Consumer Bankruptcy

A most frustrating baseball statistic is the “LOB,” runners left on base, representing missed opportunities to score runs. Creditors relying on BAPCPA’s anti-cramdown provision to make life simpler and richer by precluding cramdown of purchase-money interests will, from time to time, have to leave a few runners and claims stranded on base.  

This incredibly important change of prior law is found in an orphaned paragraph at the end of Bankruptcy Code §1325(a)(9), and is one of the most carelessly written provisions of BAPCPA:

The recent amendments to the Bankruptcy Code via the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) have provided a number of significant changes to the Code. This article will examine how the courts have been implementing the changes in the law.

The Lack of Clarity in Many Provisions of BAPCPA

With his decision in In re Attorneys at Law and Draft Relief Agencies, 332 B.R. 66, (Bank. S.D. Ga. 2005), on the applicability of the Debt Relief Agency provisions to attorneys, Judge Lamar W. Davis Jr. not only takes the bull by the horns, but literally throws it to the ground.  Unfortunately, this particular bull is not likely to stay thrown and will doubtlessly rise to gore lawyers who provide bankruptcy advice to assisted persons.  The group of lawyers gored by the DRA sections, as many commentators have already noted, is not limited to those representing consumer debtors.  Attorneys that represent creditors who themselves fall within the definition of an assisted person may also acquire the DRA taint.

The Judicial Conference has approved Official Forms 22A and 22C for use in making the means test calculation in chapter 7 (OF 22A) and determining disposable income in chapter 13 (OF 22C). Both forms utilize the same methodology in applying the transportation standards and the housing and utilities standards. In the transportation standards, the debtor is allowed the greater of the maximum ownership costs standard or the debtor's secured vehicle payments determined under §707(b)(2)(A)(iii). For housing and utilities expenses, the debtor is allowed the greater of the maximum standard for mortgage/rent or the debtor's house payment determined under §707(b)(2)(A)(iii). This begs the question: Is this the correct interpretation of §707(b)(2)(A)(ii)(I)?

Facts:

Once the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) goes into effect, a critical computation for any consumer bankruptcy case will be the debtor's "current monthly income" (CMI).  BAPCPA defines this new term, to paraphrase, as a six-month average of the debtor’s income, and specifically includes amounts paid by entities other than the debtor for regular household expenses. See 11 U.S.C. §101 (10A) (quoted below).

One provision added by BAPCPA 2005 that will impact all attorneys who represent consumer debtors is that concerning Debt Relief Agencies (“DRA”). All attorneys who represent consumer debtors are, by definition, Debt Relief Agencies: any person who provides any bankruptcy assistance to any assisted person in return for the payment of money or other valuable consideration [§101(12A)]. An assisted person is any person whose debts are primarily consumer debts and the value of whose nonexempt property is less than $150,000 [§101(3)]. Bankruptcy assistance includes:

Has Learned Hand Finally Come Home?

In the first published opinion interpreting a provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Judge Randolph Haines has held that the limitation on homestead exemption amounts contained in §522(p) is inapplicable in states that do not permit their residents to elect federal exemptions. In re McNabb, 2005 WL 1525101 (Bankr. D. Ariz. June 23, 2005). In the context of an objection to the debtor’s claimed homestead exemption, Judge Haines was called upon to determine the applicability of several new provisions regarding exemptions contained in BAPCPA as well as interpret the $125,000 cap on homestead exemption contained in §522(p).

    All ye attorneys, lend me your ear
          For tis bad tidings of which I fear
               I am the bearer