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One Year After

posted by Bob Lawless

Today is the one-year anniversary of the effective date of the 2005 bankruptcy amendments. I have refused to use the formal title--the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005--because the statute was most definitely not about consumer protection and prevented bankruptcy abuse in the same way that news talk shows fix political problems. We're not sure what the problem is, but if we talk about it a lot, we can claim credit for fixing it. Love it or hate it, we are now stuck with this law. What are the legacies of the 2005 amendments?

We're only one year out. Anyone that purports to know what effects the 2005 amendments will have is probably selling something. There is a great story about Zhou Enlai that is one of those stories that is so perfect one hopes it at least has a kernel of truth. Supposedly, Zhou was asked by that master of hubris, Henry Kissinger, for Zhou's assessment of the French Revolution. Zhou is supposed to have replied, "It is too early to say." With that cautionary note, what are at least some notes of interest over the past year:

  • Decreased bankruptcy filings: Anyway you slice it, bankruptcy filings are way off what they were before the 2005 amendments. Filing rates are perhaps 50% of what they were before the 2005 amendments. A qualified "perhaps" is in order because the difference depends on when you compare and how accurate one believes the filing statistics are. The National Association of Consumer Bankruptcy Attorneys and other consumer advocates predicts bankruptcy filings will return to their previous levels, but one wonders how much of that is wishful thinking to believe that a terrible law failed to have its intended effect. Mathematically, for bankruptcy filing rates to return to pre-2005 levels, there will need to be a surge of bankruptcy filings.
  • Textual chaos: Every reasonable expert stated that the 2005 amendments would be a technical nightmare. That is proving to be true but probably even to a degree more than expected. Maybe I just lack imagine, but I have been surprised at the number and depth of the problems with the statutory language.  If go into a restaurant and order frappe pudding and milk, I might get a chocolate malt, but I shouldn't complain if the waiter brings me something else. As the supposedly faithful agents of the legislature, the courts need instructions they can understand. There always will be ambiguities, but the 2005 amendments left many more holes the typical statute.
  • Law student interest: My law students seem less interested in pursuing careers in bankruptcy law, especially consumer bankruptcy law. After spending a semester learning that they have to vouch for their client's schedules, can be penalized for slight missteps, and will have to navigate a minefield of statutory pitfalls for their clients, they get the message that Congress wants them to do something else.
  • Bankruptcy court frustration: From a bankruptcy court poetically pondering the new penalties for failing to file schedules with "I do not like dismissals automatic"  to the WWSD ("What Would Scalia Do?") opinion about reforming the statutory text to deal with gaping holes, bankruptcy judges have been voicing their displeasure with the new statute. One court even declared Congress passed the statute as part of "an agenda to make more money off the backs of the consumers in this country." What will this mean for the future of the bankruptcy judiciary? The 2005 bankruptcy amendments made it less appealing to be a bankruptcy judge. When jobs are less appealing and there is no increase in pay, don't we get fewer applicants and fewer quality applicants?


Remind Prof. Lubben that the Red Sox have won a World Series a lot more recently than have the Cardinals ... what was it, 1982? so, in other words, many law students were not even born when the Redbirds last hoisted the Series trophy.

As a pre-2005 discharged BK individual, I do believe there are good people like myself that need the balanced system. Stuff happens and in my case, stuff did happen but my bills always got paid but at a price and games of the credit card business. Today, I get mail for two to four credit card offers daily. As one might think the system is tilted for the credit care business, you are discharged and owe no one. You are a good candidate to get back into their coffers.

Just like illegal immigration bill was an attempt to craft a bill that does nothing more than look after votes for the politicians. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is geared to protect the Credit Card business as they maintain their persistence to maintain credit card usage among the consumers.

If there is justice, the law makers should balance the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that makes it clear, fair and balanced for both consumers and creditors.

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.