Five years ago today – at approximately 2:42pm in the afternoon, I was using a elliptical machine at the gym. The news showed then President George W. Bush about to sign into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, or what we commonly refer to as BAPCPA or “the 2005 Act.”
He then gave these remarks (which I read on the closed captioning):
Yesterday, I was discussing a “Debt Relief Agency” as it is defined in the Bankruptcy Code. Part of the angst I have with the whole debt relief agency provisions is that I am – by definition – only a debt relief agencies to “assisted persons.” Debt relief agencies have certain specific obligations… but only to “assisted persons.” Before I continue writing, I’m going to take some aspirin; this analysis made my head hurt.
In yesterday’s blog, I suggested that some attorneys – namely on Craigslist – were not complying with the BAPCPA imposed requirement that they disclose that they are a “debt relief agency.” That might not have been completely fair.
Certainly, when an attorney fits into the definition of a “debt relief agency”, they must disclose that fact and are obligated to comply with additional disclosure requirements. But, if an attorney does not fit into the definition of a “debt relief agency”, may they still represent individuals in consumer bankruptcy matters? The answer is yes… and that raises some interesting questions.
As I mentioned earlier this week, the US Supreme Court issued a ruling upholding the BAPCPA requirement that attorneys be considered “debt relief agencies.”
So we’re clear: I did not go to debt relief agency school. I went to law school. I’m not a member of the Boston Bar Association Debt Relief Agency Steering Committee; it’s the Bankruptcy Steering Committee. I’m not a member and author for the American Debt Relief Institute; it’s the American Bankruptcy Institute. I’m not a debt relief agent. I’m an attorney.
Now that I’ve cleared the air on that, let me share with you some of my concerns with this decision and its implications.
Have you see advertisements for bankruptcy attorneys and seen this phrase?
Has a bankruptcy attorney ever said to you “sorry, we cannot advise you to incur debt because you’re seeking bankruptcy protection”?
Ever wonder why? Well, wonder no more. This morning, the Supreme Court of the United States issued its decision in the case of Milvatez, Gallop & Milavetz, P.A., et al. v. United States. The high court has held that (1) attorneys who give bankruptcy assistance (as defined in the Bankruptcy Code) are debt relief agencies; (2) attorneys cannot advise clients to incur debt because they are filing bankruptcy. The decision is 35 pages, and I’ll be reading through it this week.
Five years ago Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act – and at that time, I couldn’t understand what “abuse” Congress was trying to prevent. As a matter of fact, I penned an op-ed in the Boston Globe expressing my hope that Congress would not pass the legislation because, among other things, I thought the “abuse” was really coming from lenders, not consumers. After representing many honest debtors who deserve the relief that our laws afford, and have gotten the relief they deserve, I met someone yesterday who sought from me the unthinkable: they wanted me to help them lie. And even though I know that lenders and credit card companies have caused a huge economic mess in our country, this person is precisely why BAPCPA was enacted.
Among the changes to the Bankruptcy Code was the added requirement that debtors provide a copy of their federal income tax return/transcript to trustees, and if requested, creditors. The code provides that the case shall be dismissed if the returns are not disclosed timely manner. But what if a creditor does not receive the return after? In a recent Massachusetts decision, the Bankruptcy Court was called upon to answer that question.
The debtors filed their case in July 2008. Approximately one month prior to the scheduled Meeting of Creditors, the debtors provided the trustee a copy of their federal tax return. Approximately 10 days prior to the Meeting of Creditors, a creditor sent a letter requesting a copy of the return. Debtors’ counsel brought the copy of the return to the Meeting with the intent to give it to the creditor’s attorney. While the two attorneys spoke, debtors’ counsel did not give a copy of the return.
Creditor then filed a motion to dismiss citing Section 521(e)(2)(c). It argued that the Bankruptcy Code mandated that the case be dismissed and that the Bankruptcy Court had no discretion to allow the case to continue. The Bankruptcy Court however, did not agree.
The court examined the legislative history of this new (post 2005) requirement. Section 521(e)(2) requires a debtor to provide a recent tax return to the trustee at least 7 days prior to the first date set for the Meeting of Creditors. It also provides that a debtor must furnish a copy of the return to a creditor who makes a timely request. However, the section provides that the debtor is obligated to provide the return to the creditor at the same time the debtor provides it to the trustee. Thus, the creditor must request a copy of the tax return/transcript either at or before the time the debtor supplies the return to the trustee. This creditor did not make the request until after the trustee had received the return.
For those reasons, the creditor’s motion was denied to dismiss was denied.
In re Fontaine, US Bankruptcy Court, District of Massachusetts at Worcester, 08-42454
One of the goals of BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) was to prevent abuse by debtors. One of those abuses targeted were “repeat filers” and another was the failure to file documents. If schedules and other documents are not timely filed, the court is obligated to dismiss the bankruptcy case. A debtor out of the Northern District of Alabama recently learned what happens when you do not adhere to the requirements of the code.
When BAPCPA was enacted, a new concept in bankruptcy law emerged: “domestic support obligations” or “DSOs”. Child support, alimony and other support obligations received specific consideration in bankruptcy, and in particular, chapter 13. If you are looking at the potential of a bankruptcy filing, there’s something you need to know about how domestic support obligations and chapter 13 work together.
When I meet people who are considering chapter 13, it’s not surprising that they have a lot of debt. And at times, that debt might also include child support or other spousal support payments that have not been made or are delinquent. There are many reasons why: income changed, expenses changed and those obligations fell behind. But without a court order, none of these circumstances relieve a debtor’s liability.
Barney Frank: Please Read This
I have a bone to pick with Barney Frank. Yesterday, a new multi-million dollar loan program was rolled out by HUD. Sharing in the local announcements were local Congressmen and other elected officials.
According to a Boston Herald report:
Boston.com reported the program a little differently, but in substance, it’s the same.
That smells a bit like “hope.” So I’m afraid the sound of this program ruffles my feathers a bit. But what compels me to write is this quote, which also appeared in the same Boston Herald report:
Really?
I’m going on record: Mr. Frank, I’m no anarchist I find this program offensive. So today, I write this blog to you.
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Tags: Bankruptcy, Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, Chapter 13, Commentary, Consumer Protection, foreclosure, Homes, homesteads and real estate, In the News, Mortgages and Foreclosures, Yep. We're in trouble.
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