Creditors Who Lobbied for BAPCPA May Suffer the Most for It
The March American Bankruptcy Institute Journal includes an interesting analysis of the way BAPCPA may be hurting the very industry that fought so long to see it passed. Henry E. Hildebrand, III, a Chapter 13 Trustee from Tennessee, points out that while more consumers may be filing under Chapter 13 (as the law's proponents intended), those Chapter 13 filings are often not translating into any payments at all to secured creditors.
That's because the new system for determining disposable income is dependent on a formulaic application that doesn't necessarily have a basis in reality. For instance, because "current monthly income" is not, in fact, current monthly income, but rather based on income over a six month period, it is possible that the debtor's actual income is significantly higher than the "current monthly income" on which the Chapter 13 calculations are based. And then, of course, the debtor may also have additional income that is statutorily excluded, such as child support and social security income.
Additionally, since the old system wherein the Trustee could examine expenses for reasonableness on a case-by-case basis has given way to statutorily permitted expenses, many debtors end up with no disposable income-on paper, anyway.
Hildebrand suggests that the consumer credit industry, after years of lobbying for this kind of reform, may turn out to be BAPCPA's biggest victims.
I would agree with Kevin's comment about the effect of statutory expenses. If Congress has decided that these expenses are per se "reasonable" who am I to differ?
In those rare situations where my client's actual expenses are more than the statutory limits, I most likely will have documentary proof.
My sense is that the IRS budget standards may end up as more of a floor than a ceiling.