The Bankruptcy Lawyers Blog

Bankruptcy America is a national website aiming to educate individuals facing financial difficulties, and when necessary providing them with access to appropriate professionals. They have recently made interesting changes to their site to give consumers clearer navigation through their options. Reflecting the ongoing market changes of which BAPCPA is a part, the site has added debt consolidation services and credit counseling agencies, where it once provided access only to bankruptcy attorneys.

Navigation takes the consumer by the hand through a three-step qualification process, to provide an initial assessment of what the consumer's situation might be. Essentially, it's "Do you qualify for (1) debt consolidation, or (2) credit counseling and a debt management plan, or (3) chapter 13 vs. chapter 7 bankruptcy?". Simple calculators are provided for the first two stages and an outline of the means test criteria for the third stage, allowing the consumer to reach his tentative conclusion quickly and easily. At every point, there is ample supporting information for people who may want to dig a little deeper.

Each of the three stages also features a blog where users can ask anonymous questions and get professional answers to help develop comfort with taking their next step.

For more overall guidance, Bankruptcy America offers users a Financial Health Check – ten questions giving an indication of how serious or urgent a user's money problems are, based on typical symptoms such as using cash advances from one card to make payments on another.  Seriousness ranges from "healthy" to "very serious trouble now", with suggestions for action to take in each case.  Depending on urgency or other special factors, additional notes may be added to the basic advice.  The only number collected is the user's number of credit cards, yet the advice is generally appropriate and should be useful to start the user in the right direction.

Bankruptcy America is worth a look for its model of consumer guidance in the field of financial problems.

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Back in February, we generated some inter-blog discussion of the possibility and wisdom of filing petitions strategically under Chapter 13, since the means test would not be required to convert such a case to Chapter 7.

Recently, Tim Truman, a Chapter 13 Trustee for the Northern District of Texas, included that very item in his list of 50 reasons to file under Chapter 13--and without any mention of the potential risks we discussed.

Truman's list also includes the ability to repay non-dischargeable taxes, lower filing fees under Chapter 13, and the ability to dismiss and re-file Chapter 13 cases indefinitely, so long as each lasts for at least two years.

Truman also points out that our fees are typically 3 to 4 times higher in a Chapter 13 case, and those fees can be collected and accounted for by the Chapter 13 Trustee.

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I'd like to thank O. Max Gardner for making this decision available.

MEMORANDUM OPINION

This case is before the court on the debtor's motion to reopen her bankruptcy case and the opposition of Bank of America. The debtor asserts that Bank of America made an improper credit report to a credit bureau in an attempt to collect a discharged debt in violation of the discharge stay. The bank asserts that the report did not violate the discharge stay and, in any event, was promptly corrected when the debtor complained directly to the credit bureau. The bank objects to the debtor reopening her case. It makes two arguments. First, it asserts that the debtor suffered no damages and, therefore, there is no relief that may be accorded the debtor.

One purpose of reopening a bankruptcy case is to accord a debtor further relief. 11 U.S.C. §350(b). If no useful purpose can be served by reopening a case, granting the motion is a futile gesture wasteful of the court's and the litigants' resources and the motion should be denied. In re Carberry,

186 B.R. 401 (Bankr.E.D.Va.1995). A motion to reopen should be liberally granted and ought not be used to force the debtor to prove her case twice, once to reopen the case and later at the hearing on the merits. Two full merits hearings on the same issue is also wasteful of the court's and the litigants' resources. The issue of damages is principally a factual matter.

It is very difficult to show that a debtor is entitled to no damages so as to avoid reopening a case, particularly where the bank essentially acknowledges the very act of which the debtor complains but defends itself on the basis that it was remedied by the credit bureau after complaint by the debtor. This defense suggests that there may be some damages, however modest. The bank also argues that the debtor has an adequate remedy under the Fair Credit Reporting Act, 15 U.S.C. §1681s-2 and is attempting to circumvent the pre-suit requirements imposed on the debtor by the FCRA. The bank concludes that because the debtor has an adequate non-bankruptcy remedy and the debtor has not satisfied the pre-filing requirements under that remedy, the debtor should be denied her remedies under the Bankruptcy Code.

This argument fails for two reasons. First, while the FCRA and the discharge stay are similar, they are not identical. They differ in their objectives.

The FCRA seeks to minimize credit reporting errors and to cure those that are made in a prompt and efficient manner. Actions under it generally involve mistakes. The discharge stay is directed to enforcing the bankruptcy discharge. Actions under it generally involve intentional acts.

The elements that must be proved under each statute may overlap, but they are not identical. The remedies available, while similar, may differ.

Second, there is no express provision in either the Fair Credit Reporting Act or the Bankruptcy Code that either supercedes the other. [FN1] They co-exist. The bank may be correct that its single act gives rise to remedies under two separate federal laws. It may be right that both remedies are adequate. Of course, one remedy may be better than to the other.1 How the debtor wishes to proceed is up to the debtor, not the bank. She may choose the remedy she prefers. In the end, if she is entitled to relief, she is entitled to it only once.

