"A Year After BAPCPA": The Slugfest Continues
On December 6, the Subcommittee on Administrative Oversight and the Courts of the Senate Judiciary Committee held a hearing styled as an "Oversight of the Implementation of the Bankruptcy Abuse Prevent and Consumer Protection Act." Witnesses included Clifford J. White III (acting director, Executive Office of U.S. Trustees), the Honorable Randall Newsome (U.S. Bankruptcy Court for the Northern District of California), Professor Todd Zywicki (George Mason Law School), Steve Bartlett (Financial Services Roundtable), David Jones (Ass'n of Independent Consumer Credit Counseling Agencies), Professor Bob Lawless (U of I College of Law), and Henry Hillebrand, III (chapter 13 standing trustee in Nashville, Tennessee). [Witness links are to their prepared written statements.]
When it comes to BAPCPA, it's fair to say that "beauty is in the eye of the beholder," as this very old saying goes. Still, I suppose we should be thankful our legislative rules of order don't comport with those of the Taiwanese, or who knows what the hearing would have degenerated into.
Professor Lawless, no friend of BAPCPA, summarizes the day's events here (U of I Faculty Blog) and here (Credit Slips Blog). Professor Lawless took Senator Grassley to task for these opening remarks, as well as for openly questioning whether it's unethical for a judge to criticize BAPCPA. In this regard, it is worth looking at Canon 4 of the Code of Conduct for US Judges, which generally is read to allow judicial commentary on inept laws. As Professor Steven Lubet (author of Lawyers' Poker: 52 Lessons That Lawyers Can Learn From Card Players and the classic textbook Modern Trial Advocacy) wrote 22 years ago in a monograph published by the American Judicature Society entitled Beyond Reproach: Ethical Restrictions on the Extrajudicial Activities of State and Federal Judges (p.40):**
In the same manner that judges' charitable and civic activities must not detract from their impartiality, so must their personal lives be free from the suggestion that their judging will be tainted by bias. This is not to say that judges need refrain from forming and expressing opinions. There is no reason to insulate judges from normal human discourse, and there surely is no way to prevent intelligent human beings from developing what Justice Rehnquist calls "an inclination of temperament or outlook." Furthermore, in most cases where a judge's life actually has evidenced a "tendency or inclination to treat a particular litigant more or less generously than a different litigant raising the identical legal issue" [again quoting Justice Rehnquist], the appropriate remedy is recusal, not prohibition of the conduct which gives rise to the favoritism. It is natural to expect a judge to be "biased" in favor of his or her children; this bias is resolved by disqualifying the judge from sitting in cases involving the children, not by forbidding procreation.
The most disparaging remarks concerning the oversight hearing came from the National Association of Consumer Bankruptcy Attorneys (NACBA), which pulled no punches in this press release, calling the hearing the Republicans' "last gasp at one more unbalanced hearing ... before Democrats assume control." [NB: Though, as Judge Monroe reminds us here, the vast majority of Democrats weren't exactly hostile to the new law either.] NACBA President Henry Sommer summed up NACBA's views of the matter by labeling the "Republican witness line-up" as "the financial world equivalent of the Flat Earth Society" who "have been charged with slapping some lipstick on the pig." Now them's fightin' words!
Overall, however, by far the greatest contribution to the day's proceedings was, naturally, the least publicized: that being, the American Bankruptcy Institute's submission of the entire 247 page transcript of its October 16 star-studded event at Georgetown University Law Center entitled "A Year After BAPCPA." Thanks to Sam Gerdano and the ABI for making this transcript available to us all! It is outstanding reading! At the end of the day, however, the conclusions reached by event's moderator, Judge Dennis R. Dow, Bankruptcy Judge for the Western District of Missouri, surely challenge Senator Grassley's declaration that "[e]arly reports indicate that the law is working well." As Judge Dow said in closing the meeting, "the one thing we can all agree on is that we want this process to work." Yet, as his final remarks reveal, the manifest conclusion thus far is that the law is not working quite as well as Senator Grassley would have us believe. Judge Dow said:
I think it is fair to say that there are strong views held with respect to the need for an[d] impact of this legislation and the way that it is being interpreted and applied. Some things are clear; many are not. Some trends are emerging. We know that filings are down and the composition of filings have changed, but recent information indicates that they are trending back up and the long term effect is probably unclear. Empirical studies will probably have to be done in the future to determine whether the law is effective in screening out abusive cases, whether it has provided barriers to relief for needy debtors, whether it has enhanced recoveries for creditors, and whether credit counseling the requirement is efficacious and available to debtors. The court[s] – [th]is probably was predictable – ha[ve] struggled with certain provisions of the law, and looking at the same words and the same legislative history and applying the same principles, have reached different conclusions on key issues, and appellate courts are probably going to have to weigh in for us to know the answers to some of these questions.
**Special thanks to my fellow suitemate and often co-counsel Robert P. Cummins of Cummins & Cronin for a copy of Steven Lubet's 1984 monograph on extrajudicial activities and for his quick tutorial on Canon 4 of the Code of Conduct for Federal Judges.
© Steve Jakubowski 2006
You can't address the issue of whether BAPCPA is working "as intended" without defining what was the intended result of the amendments. And the result differs between the two groups involved: (A) the credit card industry and Congress which desired to reduce the number of filings and the amount of debt discharged (who appear to have won in the short term), or (B) the consumers who need relief (who appear to have lost for the time being).
But, economic trends dictate the number of bankruptcy filings and the long term (one year?) will seek much more adverse economic trends forcing more businesses and consumers to file for bankruptcy relief, even with the limitations of BAPCPA.
Finally, the more things change, the more they stay the same. Decisions of the Bankruptcy Courts will diminish the effect of BAPCPA, removing its harshness. Appellate decisions will need to struggle with the "plan meaning" of the contradictory and ambiguous wording of BAPCPA in order to reverse the decisions of the lower courts - a difficult task to be sure.
One year into the 2005 Code I have found the means test to be no big deal for the most part. Most of my clients are under the state median income anyway. The credit counseling and financial management mandates are burdensome for my clients and of doubtful value given that according to NACBA, less than 3% of debtors are candidates for debt repayment and most debtors are forced into bankruptcy due to illness, job loss or divorce, calling into question the view that a financial mgt class will fix their (non-existent) over-spending.
The household income requirement keeps needy debtors from a fresh start. I have had several clients who have moved back in with parents and pay rent, but their parental income precludes a Chapter 7. The median income tables are not suited to this common scenario.
The general feeling among the debtors bar seems to be that many years of Congressional campaign contributions by the banking industry have brought us a revised code that harms rather than protects needy consumers.
West Des Moines, Iowa
Good stuff. I have a bankruptcy recovery site that you should check out.