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GAO-08-148R 1 (2007-10-26)

handle is hein.gao/gaocrptavpq0001 and id is 1 raw text is: Aountability * Integrity ReEabity United States Government Accountability Office Washington, DC 20548 October 26, 2007 The Honorable Christopher B. Cannon Ranking Member Subcommittee on Commercial and Administrative Law Committee on the Judiciary House of Representatives The Honorable Melvin L. Watt The Honorable Adam B. Schiff House of Representatives Subject: Potential Effect of Bankruptcy Abuse Prevention and Consumer Protection Act on Child Support Payments Cannot Be Determined because Data Needed for Study Are Not Available Between 2001 and 2004, an average of more than 1.5 million people annually filed for personal bankruptcy protection. In April 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act' (Reform Act) was enacted, in part, to address certain factors viewed as contributing to an escalation in bankruptcy filings. Described as representing the most comprehensive set of reforms in more than 25 years, the Reform Act, among other things, requires those filers with the ability to pay some of their debts from future earnings to enter into repayment plans under Chapter 13 of the Bankruptcy Code instead of liquidating their assets under Chapter 7 and granting the debtor a discharge from eligible debts. Individuals usually file for bankruptcy under one of two chapters of the Bankruptcy Code. Under Chapter 13, filers submit a repayment plan to the court agreeing to pay part or all of their debts over time, usually 3 to 5 years. Under Chapter 7, the filer's eligible assets are reduced to cash and distributed to creditors in accordance with distribution priorities and procedures set out in the Bankruptcy Code. A large majority of cases filed under Chapter 7 have no assets available for liquidation, and thus no funds are available to pay creditors. Upon the successful completion of both Chapter 7 and 13 cases, the filer's personal liability for eligible debts is discharged at the end of the bankruptcy process, which means that creditors may take no further action against the individual to collect the debt. Bankruptcy filers may choose to reaffirm a debt, often for those debts secured by collateral, such as a home or a car. A reaffirmation agreement, generally filed under Chapter 7, formalizes this arrangement, whereby a filer with debts secured by collateral retains the collateral and continues to make debt payments to a creditor. You have expressed interest in learning whether the Reform Act has had or is likely to have an effect on bankruptcy filers who have a child support obligation and their ability to make these payments. Obligation refers to an amount owed or promised for payment, whereas payment refers to the act of 'Pub. L. No. 109-8, 119 Stat. 23= (2005). GAO-08-148R Child Support Under Bankruptcy Page 1

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