Bankruptcy Reform, Part II:
Chicken Little Still Looking Skyward...

      Following the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), I wrote an article entitled "Bankruptcy Reform—Gather 'Round Children—Yes, the Sky is Falling" for the spring 2005 issue of the Journal. The article focused on the hidden and not so hidden pitfalls attorneys and their clients would face in dealing with BAPCPA and its aftermath. As with all writings at the time, scholarly as they may have been, the best adjective that could be used to describe mine, as any other, would be "whiney." Judicial decisions after the effective date could also be similarly described.

   With over a year after the effective date under our belts, most courts and scholars have made the transition from "whine" to "deal." The attorney liability dangers are still very real and the cautions set forth in my prior article still apply. I will explore the interpretive decisions regarding the attorney liability provisions further in this article. But the rumors of the death of bankruptcy and the bankruptcy attorney may have been exaggerated—may have been. As bankruptcy attorneys ponder their potential upcoming demise, we continue to apply the very real changes to the law that BAPCPA brought about and speculate about the future in our newly found spare time.

——— Debt Relief Agencies ———

   Clearly the most frightening aspect of BAPCPA to bankruptcy attorneys is their new found vocation as "Debt Relief Agencies" who provide advice to "assisted persons." Under BAPCPA, Debt Relief Agencies are required to give scripted legal advice and time sensitive disclosures to each assisted person seeking any advice as to bankruptcy matters. The directives and disclosures take up several sections of the new code and many pages.² The scripted legal advice includes giving the assisted person the directive not to incur any more debt or pay anyone, including bankruptcy attorneys. This prohibition may indeed be prohibitive to some, such as the case where obtaining a car loan prior to a Chapter 13 filing in order to obtain a reliable vehicle for the work commute may indeed be the best advice for the client.

   Just after BAPCPA became effective (within hours), the Bankruptcy Court for the Middle District of Georgia took it upon itself to declare unilaterally that bankruptcy attorneys are not Debt Relief Agencies as defined by BAPCPA. In the decision, entitled In Re Attorneys at Law and Debt Relief Agencies, Judge Davis determined that attorneys did not specifically fit within the definition of Debt Relief Agencies as they were not listed therein and defined.³ The court reasoned that the blanket prohibitions, disclosures and scripts could not possibly apply to highly skilled legal professionals. On appeal the District Court agreed with the United States Trustee that there was no case or controversy before the court and reversed for lack of standing.⁴

   In July of 2006, a Texas attorney, Susan Hersh, filed an action in District Court seeking a declaratory judgment that BAPCPA does not apply to attorneys and that its provisions are unconstitutional. The court found that the attorney had standing because the arguable suppression of speech going forward conferred standing upon her.⁵

   The Texas court did not buy the Georgia rationalization that attorneys are not Debt Relief Agencies because (a) BAPCPA did not specifically exclude attorneys, (b) the section references legal advice, and (c) the House Report mentioned "attorney" 164 times. More importantly, however, the Texas court did address the issue of constitutionality. The Texas court found the scripted legal advice for Debt Relief Agencies to be overbroad and therefore unconstitutional. The section requiring Debt Relief Agencies to advise assisted persons not to take on additional debt was found to prevent lawyers from giving good counsel and to prevent clients from taking lawful actions. The court found that the requirements also go beyond the stated purpose of BAPCPA to remedy abuse of the system. A near mirror decision, Olsen v. Gonzales, similarly held on all counts and further found that, despite the foregoing, the required advertising disclosures are constitutional since attorneys are permitted to provide "substantially similar" statements.⁶

   In light of the Georgia, Hersh, and Olsen decisions, as well as a few other decisions,⁷ bankruptcy attorneys are facing the reality that they are indeed Debt Relief Agencies⁸ and that the glimmer of hope streaming from Georgia has faded into nothingness. Fortunately, the most grossly offensive Debt Relief Agency pro8vision—that prohibiting the advice to incur additional debt—has been subject to very real scrutiny. Although decisions are few, they are consistently finding that at least that portion of the statute may be unconstitutional.

