Cite as: Keith M. Lundin, Lundin On Chapter 13, § 3.7, at ¶ ____, LundinOnChapter13.com (last visited __________).
Anyone who considers the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)1 objectively can’t help but be astonished by how often wealthier debtors got better treatment than less wealthy debtors. Maybe it’s the million dollar “cap” on the exemption of IRAs—that can be more than a million dollars if the bankruptcy court exercises vestigial discretion to enlarge the exemption.2 The mathematical formula that determines access to Chapter 7 and allowable expenses for wealthier debtors (only) in Chapter 13 automatically accepts the contractual amount scheduled with respect to all secured debts.3 The 109th Congress embraced a bankruptcy law that favors debtors with expensive homes and luxury items. The credit coalition lobbyists sold Congress the bizarre notion that wealthier debtors in bankruptcy should decide for themselves whether their secured debts are reasonable and necessary.
Why are homeowners almost always better off than apartment renters under BAPCPA? Is it good policy that debtors with higher incomes eat more food and buy more clothes than debtors with lower incomes?4 Why did Congress punish attorneys with special advertising rules only when they counsel debtors with less than $175,500 of nonexempt assets?5 Attorneys who counsel wealthy debtors need less oversight than attorneys who counsel really poor people?
The wealth bias inserted into our bankruptcy law by BAPCPA is insulting and unworthy of a culture with a long tradition of better balance in the treatment of debtors and creditors.
1 Pub. L. No. 109-8, 119 Stat. 23 (2005).
2 See 11 U.S.C. § 522(n), discussed in § 48.3 Exemptions and Exemption Limitations Added by BAPCPA.
3 11 U.S.C. §§ 707(b) and 1325(b), discussed in § 96.1 Average Monthly Payments on Account of Secured Debts.
4 See discussion of IRS standards in § 95.2 National Standards.
5 See 11 U.S.C. §§ 101(3) and 528, discussed in § 4.1 WARNING! You Are a Debt Relief Agency.