Unsettled Provisions of BAPCPA - Don’t Become a Test Case!

If you are reading this blog or other web sites to learn more about bankruptcy, you have no doubt seen a large number of references to the “new” bankruptcy law - called BAPCPA - that went into effect in October, 2005.  This new law, which is now almost a year and a half old, has significantly changed the consumer bankruptcy landscape.

There are a number of fairly obvious changes, such as the credit counseling requirement, the means test and changes to the discharge rules.  What you may not know, however, is that we do not yet know how some of the provisions of this new law will be interpreted.  As you continue your research about bankruptcy, learn about some of these uncertain areas and try to avoid problems in these areas.  You do not want to be the plaintiff in a “test case!”

The credit counseling requirement, for example, gives rise to an area of uncertainty.  Section 109(h) of the Bankruptcy Code provides that “during the 180 day period preceding the date of filing” you must obtain credit counseling from an approved credit counseling agency.

Some judges have interpreted the phrase “preceding the date of filing” to mean that you must obtain credit counseling at least one day prior to actually filing.  Under this interpretation, you cannot file on the same day as you receive credit counseling.  Other judges feel differently and would allow you to file on the same day as you received counseling.

Which interpretation will win out?  Will this end up in the Supreme Court?  Nobody knows - but if you are considering bankruptcy, go ahead and get your credit counseling now, and do not put yourself in the middle of this issue.

Another area where judges have disagreed relates to treatment of creditors when you surrender a vehicle that you purchased less than 910 days previously in a Chapter 13.  Some judges read Section 1325(a) as providing that when you surrender your vehicle, the creditor may sell the vehicle and file an unsecured claim for the deficiency balance.  Other judges interpret the same Code section to mean that surrendering the vehicle satisfies satisfies the vehicle lienholder’s claim in full.

What does this mean to you?  If you are filing a Chapter 13 and are thinking about surrendering a recently purchased car or truck, you need to know how the judges in your local bankruptcy court are interpreting this provision.  You do not want to find out after you have turned in the vehicle and it is too late to change your strategy.

As you continue your research about bankruptcy, make sure to ask your lawyer whether you will be affected by any of these unsettled areas - and plan accordingly.