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Maine Law Professor Lois Lupica Publishes Groundbreaking Study on the Cost of BAPCPA

The results of a ground-breaking study funded by the American Bankruptcy Institute Anthony H.N. Schnelling Endowment Fund and National Conference of Bankruptcy Judges Endowment for Education revealed that Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) made the bankruptcy system cumbersome and costlier to use for both debtors and bankruptcy professionals. “Up until now, there has not been a comprehensive national study of the impact of BAPCPA on the bankruptcy system’s operation, on its professionals, and ultimately on the system users,” according to study reporter and principal investigator Lois R. Lupica, Maine Law Foundation Professor of Law at the University of Maine School of Law.

The study’s primary objective was to identify and monetize the costs of consumer bankruptcy access after the enactment of BAPCPA through the analysis of quantitative and qualitative data gathered from court dockets and professionals working within the bankruptcy system. Lupica examined a national random sample of 11,221 chapter 7 and chapter 13 consumer cases (approximately 0.12 percent of the consumer bankruptcy cases filed) in 90 judicial districts filed between 2003 and 2009. Qualitative data that was collected via interviews and surveys by Lupica also showed the impact of BAPCPA’s effects on consumer debtors’ attorneys, standing chapter 13 trustees, chapter 7 panel trustees, U.S. Trustees and bankruptcy judges.

To obtain a full copy of the study, please visit: http://www.abiworld.org/Fee_Study/CFSFinalReport_Final_Dec7.pdf

Since BAPCPA took effect in 2005, debtors’ attorneys’ fees plus filing fees and the debtor education fee have increased the total direct access costs (TDAC) for both consumer chapter 7 and 13 cases. The study also found that changes in unsecured creditor returns have been “statistically insignificant” as a result of BAPCPA’s new requirements. Comparing pre- and post-BAPCPA consumer chapter 7 cases, the study found the following:

  • A 37 percent TDAC increase for post-BAPCPA discharged chapter 7 asset cases.
  • A 51 percent TDAC increase for post-BAPCPA discharged chapter 7 no-asset cases.
  • The national mean attorney fee increased 30 percent from $821 to $1,072 for chapter 7 asset cases.

The study also examined pre- and post-BAPCPA consumer chapter 13 cases and found:

  • A 24 percent TDAC increase for post-BAPCPA dismissed chapter 13 cases.
  • A 27 percent TDAC increase for post-BAPCPA discharged chapter 13 cases.
  • The national mean attorney fee increased 24 percent from $2,061 to $2,564 for chapter 13 cases.

According to the study, additional debtor paperwork requirements have added time and monetary burdens throughout the consumer bankruptcy system. BAPCPA also imposed new duties and obligations on attorneys, trustees and court personnel. Lupica observed that the increased complexity of the consumer bankruptcy system calls for professionals to have a “nuanced understanding of the dissonance between how the system is designed to work in theory, and how it works in practice.”

Lupica observed, “there is a disconnect between the skill, time and commitment it takes for attorneys to provide debtors with first-rate representation, and compensation that does not always reflect such excellence,” The “tension inherent in the indispensability of highly skilled consumer bankruptcy attorneys, and the resources reasonably available to sustain a quality bar,” means the system is fighting “best practices.”

The ABI advisory board for the study included Bankruptcy Judge Steven W. Rhodes (E.D. Mich.; Detroit), Prof. Nancy B. Rapoport of the William S. Boyd School of Law at the University of Nevada (Las Vegas), Prof. Jean Braucher of the James E. Rogers College of Law at the University of Arizona (Tucson), Marc S. Stern of the Law Office of Marc S. Stern (Seattle), John Rao of the National Consumer Law Center (Boston), William E. Brewer, Jr. of the Brewer Law Firm (Raleigh, N.C.), James H. Cossitt of the Cossitt Law Firm (Kalispell, Mont.), Peter C. Fessenden, Standing Chapter 13 Trustee (D. Maine; Brunswick), Neil C. Gordon of Arnall Golden Gregory LLP (Atlanta), U.S. Trustee Donald F. Walton (Atlanta) and Claude R. “Chip” Bowles, Jr. of Greenebaum Doll & McDonald PLLC (Louisville, Ky.).

For additional questions about the Consumer Bankruptcy Fee Study, please contact John Hartgen at 703-894-5935 or via email at jhartgen@abiworld.org.

*News Release from the Ameican Bankruptcy Institute*