Section 707's "Special Circumstances" Provision May Give Debtors Some Relief (BAPCPA)
Amidst all the concern about the death of Chapter 7 under BAPCPA, an article in the New York Times discussing the additional bankruptcy hurdles faced by victims of Hurricanes Katrina and Rita does note that all is not completely lost under the new law.
In the article, Todd J. Zywicki, a law professor at George Mason University, says that "the new legislation is perfectly suited to deal with circumstances such as this [individuals who have been affected by the hurricanes]." According to Zywicki, Section 707 gives bankruptcy judges the discretion to identify victims of "special circumstances" like hurricanes, and to let them use Chapter 7 even if they don't qualify under the means test. Although professor Zywicki is probably being a little overly optimistic here, practitioners should remember that Section 707 does allow debtors to avoid the harsh effects of the means test if they can establish "special circumstances." However, as Section 707 does not define the term "special circumstances," and only sets out a few non-exhaustive examples of what qualifies as a special circumstance (such as a serious medical condition or a call to active duty in the armed forces), good and creative lawyering will be necessary to help hardship debtors who can't satisfy the means test to proceed under Chapter 7.
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