The motion to reopen will be granted.

Alexandria, Virginia October 21, 2005 /s/Robert G. Mayer Robert G. Mayer

United States Bankruptcy Judge

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As a courtesy, I am posting the following anonomously, this is a concern expressed by a well-respected, bankruptcy attorney in the field.

[As as a bankruptcy attorney - with the law change approaching]---just how much can my clients really handle---remember I live in Arkansas.

BARF is a burden shifting federal statute. It shifts the burden of creditors keeping and providing records to the debtor---and the courts seem to support this burden shifting---just look at all the BR 3001(c) decisions.
It shifts burden of collecting child support from the state to the ch 13 trustees, it shifts the burden of getting accurate tax info from the IRS filing a POC to the debtor getting that info from the IRS---and analyzing it. It shifts the burden of verifying the petition info from the trustees to debtor counsel, it shifts the burden of regulating the practice of law in BK from state bars to the EOUST.

Continue Reading...

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The Interim Bankruptcy Filing Rules are in: Download file

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If you're in the Palm Springs area turn into 920 AM KPSI (www.newstalk920.com) at 10:35 AM.

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What is it going to take for Congress to provide Katrina victims some relief - without lawmakers, so completely out of touch with the survivors, blocking the effort?

--"I don't know why some of my colleagues are actually encouraging people..to file for bankruptcy, because it's a stigma that wrecks your credit record for at least eight years." - House Judiciary Committee Chairman F. James Sensenbrenner

(Crafting law for the most advanced nation on the planet and he can't find a way to give these people credit?)

--"For someone who is genuinely poor and down and out and doesn't have the ability to repay their debts, there is no change at all," - Sensenbrenner

("No change"?? What about putting these people through the Bankruptcy Means Test, Debtor Education and Credit Counseling Certification? What about hiring an attorney who has to sort through 500 pages of new requirements? What about the additional expense?)

--Sensenbrenner stated that he would NOT hold hearings for relief from bankruptcy for Katrina survivors.

(Why not lend a helping hand here? Well we can only guess - although it's hard not to suspect that there is more here than meets the eye - after all Sensenbrenner holds nearly $250,000 in credit card stock and has received approximately $92,000 in donations from credit card company PAC's.)

I don't know how many Katrina victims can fall back on a quarter of a million in stock, but my guess is, not many.

How can anyone with that kind of financial backing, sitting dry, on Capitol Hill, even begin to understand the plight of a catastrophe refugee? We're talking about people who have been huddled in a shelter trying to reconstruct their financial records on scrap paper - people who don't even know if their old job will resurface by 2006. People whose attention is on vitals like, clean water and clothes, disease prevention and finding family members. And the Chairman has the gall to say, effectively, 'we're not going to talk about it anymore'!?

Going through a few extra hurdles isn't a problem? Come on, get in touch. Here's a little help >> Google Video

Also see:
Consumer Affairs: Congress Ponders Katrina Bankruptcy Relief
Vitter-Landrieu Lousiana Katrina Reconstruction Bill (pdf)

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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.

Our Start Fresh Today bankruptcy filing tools were architected to take the requirements into account and give the attorneys clear answers when filing after the law changes.

The purpose behind our online Means Test and Due Diligence package is to let you quickly evaluate whether your clients satisfy the means test, and if they don't, gather information that may help you establish a special circumstance. You need all the help you can get!

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See Amy Crane's - Yahoo Finance article, "New bankruptcy law requires credit counseling"

Of particular interest to bankruptcy attorneys is that, "Provisions in the new bankruptcy law mandate credit counseling before a bankruptcy can be filed and a personal financial management seminar (debtor education )before a bankruptcy is complete."

"Federal agencies, courts, attorneys and credit counseling agencies are scrambling to comply with the many changes in this new law" - Amy Crane

I'm speaking with Bankruptcy Attorneys across the country, on a daily basis, who are saying, "I don't see how I could manage filing for a client once the law changes, without...(hiring more staff, hiring a tax attorney, etc)". Attorneys are coming to grips with what is ahead and are realizing that it will be a daunting proposition just to weed through the tax forms to calculate the means test, much less to determine where to send their client for credit counseling.

When building StartFreshToday's new online filing tools, we foresaw that this rapid change would be a headache for those in the court system as well as the attorneys, which is why we have created an interface for the attorneys AND the trustees to co-manage and preview client filings in an effort to keep the whole process under the BAPCPA regulations as seamless as possible.

StartFreshToday's tools handle the bankruptcy means test, credit counseling certification, debtor education and an attorney's due diligence requirements all in one secure place. And all through a simple walkthrough format that lets attorneys save as they go, return as often as necessary, track filing status and navigate the new law without sifting for answers amidst a stack of the latest version of Federal BAPCPA documents.

