August 18, 2008
10th Circuit BAP Rules on Issue of Credit Counseling - Can the Counseling be Done Too Late - Before the Filing?
In re Francisco, --- B.R. ---, 2008 WL 2600714 (10th Cir BAP, July, 2008)
Issue: Must the required credit counseling be completed no later than the day before the bankruptcy case is filed?
The debtor completed the credit counseling the morning of the day she filed her chapter 13 petition. The judge set an OSC re why the case should not be dismissed. Section 109(h)(1) states: an individual may not be a debtor unless “such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received [counseling].” The judge dismissed the case.
The BAP reversed. “[T]he filing of the petition is treated throughout the Bankruptcy Code as a ‘bright line’ that defines the estate and alters the rights and responsibilities of the debtor and its creditors.” “[T]he focus of our inquiry is not whether Debtor's credit counseling was obtained within the 180-day period, but rather, whether it was obtained by the statutorily imposed deadline. Given that nothing in the legislative history supports an interpretation of that deadline as including a waiting period prior to filing of the petition, as well as the difficulty of enforcing such a waiting period under the current statutory language, we conclude that a debtor qualifies as a debtor under Section 109 so long as he or she completes the required credit counseling at any time between 180 days before, and the moment of, filing the petition.”
The BAP acknowledged that Congress could have said (and did not) that the counseling could be done anytime before the filing. It also said that FRBP 9006 which says you don’t include the date of the event when you are counting backwards gives support to the argument that the counsel must be done the day before filing. In the end it took the pragmatic view obviously.
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Yes, sometimes counseling can be done too late before the filling.While the BAP '05 is still in its infancy and the effects of the above changes are not yet known, it appears that fewer debtors will be able to avail themselves of protection under the bankruptcy system. The BAP '05 changes could lead to an increased incidence of recognition of debt modification income.
Posted by: madona | Aug 21, 2008 11:59:39 PM