   While the post-BAPCPA era is a far cry from "business as usual," in terms of exposure for bankruptcy attorneys, the real, rather than theoretical, effect of the "Debt Relief Agency" provisions has so far been non-existent.⁹ Even though attorneys are understandably cautious and generally compliant with the Debt Relief Agency provisions, the question remains as to the enforceability of the sections. The party with express standing under those provisions is the debtor, with enforcement powers conferred upon the state and federal courts to enjoin or sanction.¹⁰ The specific remedy in the Bankruptcy Code is to void the contract, with the presumed return of fees, and for fees or other damages. If a violation were to occur, especially concerning the requirement to advise against incurring more debt, it is difficult to conceive of a scenario where a debtor would sue, and if so, what the damages could possibly be. Despite the lack of case law and the questionable damage calculations, attorneys prefer compliance over unknown alternatives.

——— Means Test ———

   The means test has been simply stated in the media as generally prohibiting or at least discouraging those debtors who earn more than the state median income from filing a Chapter 7 bankruptcy case. In doing so, BAPCPA was heralded as a way to prevent abuse by forcing those with higher incomes to choose a Chapter 13 repayment plan over no filing at all. While the concept is indeed simple, as my last article demonstrated, the application under the specifics of the law is next to impossible. The section excerpted from the BAPCPA means test in the last article was only a small segment of the labyrinth to be solved in applying the means test. Practically, even with the software programs available to bankruptcy attorneys, wading through the test, especially for those who earn more than the median, is rarely worth the effort.¹¹ More problematic are the inconsistencies in the case law interpreting the various requirements under the means test.

   As predicted, one aspect of the means test currently receiving significant judicial attention stems from BAPCPA's definition of "current monthly income" and the lack of a definition for "projected disposable income." "Current monthly income" is defined by BAPCPA as the average monies received or earned over the six months prior to the bankruptcy filing.¹² This current monthly income figure is used to determine the eligibility for a Chapter 7 case, and potentially to determine the payments required under a Chapter 13 plan. Clearly there is a disconnect in BAPCPA where a person now earning $100,000 annually but who had been unemployed for five out of the past six months is eligible for a chapter 7 case, because she earns less than the state median according to her "current monthly income."

   In a Chapter 13 case, a debtor is required to pay his or her "projected disposable income" into the plan, although this term is not defined under the Bankruptcy Code.¹³ Leaving aside the issue as to whether the person in the above example would be eligible for a Chapter 7 case, if she were to file for Chapter 13 reorganization, would she use her "current monthly income" to minimally fund a plan, or would she, instead, be required to use her upto-the-minute budget to project the future? The existing case law on this issue is best described by Newton’s third law: for every action, there is an equal and opposite reaction. There is a dearth of appellate cases at this point, and for every case holding one way, one will find an equally opposing case with the same facts.¹⁴

   As indicated above, in the Kibbe case and in dozens if not hundreds of others, the courts utilized a "totality of the circumstances" analysis and the general abuse provisions of the Bankruptcy Code to infer that such a debtor should fail the means test (or pay more in a Chapter 13) due to currently available actual income. Practically, a debtor should pay what he or she can afford in reality. Many courts, however, disgusted with the poor drafting and ineffective measures in BAPCA, chose instead, to interpret BAPCA literally and determine that such a current high earner passes the means test, as defined, with use of the "current monthly income" standard.¹⁵ While courts generally are steering away from this analysis, seemingly reflecting the national transition from "whine" to "deal," it is difficult for courts to avoid pointing out the absurdity of certain provisions. Vermont has yet to rule on this growing split in the circuits, but has intimated that the focus on actual current income and income as projected is the more logical approach.

