Volume 4, Issue 1, 2011, ISSN 1948-5794

Investigating the Unintended Consequences of the 2005 BAPCPA “Means Test” on the Bankruptcy Chapter Choice Decision.

Donald Hackney, Matthew McPherson, Daniel Friesner

Abstract

The Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) introduced a "means test" to identify high-income bankruptcy filers and force them to file for bankruptcy under Chapter 13. This analysis investigates whether a typical individual’s propensity to file under Chapter 7 versus Chapter 13 varies significantly based on factors outside of those captured by the means test. Geographical factors or filer characteristics should not be significant predictors of chapter choice. Findings suggest the means test distorts the propensity of Chapter 7 versus Chapter 13 filings, which leads to the cost of credit being transferred from the debtor to the creditor. Full Article