Banks and the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act

Ken Benton

Principal Consumer Regulations Specialist

Q4 2005

DP 05-19 – Banks and credit card companies lobbied Congress for several years to amend the Bankruptcy Code because of an increasing number(1) of bankruptcy filings and evidence that debtors were abusing the existing code.

On April 20, 2005, President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act into law. The act makes the most sweeping changes to the Bankruptcy Code since its enactment in 1978, amends the Truth in Lending Act (TILA), and directs the Board of Governors of the Federal Reserve System (the Board) to amend Regulation Z, the Board’s implementing regulation for TILA. The act’s provisions became effective on October 17, 2005, except for the changes to TILA and Regulation Z, which become effective 12 months after the Board publishes its final regulations. This article reviews the Bankruptcy Code changes that affect banks.²

In 1979, the first year of filings for the current Bankruptcy Code, debtors filed 225,000 individual petitions. By 2004, filings increased dramatically to more than 1.5 million petitions. Chapter 7, the liquidation chapter, accounted for 71.5 percent of nonbusiness filings in 2004, or over 1.1 million cases.
A comprehensive review of all of the act’s amendments to the Bankruptcy Code is beyond the scope of this article.

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