BAPCPA: Two years of terror
By Cathy Moran, California bankruptcy lawyer on Oct 17, 2007 in General Bankruptcy Information
Bankruptcy “reform” , effective two years ago today, enshrined the hunting of consumer debtors by the United States Trustee as an honorable pursuit. It matters not whether the debtor is old, broke, or ill organized; as long as something about their situation is unusual, the debtor risks becoming the prey in the UST’s blood sport.
But, the UST says, we’re only doing our job, enforcing the law. They are partially right: the new law is equally mean spirited . BAPCPA starts from the presumption that, if not subjected to the glare of law enforcement, American consumers would lie, cheat, and steal their way to a bankruptcy discharge.
Just as importantly, however, the UST is engaged in trying to preserve its staffing level, as every bureaucracy does. It has to find something for its staff to do to justify its existence. Hence, the third degree for the individual debtor.
I would feel differently if I thought that there ever was a problem with dishonest debtors. In 28 years of bankruptcy practice, I interviewed perhaps 6 would-be clients who were obviously out to run up debts and dump those debts in bankruptcy. I threw them out of my office.
The UST’s statistics about the “abuse” that it has ferreted out are woeful. After all the document demands are met, only a fraction of Chapter 7 cases are found to be ill-grounded, but it’s a tiny fraction.
So, the people subjected to UST scrutiny and oppressive document requests are not cheats or perjurers. They are usually stressed out folks who have lived at the financial edge, trying to do the right thing, for far too long before they filed bankruptcy. Then they have to run the UST gauntlet.
I find myself recommending Chapter 13 to increasingly more clients, not because the creditors will receive a partial repayment of their claims, but so the frazzled client can avoid becoming enmeshed in the UST’s web of document requests and 2004 examinations. These kinds of Chapter 13’s usually pay nothing to creditors, because the debtor, even under the new law, is not required to pay creditors anything; they are simply the most direct route to the peace these folks deserve. That route goes around the UST.
BAPCPA has increased the cost, financial and emotional, of bankruptcy and has not materially changed what debtors repay their creditors through bankruptcy. Nice work, Congress.
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