There’s been a lot of debate over how unfair BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) is on consumer debtors. Some of that debate can actually be found on this site. There have been aspects of BAPCPA that I have called silly, and some that we have to question the logic on. Recently, the US Bankruptcy Court in New Hampshire issued a ruling that appears to correctly interpret the post-BAPCPA Bankruptcy Code, but also shows how absurd the amendments to the code may be.

Prior to BAPCPA, a Chapter 7 filing was not presumed to be an abuse of the bankruptcy code. Abuse needed to be proved by the party claiming it, and a finding of substantial abuse could lead to dismissal or conversion

Under BAPCPA, the word “substantial” disappeared, leaving only “abuse.” Also, the means test was implemented, creating an objective means to determine whether there is a presumption of abuse. If there is a presumption of abuse, the United States Trustee must file a report indicating whether the case is presumptively abusive under 11 U.S.C. Section 707(b) within 10 days of the creditor’s meeting. Within 30 days after that, the US Trustee must either file a motion to dismiss or convert the case, or a statement explaining the reasons why the US Trustee does not consider such a motion to be appropriate.

In the New Hampshire case, the US Trustee wanted to compel the debtor to produce documents as well as submit to a Rule 2004 examination (which is something like a deposition, but isn’t really the same thing – which is another subject I should write about sometime). The US Trustee argued that it did not have enough information to evaluate whether the debtor’s case was presumptively abusive. The US Trustee also argued that under Rule 9011, she had an obligation to conduct a reasonable investigation before filing a motion. Under this rule, a party can be sanctioned for filing a baseless pleading in court. In response, the debtor argued that the US Trustee’s request was overbroad and unduly burdensome.

“Both parties are right,” the court wrote “and both parties are wrong.”

Continue reading "The Two Edge’s of BAPCPA’s Sword" »

Posted by Bill McLeod at 6:08 PM | Permalink | Comments (0) | TrackBacks (0)

In yesterday’s post, I discussed the definition of “Current Monthly Income” as set forth in Section 101(10A) of the Bankruptcy Code. Currently Monthly Income is used to determine whether someone is "abusing" the bankruptcy process by filing a Chapter 7 petition, when they (arguably) should be filing a Chapter 13 petition. The Current Monthly Income (or CMI) calculation does not include “benefits received under the Social Security Act.” This would obviously include Social Security benefits, such as those received at retirement. But would this apply to other sources of income that might emanate from the act? How about DUA or unemployment benefits? A Massachusetts Bankruptcy Judge recently said yes.

In this case, the married debtors excluded from their CMI the $1,010 monthly income the wife was receiving in unemployment benefits. The US Trustee objected and sought to dismiss the case, claming that the unemployment benefits should be included in the CMI calculations, and if the income was included, there would exist a presumption that the bankruptcy process was being abused (what we also refer to as the “presumption of abuse”). Debtors argued that the unemployment compensation was a “benefit under the Social Security Act” and that Social Security Act included received as unemployment compensation.

Continue reading "What's Income, and What's Not?" »

Posted by Bill McLeod at 4:14 PM | Permalink | Comments (0) | TrackBacks (0)