BAPCPA

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The “don’t mess with Texas” attitude described earlier regarding a Texas bankruptcy court’s hard-nosed reading of the credit counseling requirements of BAPCPA’s new “bankruptcy abuse” provisions seems to be sweeping the land, as recently demonstrated in bankruptcy court decisions from Missouri and Virginia addressing another aspect of BAPCPA’s new “bankruptcy abuse” provisions: a debtor’s request for extension of time to obtain credit counseling services. See In re Gee, 2005 WL 2978962 (Bankr. W.D. Mo., 10/26/05), and In re Watson, 2005 WL 2990902 (Bankr. E.D. Va., 11/3/05).
If these early cases are any guide, then the future sure looks bleak for the poor consumer. Both these cases address the new BAPCPA requirement that permits a debtor who failed to comply with the onerous pre-filing debt counseling requirements to still be eligible to file a bankruptcy petition as long as it files a “Certification of Exigent Circumstance to Waive Debt Counseling Prior to Filing.” In this certification, the debtor requests that the Court, pursuant to § 109(h)(3), temporarily waive the requirement contained in § 109(h)(1) that Debtor receive credit counseling in order to be eligible to file a petition.
In the Missouri case, the certification alleged that a foreclosure sale of debtor’s residence was scheduled on the date of filing and that “Debtor’s counsel could not be assured a certificate could be supplied prior to the foreclosure.”
In the Virginia case, the debtor claimed he was engaged in negotiations with his landlord regarding a dispute concerning the continued occupancy of the business premises, was served with an unlawful detainer action ten days prior to filing, and was involved in mediation concerning this dispute until the afternoon prior to filing. This debtor filed his bankruptcy petition approximately twenty minutes prior to the hearing on the unlawful detainer.
The Bankruptcy Courts in both cases adopted the “plain meaning rule” of statutory interpretation and rejected each of the respective debtor’s certifications for failing to strictly comply with all the requirements of Bankruptcy Code section 109(h). This section requires, at a minimum that the debtor make a request for credit counseling services during the five-day period preceding the filing, and then certify its inability to obtain those services. Because in each case, the debtor failed to comply with the strict requirements of Section 109(h), the Courts dismissed the petitions, notwithstanding the clear exigencies facing the debtors.
In the Missouri case, the court stated:Continue Reading BAPCPA’s “Plain Meaning” Requires That a Consumer Debtor’s Feet Be Held to the Fire

In In re Virissimo, 2005 WL 2854341 (Bankr. D. Nev., 10/31/05), Judge Linda B. Riegle of the Bankruptcy Court for the District of Nevada sided with Judge Robert Mark, Chief Bankruptcy Judge of the Bankruptcy Court for the Southern District of Florida, in the debate (referenced here) between Judge Mark and Arizona’s Judge Haines regarding whether BAPCPA’s limitation on the homestead exemption, as set forth in § 522(p) to the Bankruptcy Code, limits the amount that a resident debtor can claim as exempt as “homestead” property under state law if the debtor has not owned the property for more than 1215 days and did not previously own property in the state.
Judge Riegle summarized the debate between Judge Haines and Judge Mark as follows, ultimately concluding that Judge Mark had the winning argument:Continue Reading BAPCPA’s Homestead Exemption: A Third Judge Weighs In on the Debate

The old phrase “Don’t Mess with Texas” rings true in today’s ruling from the Bankruptcy Court of the Southern District of Texas, In re Hubbard, (2005 WL 2847420) (Bankr. S.D. Tex., 11/2/05), where the Court denied a chapter 13 debtor’s request to extend the time to provide verification of credit counseling.
This mandatory requirement that consumer debtors seek the advice (in all but emergency situations) of credit counseling firms in advance of their filing for bankruptcy is a slithering outgrowth of BAPCPA, and is embodied in new section 109(h) of the Bankruptcy Code. Being the first opinion on the matter, the Court said it “will interpret § 109(g) in accordance with traditional principles.”
This case makes clear that lawyers and debtors should expect bankruptcy judges to hold a debtor’s feet to the fire and require it to follow BAPCPA’s rigid credit counseling guidelines. In sum, a tighter squeeze.
Here’s what the Court said, uncensored:Continue Reading Don’t Mess with Texas: Texas Bankruptcy Court Denies Request for Extension of Time to Provide Verification of Credit Counseling

While I’ve spent quite of bit of time bashing BAPCPA, it’s not all bad. One change, for example, that was long overdue was an amendment to the Bankruptcy Code that addressed the so-called “Deprizio problem,” a problem the drafters of the Code’s amendments in 1994 thought they had resolved once and for all.
In In re ABC-Naco, (2005 WL 2649305) (Bankr. N.D. Ill., 10/13/05), Judge Wedoff, Chief Judge of the Bankruptcy Court for the Northern District of Illinois, in addressing a challenge to the constitutionality of BAPCPA’s Deprizio amendment, first succinctly summarized the purpose of the amendment, and then affirmed its constitutionality.
For those contemplating constitutional challenges to BAPCPA based on violations of the Takings and Due Process Clauses of the US Constitution, this case is worth reading as it well demonstrates the challenges facing the litigant who contests garden variety amendments to BAPCPA like the “Deprizio amendment.” (See also, Erwin Chemerinsky, Constitutional Issues Posed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79 Am. Bankr. L. J. 571 (2005) (“identify[ing] the constitutional issues most likely raised by BAPCPA”)).
Excerpts from the Court’s opinion follow:Continue Reading Bankruptcy Court Affirms Constitutionality of BAPCPA’s Deprizio Amendment

In the first case to address who is (or is not) a “debt relief agency” under BAPCPA, an important question given the “new and significant restrictions on the activities of debt relief agencies,” Judge Lamar W. Davis, Chief Bankruptcy Judge of the Bankruptcy Court for the Southern District of Georgia, ruled sua sponte on October 17, 2005, BAPCPA’s effective date, that attorneys who are members of the bar of that court, as well as those admitted pro hac vice, are not “debt relief agencies” within the meaning of BAPCPA, so long as their activities fall within the scope of the practice of law and do not constitute a separate commercial enterprise. In re Attorneys at Law and Debt Relief Agencies, (2005 WL 2626199) (Bankr. S.D. Ga. 10/17/05). The matter raises interesting “case or controversy” issues, as it’s not exactly clear what specific situation(s) the Court was addressing, other than the obvious theoretical ones. Still, it’s hard to imagine anyone challenging or disagreeing with this opinion and order. You have to wonder whether this Court’s proactive style will catch on elsewhere.
Without explicitly casting aside “plain meaning” canons of statutory construction, the Court drew support from a wealth of current critical commentary on the topic in rejecting the plain meaning of BAPCPA’s relevant provisions (which seemingly include attorneys within BAPCPA’s definition of “debt relief agencies”), stating:Continue Reading Georgia Bankruptcy Court Rules Sua Sponte that Attorneys Admitted to Practice in the District are Not “Debt Relief Agencies” Under BAPCPA

Something’s very wrong when an estimated 500,000 Americans felt compelled in the last week to file for bankruptcy in order to avoid the chance that if they do have to file in the future, they’ll regret not having done so now. As most know, these filings were precipitated by BAPCPA (the “Bankruptcy Reform and Consumer …

This New York Times story reports on the potential conflicts of interest at credit counseling firms, whose advice must (in all but emergency situations) be first sought by consumer debtors in advance of their filing for bankruptcy following BAPCPA’s October 17, 2005 effective date.
The NYT reports that “critics say that the new counseling requirement,…