Reconceptualizing Bankruptcy Education Requirements for Incarcerated Debtors

• Publication year: 2023
• Citation: Vol. 39 No. 2

Reconceptualizing Bankruptcy Education Requirements for Incarcerated Debtors

Sydney Calas

RECONCEPTUALIZING BANKRUPTCY EDUCATION REQUIREMENTS FOR INCARCERATED DEBTORS Abstract

In the eighteen years since Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), bankruptcy scholars and professionals have launched countless critiques against two of the Act's more drastic amendments: (1) mandatory pre-filing credit counseling and (2) a mandatory post-filing financial management course. Without completing the pre-filing requirement, one cannot qualify as a debtor under the Code and is thus barred from filing for bankruptcy. Without completing the post-filing requirement, one cannot receive a discharge. Notwithstanding the volume and breadth of valid criticisms, the specific harm of BAPCPA's education requirements has been largely ignored for one population: incarcerated debtors. People in prison have debt; they enter prison with debt, they incur debt while in prison, and they leave prison with debt, along with a whole slew of financial hurdles to overcome.

As they currently stand, BAPCPA's education requirements present an additional, empty hurdle that incarcerated debtors must overcome. A hurdle, because incarcerated persons face liberty constraints that make it exceptionally difficult to obtain the required courses. Empty, because the one-size-fits-all courses are ineffective as educational programs. Bankruptcy education is not a hopeless endeavor, but the system is in need of an overhaul.

This Comment proposes a two-pronged solution. First, the education courses should be made more accessible through implementation of in-prison programming. Second, the requirements for program approval should be altered to incorporate the educational theory of differentiation and impose specific guidelines to address the unique needs of incarcerated debtors.

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Table of Contents

Introduction..........................................................................................330

I. Background ................................................................................ 335

A. Statutory Framework.............................................................. 335

1. The Pre-Filing Credit Counseling Requirement................. 335
2. The Post-Petition Financial Management Course Requirement...................................................................... 338
3. The Standards for Approving Budget and Credit Counseling Agencies and Financial Management Instructional Courses ....................340

B. Legislative History.................................................................. 342

1. Divergence from Congressional Purpose .......................... 344
2. (In)Effectiveness of the Education Requirements ............... 345
3. Specific Harm to Incarcerated Debtors ............................. 348

a. Accessibility Considerations ....................................... 349
b. Demographic Considerations ..................................... 355

II. Proposal ...................................................................................... 358

A. Previous Proposals ................................................................. 359
B. A Solution in Two Parts .......................................................... 361

1. Increase Accessibility........................................................ 361
2. Increase Efficacy .............................................................. 363

C. Method of Implementation ...................................................... 366

Conclusion.............................................................................................370

Introduction

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA").¹ BAPCPA contained significant amendments to the Bankruptcy Code,² and constituted the most drastic alterations to individual consumer bankruptcy procedure since the passage of the 1978 Bankruptcy Code.³ Among the changes were two new requirements for prospective debtors: the completion of (1) pre-filing credit counseling and (2) a post-petition financial management course.⁴ First, the Code mandates that any individual debtor seeking to file for bankruptcy obtain budget and credit counseling from an

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approved nonprofit credit counseling agency within the 180-day period preceding a bankruptcy filing.⁵ Subject to narrow exceptions,⁶ an individual who does not meet the credit counseling requirement may not be a debtor,⁷ and is thus barred from filing.⁸ Second, the Code provides that the court shall not grant a discharge to bankruptcy debtors who fail to complete an instructional course concerning personal financial management after filing a petition under chapter 7 or chapter 13.⁹ Therefore, even individuals who are able to meet the pre-filing requirements will not achieve the fundamental goal of consumer bankruptcy—the discharge—unless, subject to narrow exceptions,¹⁰ they complete an approved post-filing financial management course.

