The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Evaluation of the Effects of Using IRS Expense Standards to Calculate a Debtor's Monthly Disposable Income

by Stephen J. Carroll, Noreen Clancy, Melissa A. Bradley, Jennifer Pevar, Marianne Culhane, Michaela White


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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) requires that debtors filing for bankruptcy whose monthly income exceeds the median income for their household size in their state use the IRS expense standards rather than their current expenses to calculate their monthly disposable income (MDI). This change can affect both the options available to a debtor considering filing for bankruptcy and the amount the debtor must pay to creditors under a repayment plan. This report assesses this new requirement’s effects on debtors and the courts, finding the following. Similarly situated debtors may have substantially different payment obligations depending on the jurisdiction in which they live. Each bankruptcy case now requires more judicial time. The IRS standards, especially living expenses, yield larger deductions, on average, and, therefore, lower MDIs across the country. Generally, higher-income debtors gain less using the IRS standards rather than current expenses than do otherwise similar, lower-income debtors; this difference is significant for homeowners and highly so for renters.

Table of Contents

  • Chapter One


  • Chapter Two

    The Bankruptcy System

  • Chapter Three

    Effects of the Utilization of IRS Expense Standards on the Courts

  • Chapter Four

    Empirical Analyses of the Effects of IRS Expense Standard Use on Debtors

  • Chapter Five

    Summary and Conclusions

  • Appendix

    Office Focus Group Discussion Guide.

The research described in this report was prepared for the Executive Office for U.S. Trustees by the RAND Institute for Civil Justice.

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