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I found an interesting pdf report, regarding bankruptcy filing projections, put together by the Executive Office for U.S. Trustees way back in early 2001. Surprisingly enough their estimates were close enough to the mark for this to be worth a good read considering where bankruptcy reform is today. Obviously their projection for 'when' reform would be signed into law was a few years off, nonetheless, if you're contemplating what your bankruptcy practice will look like come 2006, this is for you.

See the bankruptcy filing projections document.

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Excerpt from an email sent from the American Bankruptcy Institute that continues the Katrina bankruptcy conversation.

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"HURRICANE KATRINA AFTERMATH

Fifth Circuit Extends Emergency Order

The U.S. Court of Appeals for the Fifth Circuit has issued an emergency order detailing its operations in the immediate future. The court system has been closed since Aug. 26 due to Hurricane Katrina.

All bankruptcy filing deadlines are extended until Oct. 10, 2005. Trial and hearing dates will be rescheduled at a later date.

For questions regarding the local U.S. Trustees Office, go to www.usdoj.gov/ust/r05 . For information about local chapter 13 cases, check the Web site for S.J. Beaulieu Jr., the chapter 13 trustee, at www.13network.com/trustees/nor/norhome.asp .

Congress Considers Katrina Bankruptcy Relief Legislation

House Judiciary Committee Ranking Member Rep. John Conyers (D-Mich.) and 27 additional Democratic co-sponsors introduced legislation on Sept. 8 to provide bankruptcy relief for victims of Hurricane Katrina. H.R. 3697, the "Hurricane Katrina Bankruptcy Relief and Community Protections Act of 2005," is designed to provide flexibility in BAPCPA for victims of natural disasters. Senator Russ Feingold (D-Wis.) and 14 other Democratic senators, introduced similar legislation in the Senate. Because provisions in existing law already allow courts to grant exceptions for "special circumstances," congressional action is uncertain.

The new bills would provide a one-year grace period for hurricane victims. Cases filed within one year of the effective date of the new law by people who live in the natural disaster area declared by the President will be handled under the law in effect on Aug. 29, 2005-- the date of the hurricane.

While focusing on the problems of individual debtors, the bill gives the courts additional flexibility to extend the deadlines for small business seeking to reorganize under chapter 11.

Find Disaster Relief Links on ABI's Katrina Page

The ABI World homepage contains links to ways that members can assist victims of Hurricane Katrina [http://www.abiworld.org/katrina.html]. Listed are local legal charitable organizations, offers of office space donations, court links and messages from ABI members in the region. The site is updated daily.

Banking and Credit Unions Testify on Katrina Relief Tomorrow

Banking and credit union industry representatives from Louisiana and Mississippi are scheduled to testify tomorrow at a House subcommittee hearing on efforts to improve hurricane victims' access to financial resources, CongressDaily reported today. Lawmakers, regulators and banking industry groups have noted that many hurricane evacuees have lost their personal identification and financial records. "While regulatory agencies and financial institutions are working together to ensure victims' cash and credit are readily accessible, we in Congress must immediately provide the tools these institutions need to continue this vital effort," Financial Services Financial Institutions Subcommittee Chairman Spencer Bachus (R-Ala.) said today. Bachu's panel is considering several legislative ideas for helping victims of Katrina, such as increasing deposit insurance coverage limits, easing prompt corrective action requirements for financial institutions whose capit al levels have temporarily dropped because of the hurricane, and providing indemnity for institutions that accept checks from consumers with limited identification." - American Bankruptcy Institute

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Continuing on a post I wrote a week ago, Katrina and the Bankruptcy Law Change: A Double Catastrophe, Bankrate.com writes about yet another blow for victims.

Law makers are starting to take interest in the topic....

Check out Bloomberg Article - Republicans Consider Easing Bankruptcy Law for Katrina Victims

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Buffalo reporting a record number of filings as the new law approaches. I'm hearing the same story from attorneys all over the country.

This appears to be shaping up as the busiest time in many of the attorneys careers I've spoken with.

Keep your chin up all!

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The Bankruptcy Abuse Prevention and Consumer Protection Act has caused anxiety for both consumers and attorneys alike. Consumers are worried - and rightly so - that they no longer will be able to qualify under Chapter 7, and that if they file under Chapter 13 they'll be required to pay back a bulk of their debts. Attorneys are put off by the filing process, which has become both time-consuming and labor-intensive, ultimately driving up costs for the debtors.

Bankruptcy filings rose from 200,000 in 1978 to more than 1.6 million last year, according to a recent article in the New York Times. Because of the law changes that go into effect in October, that number is expected to rise in 2005, by some estimates reaching 1.8 million. Nationwide, the filings have increased 12 percent in April, May and June from last year's numbers.

Other reports, including recent ones from Ohio and Kentucky, Mirror the New York Times' findings. In Ohio, for example, bankruptcy filings are on pace to increase by 6.2 percent over 2004.

Consequently, many bankruptcy attorneys are finding themselves swamped with clients hoping to beat the deadline.

Only time will tell whether filings continue to rise after the new laws are in place, or if they'll drop off dramatically because consumers find them too daunting.

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