BAPCPA was intended "to improve bankruptcy law and practice by restoring personal responsibility and integrity in the bankruptcy system and ensure that the system is fair for both debtors and creditors."¹¹ The education requirements were intended to help individual debtors "make an informed choice about bankruptcy, its alternatives, and consequences" by obtaining pre-filing counseling and "avoid future financial distress" by participating in post-filing financial management courses.¹² Despite such hopeful intentions, bankruptcy scholars, practitioners, and judges alike agree the education requirements present more of a burden than a benefit to bankruptcy filers.¹³

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Notwithstanding the volume and breadth of valid criticisms of BAPCPA's education requirements, the specific harm of these education requirements has been largely ignored for one population: incarcerated debtors. The Code does not exclude incarcerated individuals from filing for bankruptcy, and there is no evidence that Congress intended any such exclusion.¹⁴ Indeed, both before and since BAPCPA's enactment, incarcerated debtors have accessed the bankruptcy system.¹⁵ The vast majority of incarcerated debtors are likely to file under chapter 7, largely due to a lack of the regular income required for chapter 13 bankruptcy.¹⁶ This is especially true considering the disproportionate representation of low-income persons within the incarcerated population.¹⁷ And though it may be argued that relatively few incarcerated debtors file for bankruptcy each year,¹⁸ absence of evidence does not imply evidence of absence. People in prison have debt; they enter prison with debt, they incur debt while in prison, and they leave prison with debt.¹⁹ Bankruptcy provides a vehicle for individuals to secure a discharge of their debts, enabling the "fresh start" so

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essential to the bankruptcy system's central purpose.²⁰ Logically, then, one would expect many bankruptcy filings from incarcerated persons in debt. But issues of access—including the barriers presented by the education requirements—may help explain why more incarcerated persons are not filing for bankruptcy.

Though the Code does not explicitly bar incarcerated individuals from filing, it presents heightened barriers to their participation in the bankruptcy process. Fulfilling the copious requirements imposed by the code the Code presents increased difficulties for the incarcerated debtor, whose personal autonomy is vastly limited by his incarcerated status.²¹ The education requirements are no exception. From the confines of prison, the incarcerated debtor can only complete credit counseling and financial management courses over the telephone or internet.²² Prison policies across jurisdictions severely limit prisoners' telephone and internet usage.²³ Even where prisoners are permitted to use telephones and the internet, such usage can be prohibitively costly.²⁴ Despite perfunctory attempts by the Code's drafters to increase accessibility for debtors in general—by making credit counseling and financial management courses available via telephone and internet²⁵ and by requiring that services be provided

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regardless of ability to pay²⁶ —there is zero sensitivity in the statutory framework to prisoners in need of bankruptcy relief.²⁷

This Comment asserts that, as applied to the incarcerated debtor population, the education requirements set forth in BAPCPA are ineffective and thus create hollow barriers to entry into the bankruptcy system, such that the existing framework governing these requirements should be realigned to better achieve BAPCPA's purported goals. Accordingly, this Comment proposes a two-fold path towards realignment: the U.S. Trustee Program, the federal agency tasked with enforcement powers in the bankruptcy system,²⁸ should leverage its broad, delegated authority to both (1) require education programs be made accessible to incarcerated debtors through the implementation of in-prison programming and (2) overhaul the current requirements for program approval to reflect current educational pedagogy and impose specific guidelines to address the needs of incarcerated debtors. Through these changes, the overall efficacy of the education programs for incarcerated debtors could be improved and BAPCPA's educational requirements could be realigned to better achieve the Act's original aims.

This Comment does not assert that debtor education is an unworthy objective, not for the debtor population at large and not for the incarcerated debtor population. Rather, this Comment asserts that, in the eighteen years since BAPCPA was passed, the education requirements have not achieved their objective, and thus must be reoriented towards this compelling goal.

First, this Comment explores the relevant portions of the Code governing the education requirements. Then, it reviews the legislative history of...