Ten Things I’d Change About BAPCPA-Part One

I often think how much better things would be if I could be in charge. Trust me, you’d be better off, too. I realize that is approximately as likely as monkeys flying out…well, you know. But as the third anniversary of BAPCPA approaches, and with a lot of really great ideas from Wendell Sherk, I got to thinking about what changes to BAPCPA I’d make if I were in charge. Roughly in order of their importance to me, here they are:

1. First, I would permit a waiver of the requirement for pre-bankruptcy credit counseling when there is a foreclosure pending. Actually, if I were in charge, I’d eliminate the credit counseling requirement completely. It’s pointless, a waste of time, and insulting to both the motives and the intelligence of debtors and their lawyers.

The first problem with the credit counseling requirement is that it assumes facts not in evidence. It assumes that a whole lot of folks run up a bunch of debt, look at their bills, and the first thing they think is “Aha, I’ll file bankruptcy!”

Well, I’ve got news. I’ve been doing this for more than twenty years (I was a mere child when I passed the bar, by the way) and I haven’t met any of those people yet. Let’s see if I can put this plainly. People don’t want to file bankruptcy. People don’t like to file bankruptcy. People do everything short of selling their first-born to avoid filing bankruptcy.

Credit counseling does not divert any significant number of people from the path to bankruptcy because, wait for it, they NEED to file bankruptcy. In fact, my experience, and that of my colleagues, is that most people wait too long, and most people have already tried some form of credit counseling or debt management before they ever consider bankruptcy. There is no willy-nilly rush to the bankruptcy court. Never has been. So, credit counseling provides no useful purpose in any case.

Worse than being useless, the credit counseling requirement is an impediment to those trying to save a home from foreclosure. Credit counselors have nothing to offer that will stop a foreclosure. Only a Chapter 13 is guaranteed to do that. When time is short, it may be difficult to complete the counseling requirement, especially if the debtor is operating under a disability, such as functional illiteracy or a language barrier.

There is a mechanism that allows a debtor to file a case and seek a waiver afterwards, but if the judge does not grant the waiver (and it is in his discretion) then the case is dismissed.

An additional problem with that provision is that it increases the cost to the debtor. In most Chapter 13 cases, some or all of the debtor’s attorney fee is to be paid through the plan. If I have to do extra work, and there is the chance that the court may not allow the case to go forward, I have to charge more up front. It just compounds the problems for a debtor whose home is in foreclosure.

Allowing a waiver of the credit counseling requirement when there is a foreclosure pending would be easy to implement and monitor, too. Instead of attaching a credit counseling certificate to your filing, you could attach a copy of foreclosure pleadings, or an affidavit referencing that proceeding.

Without my really intending it, this turned into a rant, and ran a little long. I’ll continue this in Part Two.