Attorneys rely on courts’ interpretations of statutes in representing their own clients. Since BAPCPA is fairly new, its new rules and requirements are still working their way through the courts. Among the requirements that I have written about is the need to obtain credit counseling prior to filing bankruptcy. I refer to this as the “ticket in”. This certification from a US Trustee approved counselor needs to be obtained before filing. But now, an issue is arising in the courts as to when the credit counseling needs to be done prior to the filing. At least two bankruptcy courts have chimed in on the issue, and they are not agreeing.
Under section 109 of the bankruptcy code:
an individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111 (a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.
So what does the term “date of filing of the petition” mean?
The Warren Case
Coming out of the Bankruptcy Court in Arkansas is the case of In re Warren. The issue of exactly when the credit counseling must be completed was litigated. The Trustee argued that because it is the 180 day period preceding the date, the code refers to a particular day on the calendar. Thus, if the date of the filing is December 1, the credit counseling requirement must be fulfilled with 180 days preceding that date, but ultimately not on that date.
The Arkansas Bankruptcy Court did not agree:
In the instant case, the Court interprets the words “date of filing” as used in section 109(h)(1) to mean the specific day, month, year, and time of day the petition was filed. In bankruptcy, the exact time of filing is a critical bright line in determining property rights of debtors and creditors. At the moment a petition for relief is filed, the automatic stay goes into effect, affording the debtor an extra measure of protection from the legal maneuvers of his creditors. On October 27, 2005, at 3:03 p.m., the debtor was subject to impairment of his property interests; at 3:04 p.m., the moment of filing, he received the relief from his creditors afforded him by the automatic stay and other provisions of the Bankruptcy Code.
The Arkansas Bankruptcy Court also looked at the legislative history, and found nothing suggesting that “Congress contemplated at least a one-day waiting period after completion of credit counseling.” There really is nothing anywhere that suggests that debtor’s have to “cool off” or “sleep on it” before they file bankruptcy.
DC Disagrees
In two cases, In re Murphy and In re Mills. the District of Columbia Bankruptcy Court did not agree.
In Murphy, the bankruptcy court found that because the counseling took place on the date before the petition was filed, the requirement was satisfied. However, in Mills, which was decided after the Arkansas court decided Warren, the court took a more stringent approach.
In Mills, the debtor fulfilled the credit counseling requirement on the same day she filed the bankruptcy petition. The court flatly disagreed with the analysis in Warren and essentially stated that the statute speaks for itself.
What Does It All Mean?
But does it? It is clear by these two cases that there is a dispute as to the interpretation of the Section 109 credit counseling requirement. In Mills, the debtor’s case was dismissed because the debtor did not obtain credit counseling on the day prior to the filing. Undeniably, it was a result the debtor was not expecting or hoping for.
The District of Massachusetts has not yet issued any ruling on this particular issue. With that said, it’s my recommendation that for now, it’s better to be safe than sorry. Debtor’s contemplating bankruptcy should – unless a Massachusetts bankruptcy court ruling states so otherwise – to make every effort to fulfill the credit counseling requirement prior to filing the petition….meaning, at least a day. No debtor wants to be the “test case” on this issue, and no debtor wants to see their bankruptcy petition dismissed when the protections afforded by the bankruptcy code are exactly what they require.
Related posts:
- A Warning for Homeowners Facing Foreclosure
- Pro Se Perils: No Ticket and No Excuse
- Furnishing Tax Returns to Creditors
- The Joke of the New Bankruptcy Law: Credit Counseling
- No Ticket? No Discharge: The Ticket Out of Bankruptcy
Tags: Bankruptcy