   Rest assured, the foregoing is merely one issue of many that calls into question the providence of the means test and its applicability in determining whether and how a Chapter 13 case should proceed.¹⁶ With all the current litigation and legal haranguing, the next logical question is whether the means test, statistically, is working. Statistically, the percentage of Chapter 13 filings as compared with Chapter 7 filings has increased post- BAPCPA.¹⁷ One speculation as to the cause of this comparative increase is that it stems from the uncharacteristic flood of Chapter 7 filings just prior to BAPCPA’s effective date. Conversely, however, the average percentage dividend paid to unsecured creditors in each Chapter 13 case appears, at least in Vermont, to have decreased. This may be due in part to the foregoing legal issues with respect to projected disposable income, but also due to other factors such as increased costs of filing and legal representation and the inability to cram down new vehicle loans.¹⁸ It remains to be seen, then, whether the means test is all it was cracked up, or rather, conjured up, to be.

——— Automatic Stay ———

   In keeping with the theme of ‘abuse prevention’ under BAPCPA, there was a concerted effort by Congress to deter repeat bankruptcy filings by limiting the application of the "automatic stay" or protection for debtors from collection activity or litigation. The automatic stay protection is limited to thirty days in cases filed within a year of a prior dismissal of a bankruptcy case (with the exception of any dismissals prompted by a failure to pass the means test).¹⁹ The debtor can request an extension, but the extension must be heard within forty-five days of the filing. If two cases were filed within the prior year, there is no automatic stay, unless the debtor can prove such things as a change in financial condition and good faith to show that the stay is warranted.²⁰

   Early in the post-BAPCPA litigation, certain renegade courts yet again used the automatic stay amendments as a vehicle for demonstrating the absurdity of BAPCPA’s drafting. Because the section limits actions against a debtor’s "estate," rather than the debtor as a person, without definition, the courts had been deciding that the automatic stay still applies to prevent actions against the serial filing debtor.²¹ While the limits to the automatic stay seem like the most logical and well-intended BAPCA sections for preventing abuse within the bankruptcy system, the difference of court opinions do demonstrate further shortcomings in BAPCPA’s drafting. Practically, there has been relatively little litigation on the subject, with secured lenders preferring to receive payments over the collateral, especially due to the tight time constraints in seeking relief, and due to the conflicting case law.

   There appears, however, to be an unforeseen effect of the new automatic stay limitations when certain cases are subject to procedural dismissals under BAPCPA. In section 521, a debtor has seemingly countless and enhanced duties under BAPCPA.²² Some of the duties include a requirement to file or provide tax returns within a certain time frame, to provide sixty days of paystubs with the petition and file the requisite statement of intent. Further, as described below, the debtor must undergo a prefiling counseling course and a postfiling financial management education course prior to receiving a discharge. Under any of these provisions, a failure to comply, even if due to attorney error, commands that the debtor’s case "shall" be dismissed.²³

   This dismissal provision has real impact in cases where the debtor or counsel made what would seem to be a minor procedural mistake—often through no fault of the debtor, but rather due to incompetent counsel²⁴— by perhaps failing to provide tax returns. The client still obviously has a need for bankruptcy relief after the dismissal, but his or her next filing would be subject to the "serial" filing prohibitions with respect to the automatic stay. The harsh results would seem to be unintended by Congress in light of the new and complex requirements of BAPCPA. The judges, however, seem to have no discretion in avoiding dismissal as in many other sections where discretion has been removed. The automatic dismissal provisions seem to provide a real weapon for creditors in any case. If tax returns are not provided upon request, the debtor’s case may be dismissed without much room for exception. It would be wise for creditors then, as a tactical sword, to demand returns in every case.

——— Credit Counseling ———

   As the prior article indicated, one of the major components of BAPCPA is the requirement that debtors obtain both pre-petition credit counseling and post-petition financial management education. The certificate of counseling is a prerequisite to filing eligibility with limited exceptions. At a going rate of approximately $50 each class, the counseling represents an additional expense (added to the filing fee that skyrocketed to $299) for those seeking financial relief. The courts, try as they might, initially had trouble interpreting the credit counseling provisions in a debtor-friendly fashion, since the wisdom of the pre- petition counseling seemed to escape many courts. The BAPCPA provisions, however, for once are extremely clear, albeit with a practical loophole in their application.

