On Second Thought... Texas Bankruptcy Court Reverses Its "Don't Mess With Texas" Stance Based on Lack of Proof of Availability of Credit Counseling

In a prior post, I wrote:

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 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.

Six days later, the Hubbard court changed its mind, sua sponte, advising that it was reconsidering its prior order. In re Hubbard, 2005 WL 3061939 (Bankr. S.D. Tex., 11/08/05). Notably, however, Judge Isgur did not change his mind about the "plain meaning" of the statute, saying he "sees no ambiguity in the statute." He also didn't change his view that
"[t]he applications filed by the debtors do not constitute certifications under the law, stating that "[u]ntil certifications are filed, the Court will not consider whether the factual allegations made in the applications satisfy the requirements of § 109(h)(3)."

Instead, the court focused on the availability of credit counseling in the Houston area, and the debtor's allegation that credit counseling was not available. Seizing this hook, the Court found grounds for dispensing justice to the poor debtor caught in BAPCPA's imperfect transitional world. The Court stated:

In this case, the substance of the debtors' allegations is that credit counseling is not available in the Southern District of Texas. Those allegations more appropriately state a case for relief under § 109(h)(2) rather than under § 109(h)(3). Section 109(h)(2) provides that the credit counseling requirement does not apply to a debtor who resides in a district for which the United States trustee determines that approved agencies "are not reasonably able to provide adequate services to the additional individuals who would otherwise seek credit counseling from such agencies by reason of the requirements of paragraph (1)." Taken as a whole, the debtors allege that credit counseling is not available in this district. If credit counseling is not available, then the United States trustee is required by § 109(h)(2) to make that determination and its concomitant certification.


The Court recognizes that the statute is new and that there is a transition period during which things might not go smoothly. Section 109(h)(2) allows the United States trustee to review a determination with respect to the availability of credit counseling, and requires that such a review occur not less than one time a year.

The Court further recognizes that credit counseling may be available in this District and that these debtors may be mistaken. It is also possible that the United States trustee's initial process of determining whether credit counseling is available may have produced inaccurate results. It is imperative that the Court determine the accurate facts.

Accordingly, the United States trustee shall appear and describe the procedures that have been undertaken by the United States trustee with respect to the United States trustee's certification obligations under the statute.

In one final irony to this apparent happy ending, the Court ordered the US Trustee to defend itself and to "appear and describe the procedures that have been undertaken by the United States trustee with respect to the United States trustee's certification obligations under the statute."

The Court granted the debtor's leave to "file an amended motion that complies with the requirements set forth in this order," stating that "[a]ny amendment must include an appropriate certification and must detail the efforts undertaken by the debtor to receive credit counseling."

In the end, the "Don't Mess with Texas" attitude remains sound law. It's just been extended now to cover the US Trustee's offices too, who will be called to the mat to provide Courts with certifications of their performance of their obligations under BAPCPA regarding credit counseling.

© Steve Jakubowski 2005

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