Does BAPCPA Make Bankruptcy Laws More Business-Friendly?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) aims to tighten previous bankruptcy laws through stricter practices and more frequent reviews. In many cases, businesses

Prior to the passage of BAPCPA, the law allowed companies that were filing for bankruptcy to file a preference claim in order to "claw back" any monies that had been paid out to another business within 90 days of declaring bankruptcy. (Read BAPCPA Impact on Preference Mediation for more information on this topic.) Even though preference claims are still a part of the bankruptcy law, there are now much stricter standards for their use.

For example, under the new standards a business can dispute a preference claim by proving that the money was exchanged during "the ordinary course of business," thus voiding the claim. Additionally, the preference claim has to be filed in the area where the business is located rather than where the bankruptcy case is being handled. This is significant because it protects small business owners from the travel and legal expenses they would incur in going to a different area to defend themselves against the claim. Under the old law, small business owners often found it cheaper to pay the claim than to incur travel costs to fight the claim.