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Treatment of Health Care Expenses under the Bankruptcy Abuse Prevention and Consumer Protection Act 1 (March 29, 2005)

handle is hein.bank/crsbank0047 and id is 1 raw text is: Order Code RS22096 March 29, 2005 CRS Report for Congress Received through the CRS Web Treatment of Health Care Expenses under the Bankruptcy Abuse Prevention and Consumer Protection Act Robin Jeweler Legislative Attorney American Law Division Summary If enacted, the Bankruptcy Abuse Prevention and Consumer Protection Act would subject prospective debtors under the U.S. Bankruptcy Code to a means test to determine whether they could liquidate under chapter 7 or reorganize under chapter 13. Large outstanding medical expenses alone will not determine eligibility to liquidate or reorganize. They will, however, affect the means test in one of two ways. Prebankruptcy health care expenses are likely to raise the amount of a debtor's unsecured debt. Health insurance premiums and ongoing costs for care of the debtor's dependents may be deducted from the debtor's monthly income to determine the level of disposable income. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),1 if enacted, would amend the U.S. Bankruptcy Code, 11 U.S.C. § 101 etseq., to subject debtors to a means test to determine whether they may file under chapter 7 of the U.S. Bankruptcy Code and liquidate their debts, or whether they would have to file under chapter 13, governing consumer reorganization, in order to realize a discharge of indebtedness.2 A debtor who, pursuant to the complex means test determination, is presumed to have $100 a month in disposable income would either have to refrain from filing, or would be subject to a three- to five-year reorganization plan.3 S. 256, 109th Cong., 1st sess. (2005), passed the Senate on March 10, 2005. It was reported favorably by the House Judiciary Committee on March 16,2005. See also H.R. 685, 109th Cong., 1st sess. (2005). 2 In order to file under chapter 13, there is ajurisdictional debt limit of no more than $307,675 in unsecured debt and $922,975 in secured debt. An individual whose indebtedness exceeds these amounts could reorganize under chapter 11, which is designed for business reorganization. ' For more information about the means test provisions, see CRS Report RS22058, Bankruptcy Reform. The Means Test, by Mark Jickling. Congressional Research Service oe The Library of Congress

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