   Debtors may seek a "waiver" of the counseling requirement under certain "exigent" circumstances.²⁵ The "waiver" is actually a brief extension. The court may approve the waiver if the debtor describes exigent circumstances that merit a waiver and states an inability to obtain the counseling within five days of making the request. The query still exists as to the proper procedural mechanism for a would-be debtor facing foreclosure say, tomorrow, and how that debtor would prove the inability to receive counseling within five days when it is really needed within one. To obtain a waiver, the courts are now developing procedures. The decisions since BAPCPA’s effective date have focused on the definition of the words "exigent" and "inability."

   Courts seem to be holding consistently that an inability to pay constitutes an inability to obtain credit counseling, despite the requirement that approved agencies are required to provide counseling without regard to the debtor’s ability to pay the fees. Once again, however the results have been inconsistent and may, at times, hinge on the question as to whether the debtor first tried to obtain pro bono services from the agency.²⁶ Incarceration, too, does appear to amount to inability to receive counseling.²⁷ Vermont has had several occasions to adjudicate the credit counseling waiver issues and has developed a six-part test to analyze whether a waiver should be granted.²⁸ If the waiver is not granted, a debtor is not eligible for filing and unfortunately for the debtor, under Vermont’s holding, the case would be dismissed rather than voided ab initio.²⁹

   There has been little activity with respect to the debtor’s required post-petition financial management course. Clients have commented that this course, unlike the first, does present some valuable information and education. The BAPCPA rub (we have yet to find a section without one) lies with the fact that the counseling must be self-executing and must take place prior to discharge. While the Vermont court does provide counsel with a helpful reminder of the upcoming discharge date, the harsh result of failing to have your client undergo the counseling is a closing of the case without discharge. With the short-lived attorney-client relationship that bankruptcy provides, this task may not be as simple as it sounds. And, once again, if a case closes without discharge, a debtor upon refiling to seek the needed relief, would be a serial filer, subject to the limitations on the automatic stay.

——— Reaffirmation Agreements ———

   Reaffirmation is a creature of the Bankruptcy Code whereby a debtor excepts a certain debt from discharge in bankruptcy. When a debtor reaffirms the obligation to a creditor, it is a reinstatement of the enforceability of the promissory note. As such, upon default after the bankruptcy, the creditor can proceed to seek personal judgment after the collateral is sold for less than the note balance. Without reaffirmation, the creditor has the right to reclaim the property securing the debt, but cannot obtain a monetary judgment.

   Prior to the enactment of BAPCPA,debtors in this Circuit had four options with respect to a creditor’s collateral: (1) surrender; (2) redeem (i.e., pay the present value of the collateral); (3) reaffirm; or (4) merely retain the collateral and keep current. The fourth option, commonly referred to as the "ride- through," has been eliminated by BAPCPA. Under BAPCPA, the debtor must perform his or her stated "intention" with respect to collateral, being only redeem, surrender or reaffirm, within forty-five days of the meeting of creditors, or the creditor will be automatically granted relief from stay to pursue its remedies in state court.³⁰ Technically, then, no ride-throughs are authorized under BAPCPA.

   It remains to be seen, however, exactly what would happen to a Vermont debtor should he or she keep current on the note and not reaffirm the debt (the tantalizing legal question being would the creditor be permitted to allege bankruptcy as default at the state court replevin hearing if the debtor is current in payments—in other words, can a creditor repossess a car if the debtor is making timely payments just because bankruptcy was gone through without reaffirming?). More often than not—either from fear of violation of the bankruptcy discharge or from a desire simply to exert leverage—a creditor will not provide monthly statements to a debtor unless the debtor reaffirms, even if the debtor requests them. So payment default after bankruptcy is likely, but, without reaffirmation, the creditor’s sole remedy would be repossession of the depreciated collateral.³¹

