The “Special Circumstance” of Student Loan Debt Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) attempts to steer debtors away from chapter 7 and into chapter 13 plans in which they will have to repay a portion of their debt. BAPCPA employs a formula known as the “means test” which deducts certain expenses from income to determine disposable income and the ability to repay. Whether by design or oversight, Congress failed to include student loan repayment as an express, allowable expense in the means test. For some debtors, this means that a chapter 13 plan may not truly reflect the debtor’s ability to repay. As a result, some have argued that student loan repayment constitutes a “special circumstance,” which merits inclusion in the means test. This Note examines the divergent case law on this issue and the policy implications of not including student loan debt repayment in the means test. The Note argues that courts that have determined that student loans constitute a special circumstance present a more reasoned analysis but that ultimately Congress should amend BAPCPA to deal expressly with student loans.