Don't Mess with Texas: Texas Bankruptcy Court Denies Request for Extension of Time to Provide Verification of Credit Counseling

The old phrase "Don't Mess with Texas" rings true in today's ruling from the Bankruptcy Court of the Southern District of Texas, In re Hubbard, (2005 WL 2847420) (Bankr. S.D. Tex., 11/2/05), where the Court denied a chapter 13 debtor's request to extend the time to provide verification of credit counseling.

This mandatory requirement that consumer debtors seek the advice (in all but emergency situations) of credit counseling firms in advance of their filing for bankruptcy is a slithering outgrowth of BAPCPA, and is embodied in new section 109(h) of the Bankruptcy Code. Being the first opinion on the matter, the Court said it "will interpret § 109(g) in accordance with traditional principles."

This case makes clear that lawyers and debtors should expect bankruptcy judges to hold a debtor's feet to the fire and require it to follow BAPCPA's rigid credit counseling guidelines. In sum, a tighter squeeze.

Here's what the Court said, uncensored:

There are no reported opinions dealing with § 109(h). Consequently, the Court will interpret § 109(g) in accordance with traditional principles. "The plain meaning of legislation should be conclusive, except in the 'rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.' " United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989).

The Court sees no ambiguity in the statute. Subparagraph (1) requires the debtor to receive credit counseling, subject to the exceptions in subparagraphs (2) and (3). Subparagraph (4) makes subparagraph (1) inapplicable to certain debtors (i.e., those suffering from incapacity, disability, or active military duty in a military combat zone).

There is no allegation that the debtor is incapacitated, disabled or in active military duty in a combat zone. Accordingly, subject to subparagraphs (2) and (3), the debtor must receive credit counseling.

The debtor alleges that she attempted to obtain credit counseling, but she was unable to get "signed up" with a counselor. The motion alleges that the credit counseling agencies were "swamped the week before and after the law change and unable to respond to inquiries." The debtor requests a 45 day extension.

For the following reasons, the motion is denied without prejudice.

Subpargraph (2) makes an exception from subparagraph (1) for debtors who reside in a district for which the United States trustee determines that the approved agencies are not reasonably able to provide the credit counseling services. There is no allegation that the Southern District of Texas has been so certified. Accordingly, the Court finds that subparagraph (2) does not excuse the debtor's compliance. 11 U.S.C. § 109(h)(2).

Subparagraph (3) provides for a temporary exemption from the application of subparagraph (1) if:

a. The debtor submits a certification to the Court regarding the exception; and

b. The certification describes exigent circumstances that merit a waiver of the credit counseling requirement; and

c. The certification states that the debtor requested credit counseling services from an approved agency, but was unable to obtain the services during the five-day period beginning on the date on which the debtor made the request; and

d. The certification is satisfactory to the Court.

11 U.S.C. § 109(h)(3)(A).

If the debtor meets the foregoing requirements, the debtor receives an exemption of not more than 30 days. 11 U.S.C. § 109(h)(3)(B). The 30 day exemption may be extended for an additional 15 days. 11 U.S.C. § 109(h)(3)(B).

The debtor has failed to meet the requirements of § 109(h)(3).

The debtor has not filed any certification with the Court. The debtor has filed an unverified motion. It contains no affidavit, declaration or other certification as to its accuracy. The plain language of § 109(h)(3) requires a certification. Without a certification, the motion is fatally defective. Normally, the certification should set forth the facts underlying any alleged exigent circumstances, the date(s) on which the debtor requested credit counseling, which agencies were contacted to render the services, why the debtor believes that the services could not be obtained before the filing, and when the services are reasonably likely to be obtained.

The language of § 109(h)(3) is conjunctive. Accordingly, the debtor must satisfy each of the elements set forth in that subparagraph. Feist Publ'n, Inc. v. Rural Tel. Servs. Co., Inc., 499 U.S. 340, 357 (1991). The debtor's motion does describe exigent circumstances that merit a waiver of the credit counseling requirement. If the motion were certified and if exigent circumstances were sufficient, the motion would be satisfactory. But, that is not the structure of the statute. The debtor must additionally demonstrate that the debtor requested credit counseling services, but was unable to obtain the services during the five day period beginning on the date on which the debtor made the request. The motion makes no such allegation. Because the statute requires that all of the requirements be satisfied, the debtor's motion must fail.

With respect to whether the certification is otherwise satisfactory to the Court, there is not presently any certification. If an amended motion is filed, the Court will consider the content of the certification to determine if it is satisfactory.

Finally, the debtor requests a 45 day extension. Under the plain meaning of the statute, an extension beyond 30 days requires a court to consider why a 30 day extension is insufficient to meet the exigent circumstances demonstrated by a debtor. The debtor's present motion does not suggest a basis by which the Court can determine whether 30 days would be sufficient. Moreover, if 30 days is not sufficient, the motion does not suggest a basis on which the Court can conclude that 45 days would solve the problem faced by the Debtor.

Because the debtor has failed to set forth a satisfactory basis for her requested extension, the motion is denied without prejudice.


Steve Jakubowski

© Steve Jakubowski 2005

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