   BAPCPA’s section governing reaffirmation agreements and the companion form are incredibly complex and detailed.³² As demonstrated in the prior article, there is exposure for the debtor’s attorney if the debtor is unable to perform, where the debtor’s budget presumes an inability to pay.³³ The reaffirmation also risks being denied by the court if not prepared properly. In an effort to educate filers, the Vermont bankruptcy court has recently issued an order citing the eight most common reasons why reaffirmations are not approved. To further educate filers, the Vermont court prepared a "handy" flow chart—which resembles more of an Op-Art piece by Vasarely, than a filing aid—to assist with wading through BAPCA’s reaffirmation requirements.³⁴ And because Vermont is the only district in the country which requires a separate certification from the preparer that the filed agreement complies literally with the Bankruptcy Code, denials are common.

——— Filing Statistics and Projections ———

   A Vermont bankruptcy court study conducted in mid-2006 reports that filings are down approximately 60 percent over the 2004 figures. Taking out the 2005 filing boom anomaly, and comparing to 2004, the filings are still down by extraordinary numbers. The question on the mind of every practitioner, judge, scholar and analyst in the bankruptcy field is whether the filing volume will bottom out. In 2006, filings have slowly but steadily increased. Filings in Vermont are slowly increasing in 2007 and we may approach 50 percent of 2004 levels this year. But filing fees and attorney fees can have a very real impact. People are discouraged from filing perhaps due to the bad press of BAPCPA, the conflicting case law or the increased fees. Still, in my experience, clients who ultimately find their way to competent bankruptcy counsel are still baffled by how remarkably easy it is to file for bankruptcy relief.

   To interpret the data, we must first ask why bankruptcy was so prevalent through 2004 before we can determine whether filings will return to pre-BAPCPA levels. One misconception is that Americans are overspending on "stuff." Most would assume that Americans are overspending on clothes, appliances, nights out, and other extravagances. Credit card use is through the roof, so it must be the stuff, right? Wrong. Renowned Harvard Law Professor Elizabeth Warren has been conducting a thorough analysis of spending in America now as compared to thirty years ago. The results reported in her 2005 article, "The Immoral Debtor," were startling.³⁵

   In inflation-adjusted dollars, Americans are spending less than they were thirty years ago on food, despite the new era of working moms and eating out. Professor Warren attributes this to the lack of superstores and the price of the major diet staple—meat—thirty years ago. So it must be the fancy designer clothes. Wrong again. Americans are spending less now on clothes in inflation-adjusted dollars than they were thirty years ago, partly attributable to modern discount superstores. The same applies for appliances: while spending on electronics has increased, the savings for appliances overall far outweigh that increase. Finally and surprisingly, Americans spend less over their lifetimes per car today in inflation-adjusted dollars than they did thirty years ago. Despite today’s souped-up SUV’s, people simply keep each car longer.

   So where are the fraud and the purchasing with reckless abandon? According to Warren’s study, it turns out that Americans are spending astronomically more on their homes, insurance, child care, and multiple vehicles than they did thirty years ago. Home down-payments have decreased while housing prices have skyrocketed. Families are competing to buy houses they may be unable to afford in a shrinking number of decent school districts. With the advent of the working mom, while per household income has increased, working males are making essentially the same as they did thirty years ago in inflation-adjusted dollars, so they are unable to afford these increased expenses. The families also spend more on dependent care, for children and other relatives, since both spouses must work to maintain the household. With savings at 0.6 percent now, as compared to 11 percent thirty years ago, there is simply no room for misfortune such as divorce, injury, or job loss.³⁶

   With these factors in play, the current rate of Chapter 13 filings as compared to Chapter 7 filings should not be overemphasized. Foreclosures are undeniably on the rise, especially in light of the rising variable-interest-rate loans and declining real estate market. Chapter 13 filings inevitably increase in response, but due to BAPCPA’s changes and the reality that many debtors cannot now afford their mortgage payments, Chapter 7 cases are soon to follow and increase. The effect that the business climate has on consumer filings also cannot be overlooked, as manufacturers continue to lay off thousands of workers annually.

