My List of Top Ten Changes Wrought by BAPCPA

05 Oct My List of Top Ten Changes Wrought by BAPCPA

As the second anniversary of the effective date of BAPCPA approaches, it occurs to me to catalog the changes that have occurred in my practice over the last two years. And when I got to thinking about it, not all of the changes are negative. In no particular order, here they are:

1. The stacks on my desk are larger. Unfortunately, this is not because I am filing more cases. It is because each case that I file has more paper in it. I have one brand new case (the client just brought me all the paperwork to prepare a filing) and the file is six inches thick. I pulled out the ruler and measured. (And okay, if I’m honest, that file is on the floor. But it was just too big!) That particular file may be somewhat thicker than others because the client in question (God bless her) had organized everything she brought me into it’s own separate file folder. Nevertheless, the volume of paper that I look at in connection with each and every filing has increased since BAPCPA became effective.

2. My relationships with my colleagues at the bar have strengthened and deepened. That’s a really good thing. Such a complex and far-reaching piece of legislation just can’t be absorbed overnight, and the approach many of us have taken is to rely on each other, to communicate our questions, new approaches, and share our “war stories,” of success and failure, in order to educate and elucidate each other. In the past two years I’ve worked with other attorneys (from all over), judges, and law professors, who have all worked toward one goal–making sure the people we all serve get a fair shake.

3. The timing of case filings has become more critical than ever. I think the reason for this is twofold: it takes longer to put together the paperwork and get credit counseling scheduled, and because there is so much more to do fees are higher, which therefore takes longer to save. Especially where there is a foreclosure, it is important to see clients early in the process.

4. The availability of in forma pauperis filings is a positive change. Before BAPCPA we were not able to get a waiver of the filing fee the court charges (currently $299 in a Chapter 7 case) . The best we could do was ask the court to allow a debtor to pay that fee in installments. In my practice this is an issue with pro bono filings, i.e., where I have not charged a fee. I do one or two a month, yet even so, it was hard to make certain the court fees got paid. Imagine what a problem that was for legal services. (And trust me, nothing is worse than having a client who comes to you with a problem you can solve, taking the case without charging an attorney fee, filing the case, and then having the case dismissed because the client couldn’t pay the court fee.) BAPCPA gave us the ability to apply to the court to proceed without paying the filing fee, and for that I am grateful.

5. The volume of case law that I read has increased tremendously. Basically it’s a function of trial-level courts dealing with a whole bunch of new issues all at once, but it’s a bear trying to read all the cases that come out in my district alone (where there are three very prolific judges) much less other districts around the country. (This is particularly challenging for me, because for some reason I could never retain case names in memory. I can remember what they say, but not their names. Okay, whine over.)

6. Clients have one good chance to save their homes in foreclosure, but that’s about it. It’s harder to re-file a Chapter 13 case once a case has been dismissed, and it’s more expensive. If one Chapter 13 case has been pending in the previous year, a motion has to be filed with the second petition to keep the stay in effect, and in my district the motion must be supported (by affidavits or other documentation) and a hearing must be held. All of that multiplies the work that must be done, and therefore increases the fees I have to charge if there has been a prior case. I find that most clients just can’t afford it–they are usually in the situation to begin with because of some financial catastrophe.

7. I spend a lot more time involved in reviewing and litigating claims. I don’t know if it’s truly a result of BAPCPA, or the sub-prime mortgage meltdown, or some critical mass of the two together, but I see more claims that are unsupported by documentation or the debtor’s records, more mistakes (viewing the matter charitably) by mortgage lenders, and more questionable charges, like unaccrued interest, included in claims.

8. I am doing more Chapter 13s than I did before, which was supposed to be the result under BAPCPA. After all, the point of the means test was to “encourage” those who had excess income to pay into a Chapter 13 plan rather than file a Chapter 7 and discharge those debts. But I don’t think that’s really the reason. I can only recall a handful of cases over the last two years where the debtor wanted to file a Chapter 7 but was forced to consider a Chapter 13 because of excess income. And of that handful, I doubt the result would have been different under prior law in this district, where the United States Trustee has always monitored such cases for abuse. Many more of my cases are the result of adjustable rate mortgages re-setting, and the strain that has placed on the family budget.

9. As a result of the passage of BAPCPA, the South Carolina legislature enacted a long-overdue increase to the homestead exemption under South Carolina law, increasing the exemption from $5,000 to $50,000. The legislature cited the passage of BAPCPA, which made it more difficult and more expensive to file bankruptcy to protect equity in a home, as the reason for the change. Thanks are due to the legislature for taking decisive action to protect homeowners in South Carolina. Not only was that a good thing by itself, but it led to the final item on my list….

10. I am filing more Chapter 7 cases for homeowners with significant equity, in order to protect their homes from the claims of creditors. (Many are cases that would have been Chapter 13s before the law changed.) One of the confusing things about bankruptcy to the lay person is the dichotomy between fear of losing everything in bankruptcy (which doesn’t happen, by the way) and the stories everyone hears of someone who filed bankruptcy and got to keep everything (including cars, boat, vacation home). Without a reasonable homestead exemption, bankruptcy can operate to reward those who have, shall we say, spent unwisely. If you borrow all the equity from your home, you can keep the home, as long as you can make the payments. On the other hand, work diligently to pay off your home, suffer some setback like major medical expenses, and your home is at risk. The increased homestead exemption allows us to avoid that counter-intuitive result, and reward those who invest in their homes. So there, another good thing to come out of BAPCPA, however unintended the result.

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