Make no mistake, the 2005 Congressional passage of the Bankruptcy Abuse Prevention and Consumer Protection Act was not meant to prevent abuse of bankruptcy (though I'm sure they found a few examples for media purposes) nor to protect consumers (that doesn't even make any sense). The Bankruptcy Prevention and Credit Card Company Protection Act would've been a far more accurate description, but, well, we understand how the government works. Nevertheless, despite what debtors may have heard, Chapter 7 (the traditional, or ‘debt relief', form of bankruptcy; this program previously accounted for more than two-thirds of all American bankruptcies by United States Trustee records) protection still exists. It's just a good deal more difficult to enter and hazardous to endure. When the average American hears the term bankruptcy, they probably imagine something like the Chapter 7 debt liquidation program - debts eliminated, property seized, creditors forever warned - and, while that's never been exactly anything Americans hoped they'd ever have to accept, they did assume the protection would be available for them.

After the passage of BAPCPA, though, it's harder than ever to qualify for Chapter 7, and many borrowers might wish they'd never thought about the program. Chapter 7 bankruptcy protection has always involved the threat of property seizure in order to repay creditors: in the most basic sense, the debtor filing lists all assets (for the sake of Chapter 7, assets includes everything from family heirlooms to their children's toys) with the understanding the courts may decide to auction them off essentially at whim. Every state maintains their own specific exemptions - homes and primary vehicles purchased more than two years previous to filing are almost always exempt as well as property considered necessary for the borrower's work and whatever the Internal Revenue Service deems ordinary household items - but, under the new legislation, debtors declaring bankruptcy under Chapter 7 must list the property not under salable value (which, reasonably enough, equals garage sale prices) but replacement value (which, even for the most basic possessions like coffee makers or throw rugs, can quickly add up). Beyond all that, after the BAPCPA changes to the bankruptcy code, it's increasingly difficult for ordinary wage earners to even meet the new government requirements for Chapter 7. There's what's called a ‘means test' that compares the borrower's income to the average for the state which ignores obvious drawbacks (east Californians and west Texans are essentially out of luck) and replaces the judgment and experience of court appointed trustees with arbitrary distinctions. This new method of testing does not examine the debts of a family nor what put them in this position - purely the money they've earned from a set period. Seasonal workers or folks depending upon bonuses should also expect ridiculously unfair treatment should they file during the wrong months. Even should they manage to qualify under current guidelines, debtors that successfully declare bankruptcy under Chapter 7 must wait another eight years after discharge before another filing no matter what may happen to them in the meantime. Furthermore, the debtors must take government certified lessons on debt as if this was their fault, as if they managed to find themselves owing tens of thousands of dollars by accident or, worse, malfeasance. These courses are often outrageously expensive, and, of course, they're paid for entirely by the borrowers themselves. Not only is this condescending and incredibly demeaning to citizens that, likely, have already undergone significant personal turmoil - nobody, NOBODY, wants to go bankrupt; any court official will tell you the family tragedies that ordinarily precede filing - but the costs in terms of time and actual money are more than significant to the people who can least afford them.

All of these changes wrought by the Bankruptcy Abuse Prevention and Consumer Protection Act were intended to nudge people toward the Chapter 13 alternative. That program, which has exactly the same consequence for the borrower's credit rating as the traditional Chapter 7 bankruptcy, requires the filer to pay back the majority of their debts within a set time limit - and, at the same point, live within a budget decided by the trustee according to living expenses designated by the government. There's an obvious problem with allowing IRS regulations, backed by a legislature controlled by the very lenders whose lax credit policies are just as responsible for the current debt crisis, to dictate living conditions absent knowledge of specific situations, and it's something worse than irresponsible for the government to presume the needs of families based wholly upon the other incomes of their region. As with the Chapter 7 counterpart, there's certainly a point to personal bankruptcy protection under Chapter 13 even considering the current circumstances debtors must face. The program will halt foreclosure proceedings and wage garnishments, ensure that the lights and heat and water aren't turned off, and - the easiest part (they're legally refrained from harassment once notified), but, for most debtors, the most satisfying - stop bill collectors from flooding the mailbox and ringing the phone off the wall. Chapter 13 bankruptcy carries the same restrictions as Chapter 7: no secured debts protected, no alimony or child support, no tax liens, no student loans. Still and all, the program, however weakened, does help desperate borrowers every day avoid towering debts and provide a path toward financial security. Curious borrowers might wish to take a look at the new debt settlement industry, a rather similar system to Chapter 13 that effectively negotiates greater balance reductions from credit card debts through the threat of bankruptcy without the repercussions upon credit reports, but, regardless, the important point's that anyone realizing they have a problem should do something about it. No matter how the financial services Political Action Committees and their associated flacks attempt to shake bankruptcy protection, it still exists. For many borrowers, it may well be their final solution, an equal number of borrowers may find the developing solutions rather a better fit, but, at the very least, everyone to have ever worried about a debt payment should know just what that final solution entails.