ THE STATUTE.15 Read every word of the statute. Give every word its due. Don’t let anyone tell you what this statute says, much less what it meant to say. When you read a decision that answers all questions raised by BAPCPA with respect to some aspect of Chapter 13, don’t cheer, or fret or suffer less diligence—an inconsistent opinion of equal certainty is surely but days from publication.


If you are just beginning to study or practice Chapter 13 after BAPCPA, consider starting with the Ten Principles of BAPCPA that follow.16 Then read the Other Code Sections You Should Read.17 Stop briefly to contemplate your status as a Debt Relief Agency.18 Progress from there to the specific topics organized below in the approximate progression of a Chapter 13 case—from eligibility to confirmation and discharge. There are separate units on the history of Chapter 13 before19 and after20 BAPCPA and Resources for further study21 that fall in the category of reference materials. When the dreaded moment comes and you are forced to explore whatever qualifies as “legislative history” for a Chapter 13 provision of BAPCPA, locate Appendix AA for a section-by-section tracing of that elusive history and a collection of legislative materials. Much of this legislative history is not particularly helpful, but sometimes even that knowledge is predicate to the use of other techniques to coax meaning from BAPCPA.


Good luck. Chapter 13 practice is perhaps not quite the pleasant experience it was over the quarter century before 2005. You will discover that the credit community set out to disable Chapter 13 as the chapter of choice for individual debtor rehabilitation—notwithstanding ample public protests to the contrary.22 But they only partially succeeded. Chapter 13 is alive and recovering, if not quite so robust as before BAPCPA. The artlessness of the drafters of BAPCPA creates many frustrations but also many new opportunities for clever counsel to forcefully and effectively represent debtors and creditors in Chapter 13 cases.


1  See § 2.2  Brief History, Including “Legislative History,” of BAPCPA.


2  Pub. L. No. 109-8, 119 Stat. 23 (2005).


3  The Presidential Signing Statement is reproduced in App. Q.


4  See § 48.2  BAPCPA and Exemptions, § 48.3  Exemptions and Exemption Limitations Added by BAPCPA, § 48.5  Timing and Procedure Considerations Added by BAPCPA, § 48.6  Domicile Rules after BAPCPA and § 49.4  Section 522(f) after BAPCPA: Household Goods Corrupted.


5  Many could be named, but the names that most immediately come to mind are Ken Klee, Rich Levin, Vern Countryman, Frank Kennedy, Larry King, George Treister, Gerry Smith and Joe Lee.


6  See discussion of the history of BAPCPA in § 2.2  Brief History, Including “Legislative History,” of BAPCPA.


7  At least one of the contributors to BAPCPA told a congressional committee that “not one word” of BAPCPA needed change or correction. See Hearings Before Senate Judiciary Comm. (Feb. 10, 2005) (testimony of Professor Todd Zywicki).


8  As explained in § 2.2  Brief History, Including “Legislative History,” of BAPCPA and § 3.10  Nine: Malice or Incompetence?, mainstream bankruptcy scholars and experts—including many of the individuals who contributed to the construction of the 1978 Code—were refused participation in the drafting of BAPCPA.


9  See, e.g., 11 U.S.C. § 1326(b)(3) (This section seems intended to compensate Chapter 7 trustees who successfully convert or dismiss a case for “abuse” under § 707(b), but does it?). See § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA.


10  See, e.g., 11 U.S.C. § 1325(b)(3) (Chapter 13 debtors with current monthly income greater than applicable median family income have been relieved of the reasonable and necessary test for allowance of expenses at confirmation.). See § 94.1  Big Picture: Too Many Issues.

11  See, e.g., discussion of the projected disposable income test after BAPCPA in §§ § 92.1  In General, § 92.2  Projected Disposable Income: All Debtors, § 92.3  Current Monthly Income: The Baseline, § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3), § 93.1  Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Median Family Income, § 94.1  Big Picture: Too Many Issues, § 94.2  Netting Issues, Including Exclusion of Payments for Debts, § 94.3  Accounting for Spouses, § 95.1  In General, § 95.2  National Standards, § 95.3  Local Standards: Housing and Transportation, § 95.4  Other [Necessary] Expenses—In General; All Categories, § 95.5  Other [Necessary] Expenses—Accounting and Legal Fees, § 95.6  Other [Necessary] Expenses—Charitable Contributions, § 95.7  Other [Necessary] Expenses—Child Care, § 95.8  Other [Necessary] Expenses—Court-Ordered Payments, § 95.9  Other [Necessary] Expenses—Dependent Care, § 95.10  Other [Necessary] Expenses—Education, § 95.11  Other [Necessary] Expenses—Health Care, § 95.12  Other [Necessary] Expenses—Involuntary Deductions, § 95.13  Other [Necessary] Expenses—Life Insurance, § 95.14  Other [Necessary] Expenses—Secured or Legally Perfected Debts, § 95.15  Other [Necessary] Expenses—Unsecured Debts, § 95.16  Other [Necessary] Expenses—Taxes, § 95.17  Other [Necessary] Expenses—Optional Telephones and Services, § 95.18  Other [Necessary] Expenses—Student Loans, § 95.19  Other [Necessary] Expenses—Internet Provider/E-mail, § 95.20  Other [Necessary] Expenses—Repayment of Loans to Pay Federal Taxes, § 95.21  Health and Disability Insurance, § 95.22  Family Violence Expenses, § 95.23  Five Percent More Food and Clothing, § 95.24  Elderly, Ill or Disabled, § 95.25  Administrative Expenses, Sorta, § 95.26  Education Expenses, § 95.27  Home Energy Costs, § 95.28  ABLE Program Contributions, § 96.1  Average Monthly Payments on Account of Secured Debts, § 97.1  Total Priority Debts and Divide by 60, § 98.1  Additional Expenses or Adjustments to CMI, § 99.1  In General, § 99.2  Amounts Paid by Others under § 101(10A)(B), § 99.3  Child Support, Foster Care and Disability Payments, § 99.4  Pension Loan Repayments, § 99.5  Employee Benefit Plan Contributions, § 99.6  § 1325(b)(2)(A)(ii): Charitable Contributions (Again?) and § 100.1  Applicable Commitment Period Calculation.


12  See § 3.2  One: Those Who Can Pay Should Pay.


13  See § 3.8  Seven: Unsecured Creditors Don’t Count.


14  See § 3.2  One: Those Who Can Pay Should Pay.


15  See § 3.12  Conclusion: The Job Ahead.


16  See § 3.1  Understanding Chapter 13 after BAPCPA, § 3.2  One: Those Who Can Pay Should Pay, § 3.3  Two: Don’t Trust Debtors, § 3.4  Three: Don’t Trust Judges, § 3.5  Four: Don’t Trust Lawyers, § 3.6  Five: Make the Door Smaller, § 3.7  Six: The Rich Fare Better Than the Poor, § 3.8  Seven: Unsecured Creditors Don’t Count, § 3.9  Eight: Debtors Must Beg for Relief, § 3.10  Nine: Malice or Incompetence?, § 3.11  Ten: The Prior Law Is Still There and § 3.12  Conclusion: The Job Ahead.


17  See § 4.4  Other Sections You Should Read.  


18  See § 4.1  WARNING! You Are a Debt Relief Agency.


19  See § 2.1  Brief History of Chapter 13 before 2005.


20  See § 2.2  Brief History, Including “Legislative History,” of BAPCPA and § 2.3  Brief History of Chapter 13 after BAPCPA.


21  See § 2.4  Sources of Information and Resources You Need.


22  See, e.g., H.R. Rep. No. 109-31, at 18 (2005).