24 Dec Ten Things I’d Change About BAPCPA-Part Six
The problem with the title to this series is the possibility that one might interpret it to mean that the provisions of BAPCPA can be “fixed” with ten changes. Actually, I have largely riffed off of Wendell Sherk’s suggestions, and he had at least 18, not counting subparts. Depending on the way courts interpret these provisions, other changes might be more urgent to someone else. However, there were a few (very few) positive changes within BAPCPA. One of those was the addition of section 524(i). Although it was well-intended, that too created a problem, which ought to be fixed. Fortunately, this fix is easy.
Section 524(i) was a new addition to the Bankruptcy Code, and it provides that willful failure of a creditor to credit payments as provided by a bankruptcy payment plan can be sanctioned as a violation of discharge injunction. That’s fine as far as it goes. It means that mortgage creditors can’t choose to apply payments in a way that is inconsistent with a court-approved payment plan, and continue to accrue rolling late charges and other fees as if the loan was in default. However, courts have interpreted the provision to require some type of language in a plan to make the provision effective. In other words, the provision is not self-executing, and it should be.
It would be a simple matter to amend section 524(i) to make the provision self-executing, and offer the same protection to all debtors, regardless of whether their plans contain language that most lay people would not understand. The issue is especially important for debtors who are representing themselves in bankruptcy. It is difficult, if not impossible, to make it through a bankruptcy reorganization without the help of a good, experienced, lawyer. The trap for the unwary laid by section 524(i) is just unfair.
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