   As for business filings, BAPCPA’s effect would seem to be less significant. While this article has focused on the impact upon consumers and practitioners, there is no doubt that BAPCPA’s Chapter 11 provisions, such as those provisions governing preference actions and reclamation rights, have had an impact. However, Chapter 11 filings have been steadily decreasing all throughout this decade, meaning BAPCPA is not solely to blame for the calm business-filing climate. Vermont has typically had well under ten Chapter 11 filings per year throughout the last ten years.

   Most scholars, either through extrapolating data or by relying on a hunch, believe that business bankruptcies are on the rise.³⁷ According to the American Bankruptcy Institute, as Attorney John Penn states, filings will rise because too much money is chasing after few good deals. Weaker companies are being propped up, merely deferring the inevitable demise of the companies which are extremely over-leveraged, says Penn.³⁸ The focus has been upon continually fixing liquidity, rather than focusing on the underlying causes of the company’s financial difficulties.

   The proliferation of hedge funds and second-tier financing has created a false sense of security in many marginallyoperating companies. When interest rates increase and the liquidity drops, it creates a snowball effect. Second lien financing, too, has increased from approximately $57 million nationally in 2002 to a whopping estimated $30 billion in 2006.³⁹ That is a significant amount of risky investment in a reportedly declining real estate market.

   One historically reliable indicator of upcoming bankruptcy booms is the default rate on speculative-grade bonds, currently at 1.8 percent compared to the historical average of 5 percent.⁴⁰ As described in Forbes:

Most experts expect the default rate to rise in 2007, reaching 2.5% to 3% at the end of the year. That still won’t be a boom by historic standards, but it will feel like one compared with the bankruptcy holiday that defined 2006. The following year, however, is a different story. [Wilbur L.] Ross expects default rates to rise as high as 7% or 8% in 2008, and many restructuring experts agree. ‘I think when [a correction] comes, and it is coming, it’s going to be a big one,’ says Jay Goffman, a partner in the corporate restructuring department at law firm Skadden Arps.⁴¹

   In Vermont, the bulk of businessrelated filings tend to be either liquidations or reorganizations by the company’s principals after certain failure. Many average-sized Vermont companies simply fold, rather than incur the prohibitive costs of a Chapter 11 reorganization. Negative factors such as rising insurance costs and costs of fuel, as well as increased outsourcing and international competition are not likely to decrease. The importance of strategic planning in dealing with these factors cannot be overemphasized.⁴²

   Like the rising of the sun, it seems inevitable that interest rates will rise and liquidity will fall. Because the socioeconomic factors driving the need for bankruptcy relief show no signs of improvement, the very real need for bankruptcy relief can only increase. Depressing as the harsh economic realities may seem, bankruptcy practitioners cannot help but secretly wish for the other shoe to drop, and quickly, to insure that they can bridge the gap. But when the shoe does drop, squarely in the midst of the inconsistent and sometimes illogical case law under BAPCPA, the fun will really start.

