In my October 17 blog entry I discussed how thrilled I am about the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. And recently I addressed one of the requirements of the Act: the need to obtain a “ticket” into bankruptcy, by obtaining mandatory credit counseling prior to filing and providing certification to the court.
On December 22, 2005, the Bankruptcy Court for the Western District of Texas at Austin was forced to dismiss a joint Chapter 13 case because one of the debtors had not obtained the mandatory credit counseling. The Debtors told the court that they were “working with the mortgage company to determine the exact amount that was owed but [the mortgage company] had refused to accept payment at the last moment…”. The Debtors filed their case in an effort to stave off a foreclosure of their home. While the court's hands were tied, the court was not happy about dismissing the case.
While the opinion aptly illustrates how absurd the new bankruptcy laws are by pointing out, among other things, that “to call the Act a ‘consumer protection’ Act is the grossest of misnomers,” it should not be inferred that bankruptcy relief is not available. It only emphasizes what has already been observed on this blog: the new bankruptcy laws have new requirements that must be adhered to, but bankruptcy relief itself is still available.
Rather than further summarize the case, you can read the five page decision here.
Unfortunately, there are some lessons to be learned from this case. The most important: distressed debtors, especially homeowners facing foreclosure need to speak with a bankruptcy attorney at the earliest possibility, and know that if they want to have bankruptcy as an "option", they need to plan accordingly.
