Stricter notice requirements

BAPCPA enacts a provision that protects creditors from monetary penalties for violating the stay if the debtor did not give “effective” notice pursuant to §342, [§342(g)]. The new notice provisions require the debtor to give notice of the bankruptcy to the creditor at an “address filed by the creditor with the court,” or “at an address stated in two communications from the creditor to the debtor within 90 days of the filing of the bankruptcy case. The notice must also include the account number used by the creditor in the two relevant communications [§342(c)(2)(e) & (f)]. An ineffective notice can be cured if the notice is later “brought to the attention of the creditor.” This means that the notice must be received by a person designated by the creditor to receive bankruptcy notices.

[edit] Dischargeability

BAPCPA also provided more protections to creditors because it expanded the exceptions to discharge. The presumption of fraud in the use of credit cards was expanded. The amount that the debtor must charge for “luxury goods” to invoke the presumption is reduced from $1,225 to $500. The amount of cash advances that would give rise to a presumption of fraud has also been reduced, from $1,225 to $750. The time period was increased from 60 days to 90 days. Thus, if a debtor purchases any single item for more than $500 within 90 days of filing, the presumption that the debt was incurred fraudulently and therefore non-dischargeable in the bankruptcy arises. Prior to BAPCPA, the presumption would not have arisen unless the purchase was for more than $1,225 and was made within 60 days of filing (§523(a)(2)(C)).

BAPCPA amended §523(a)(8) to broaden the types of educational loans that can not be discharged in bankruptcy absent proof of “undue hardship.” The nature of the lender is no longer relevant. Thus, even loans from “for-profit” or “non-governmental” entities are not dischargeable.

[edit] Applicability of exemptions

BAPCPA attempted to eliminate the perceived “forum shopping” by changing the rules on claiming exemptions. Exemptions define the amount of property debtors may protect from liquidation to pay creditors. Typically, every state has exemption laws that define the amount of property that can be protected from creditor collection action within the state. There is also a federal statute that defines exemptions in federal cases. In bankruptcy, Congress allowed states to opt out of the federal exemption scheme. Opt out states still controlled the amount of property that could be protected from creditors, or “exempted” from creditors, in bankruptcy cases.

Under BAPCPA, a debtor who has moved from one state to another within two years of filing (730 days) the bankruptcy case must use exemptions from the place of the debtor’s domicile for the majority of the 180 day time period preceding the two years (730 days) before the filing [§522(b)(3)]. If the new residency requirement would render the debtor ineligible for any exemption, then the debtor can choose the federal exemptions.

BAPCPA also “capped” the amount of a homestead exemption that a debtor can claim in bankruptcy, despite state exemption statutes. The new law caps homestead exemptions at $125,000 in situations where a debtor has been convicted of a felony demonstrating that the filing of the bankruptcy was an abuse of the provision of the Bankruptcy Code, or if the debtor owes a debt arising from a violation of federal or state securities laws, fiduciary fraud, racketeering, or crimes or intentional torts that caused serious bodily injury or death “in the preceding 5 years” [§522(q)]. There is an exception if the property is “reasonably necessary for the support of the debtor and any dependent of the debtor.”

Also, there is a “cap” placed upon the homestead exemption in situations where the debtor, within 1215 days (about 3 years and 4 months) preceding the bankruptcy case added value to a homestead. The provision provides that “any value in excess of $125,000” added to a homestead can not be exempted. The only exception is if the value was transferred from another homestead within the same state or if the homestead is the principal residence of a family farmer (§522(p)). This “cap” would apply in situations where a debtor has purchased a new homestead in a different state, or where the debtor has increased the value to his/her homestead (presumably through a remodeling or addition).

[edit] Lien avoidance

Some types of liens may be avoided through a chapter 7 bankruptcy case. However, BAPCPA limited the ability of debtors to avoid liens through bankruptcy. The definition of “household goods” was changed limiting “electronic equipment” to one radio, one television, one VCR, and one personal computer with related equipment. The definition now excludes works of art not created by the debtor or a relative of the debtor, jewelry worth more than $500 (except wedding rings), and motor vehicles (§521(f)(1)(B)). Prior to BAPCPA, the definition of household goods was broader so that more items could have been included, including more than one television, VCR, radio, etc…