1. The Bankruptcy Code defines "assisted person" as "any person whose debts consist of primarily consumer debts and the value of whose nonexempt property is less than $150,000.00" 11 U.S.C. §101(3).
2. The "Debt Relief Agency" provisions may be found at 11 U.S.C. §101(12A) (definition) and §§526-528.
3. In Re Attorneys at Law and Debt Relief Agencies, 332 BR 66 (Bankr. S.D. Ga. 2005).
4. In Re Attorneys at Law and Debt Relief Agencies, 353 BR 318 (S.D. Ga. 2006)
5. Hersch vs. United States, 347 BR 19 (N.D. Tx. 2006).
6. Olsen vs. Gonzales, 350 BR 906 (D. Or. 2006).
7. Two new cases have reached conclusions substantially similar to those in Olsen. Milavetz, Gallop & Milavetz, P.A. vs. United States, 355 BR 758 (D. Minn. 2006); Zelotes vs. Adams, 2002 US Dist. LEXIS 13236 (D. Conn. Feb. 27, 2007).
8. The queries still exist as to the dividing line for those attorneys who assist people with consumer debts and minimal equity but in a business setting or as a creditor, since the definition itself does not exclude creditors’ attorneys. The issue as to whether an attorney must be paid for the services as the definition implies, and in what fashion, to be deemed a Debt Relief Agency, also still exists.
9. The heightened Rule 11 scrutiny discussed in my prior article is still very concerning, particularly with respect to the certification of the debtor’s schedules and possible continuing liability for a debtor’s changed circumstances post-petition and a failure to amend. See, e.g., Jackie Gardina, Does the Obligation to Engage in a "Reasonable Inquiry" Ever End?, Sixth Annual VBA Bankruptcy Law Section CLE materials, December 1, 2006.
10. 11 U.S.C. §526(c).
11. The expense allowances, using certain of the IRS guidelines, are far from generous. For example, the housing and utility allowance for mortgage/rent expenditures for Chittenden County is still $1,050. See www.usdoj.gov/ ust. Not only is the test next- to-impossible to wade through, any given debtor is rarely likely to "pass" if he or she were to earn over the state median.
12. 11 U.S.C.§101(10A).
13. 11 U.S.C. §1325(b)(1)(B).
14. See, e.g., In Re Brady, 2007 Bankr. LEXIS 501 (Bankr. D.N.J. Feb. 13, 2007) (debtor’s actual budgeted surplus income would not be considered because the "current monthly income" of the means test controlled), compared with In Re Kibbe, 342 BR 411 (Bankr. D.N.H. 2006) (actual income would be used as projected under plan and not according to means test where debtor began earning more shortly before filing). This example is merely one of hundreds of directly opposing cases, even within the same district, on this and other means test issues. Special thanks to Raymond Obuchowski who has compiled hundreds of means test cases and has divided them by subject or position.
15. After all, Congress meant what it said, even though "it" may not have understood what it meant to have said.
16. There are countless decisions reflecting Newton’s third law with respect to other provisions of the means test. For example, for every case determining that a debtor may not claim the IRS vehicle ownership expense if the car is either to be surrendered or not subject to a lien, one will find a case determining that the vehicle ownership allowance is available for those who have no liens or even those who are surrendering their car. Compare In Re Carlin, 348 BR 795 (Bankr. D. Or. 2006) and In re Love, 350 BR 611 (Bankr. M.D. Ala. 2006) with In Re Crews, 2006 BANKR. LEXIS 3632 (Bankr. M.D. N.C. Dec. 22, 2006) and In Re Oliver, 2006 Bankr. LEXIS 1607 (Bankr. D. Or. June 29, 2006).
17. Before all of our Congressional representatives give themselves a proverbial pat on the back for the current rate of Chapter 13’s as compared to Chapter 7’s being approximately 40 percent, rather than the historical 25 percent, they should recognize that this figure is considered to reflect more the huge spike and trough of Chapter 7s since 2005 rather than any meaningful trend toward Chapter 13’s themselves in the future. See Charles J. Tabb, Consumer Bankruptcy Filings: Trends and Indicators, Law and Economics Working Papers, Paper 67 (2006).
