Bankruptcy News

Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which opens a new era in the history of bankruptcy law and practice, was passed by Congress and signed into law by President Bush on April 20, 2005. The United States Trustee Program is the component of the Department of Justice that protects the integrity of the nation’s bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The Act gives the U.S. Trustee Program new responsibilities in a number of areas, including:

• implementing the new “means test” to determine whether a debtor is eligible for chapter 7 (liquidation) or must file under chapter 13 (wage-earner repayment plan);

• supervising random audits and targeted audits to determine whether a chapter 7 debtor’s bankruptcy documents are accurate;

• certifying entities to provide the credit counseling that an individual must receive before filing bankruptcy;

• certifying entities to provide the financial education that an individual must receive before discharging debts; and

• conducting enhanced oversight in small business chapter 11 reorganization cases.

Over the past few years, the U.S. Trustee Program’s civil and criminal enforcement efforts have strengthened the integrity of the bankruptcy system by providing consumer protection and combating fraud and abuse. The Program’s Annual Report of Significant Accomplishments [PDF - 3.3 MB] explains many of its duties and activities. The additional tools provided under the Act will give the Program further opportunities to improve the bankruptcy system.

The U.S. Trustee Program has begun its planning and implementation efforts in preparation for assuming its new responsibilities on October 17, 2005, when most provisions of the Act take effect. Working groups of employees from the Program’s Executive Office and its regional and field offices are assisting in the process. Please consult the Program’s web site for updated information as implementation proceeds.

The U.S. Trustee Program welcomes this opportunity to further enhance the integrity, effectiveness, and efficiency of the nation’s bankruptcy system. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 represents an important new development in the Program’s continuing efforts to improve bankruptcy processes and procedures.

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	Did You Know?
	Special purpose entities in bankruptcy can be used A business, usually a special-purpose entity, established to perform limited functions and to have one or a few primary creditors. This type of entity is sometimes established to protect lenders on large, complex projects, when the lender is to be paid solely or almost exclusively out of the money generated when the project becomes operational.