18. BAPCPA eliminated a major benefit of a Chapter 13 filing by making unavailable the option for a Chapter 13 debtor to bifurcate, or pay only the present value of a vehicle purchased within 910 days, as secured under the plan rather than the full claim. With so many debtors having bought rapidly depreciating vehicles at what can only be termed "absurd" interest rates pre-petition in order to purchase reliable transportation, the ability to "cram down" a vehicle claim to its value was a huge pre-BAPCPA benefit of Chapter 13. Post-BAPCPA, car financers reap benefit at the expense of the debtors and general unsecured creditors. This provision has also sparked considerable litigation over the meaning of certain terms in the "910" section such as "personal use." See 11 U.S.C. §1325(a), "hanging paragraph" (was not codified by number) and citing cases.
19. 11 U.S.C. §363(c)(3).
20. 11 U.S.C. §363(c)(4).
21. See, e.g. In re Harris, 342 BR 274 (Bankr. N.D. Ohio 2006); In Re Jones, 339 BR 360 (Bankr. E.D.N.C. 2006); and In Re Moon, 339 BR 668 (Bankr. N.D. Ohio 2006).
22. See 11 U.S.C. §521 (a) - (j).
23. See 11 U.S.C. §521(i). The "automatic dismissal" provisions literally leave judges hanging, since there are actually no procedural provisions built into BAPCPA for which a court or party must request or order such a case dismissal. Indeed the paradox left Judge Cristol to wax poetic in In Re Riddle, Case No. 06-11313 BKC-AJC (Bankr. S.D. Fla. July 17, 2006) when describing the elusive "automatic dismissal."
24. Incompetent may be a bit strong in light of the extent of micromanagement that BAPCPA compels, but with a year under our belts, bankruptcy counsel would have little if any excuse in neglecting any of the myriad of requirements.
25. 11 U.S.C. §109(h)(3).
26. Compare In Re Piontek, 2006 WL 1837905 (Bankr. W.D. Pa. July 5, 2006) (no waiver would be granted when debtors had some cash and had not first asked for counseling pro bono) with In Re Westenberger, 2006 WL 1105008 (Bankr. S.D. Fla April 25, 2006) (waiver granted where debtor’s accounts were frozen by creditor even though no pro bono request was made).
27. In Re Star, 341 BR 830 (Bankr. E. D. Va. April 24, 2006).
28. In Re Hess, Madore, 347 BR 489 (Bankr. D. Vt. 2006) (finding exigent circumstances).
29. See In Re Westover,2006 WL 1982751 (Bankr. D. Vt. July 11, 2006) (the ineligible debtor case will be dismissed and may subject the debtor to the serial filings requirements of 11 U.S.C. § 362).
30. 11 U.S.C. §521(a)(6).
31. The foregoing paragraphs describing reaffirmation agreements generally have been reproduced, in part, from Jennifer Emens- Butler, Deciphering Bankruptcy Jargon: "Ridethroughs" and "Reaffirmations," Strictly Business, Oct. 2006, at 8.
32. See 11 U.S.C. §524.
33. See 11 U.S.C. §524(k)(5).
34. The flow chart can be found at www.vtb.uscourts.gov/issues/reaf_flow_chart_ VT031207.pdf. The reference to Vasarely and the flippant nature of the description refers to the beast that is Section 524 and is not intended to undermine the considerable effort that the court made to assist filers.
35. "The Immoral Debtor" was presented as the materials for the Macroeconomics of Consumer Bankruptcy section at the 79th Annual National Conference of Bankruptcy Judges. All references to Warren’s findings are to the written "The Immoral Debtor" materials, 79th Annual NCBJ conference, at 10-1.
36. The foregoing paragraphs describing Professor Warren’s article have been reproduced, in part, from Jennifer Emens- Butler, Bankruptcy Is Still a Viable Option, Strictly Business, Feb. 2006, at 4.
37. See Report: Corp. Bankruptcies Set to Rise, AP business wire, Nov. 9, 2006.
38. Id.
39. See In the (RED): The Business Bankruptcy Blog, http://bankruptcy.cooleye.com (citing CFO.com) (Jan. 18, 2007).
40. See Hannah Clark, Money and Management: A Bankruptcy Boom Cometh, Forbes.com, Dec. 22, 2006, http://forbes. com.
41. Id.
42. The foregoing paragraphs describing the expected increase in business filings have been reproduced, in part, from Jennifer Emens-Butler, Business Bankruptcy Filings Expected to Rise, Strictly Business, Feb. 2007. Bankruptcy Reform: Part II

The information provided in this article is offered for informational purposes only; it is not offered as and does not constitute legal advice. Every situation is unique— you are encouraged to seek legal consultation to address your individual circumstances.