Section 7.2 Prebankruptcy Counseling, Debtor’s Responsibilities, and Counsel’s Responsibilities

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

A. (§7.2) Prebankruptcy Counseling, Debtor’s Responsibilities, and Counsel’s Responsibilities

Prebankruptcy credit counseling is now required under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23. See 11 U.S.C. § 109(h)(1). Essentially, this new requirement provides that no individual may be a debtor under any bankruptcy chapter unless that person has successfully completed a credit counseling course within the 180-day period before the date of the bankruptcy filing. The course must be through an approved nonprofit budget and credit counseling agency. Section 109(h) specifically provides that the briefing may be by telephone or over the internet. There are numerous agencies approved to provide this service; a full list may be found at:

www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm

Because BAPCPA mandates credit counseling for individuals, a corporation or partnership is not required to complete such a course. But it is important to note that credit counseling is required even for individual business bankruptcies under Chapter 11. For example,
In re Hedquist, 342 B.R. 295 (B.A.P. 8^th Cir. 2006), states that credit counseling is a requirement and that the court has no discretion other than to dismiss the case filed by a Chapter 11 debtor absent exigent circumstances found in § 109(h).

The credit counseling course may be waived if:

· there are not sufficient services within the district;

· the debtor submits a certification together with the petition describing exigent circumstances that merit a waiver; or

· the court determines that the debtor is unable to complete the requirement because of incapacity, disability, or active military service in a combat zone.

Section 109(h). Even if the application for waiver is successful, the course still must be completed within 30 days after the petition date. In re Gee, 332 B.R. 602 (Bankr. W.D. Mo. 2005).

The few reported cases on the issue have unanimously held that a waiver of the credit counseling requirement is subject to very difficult requirements. The quick file or emergency filing to stop a foreclosure or garnishment is not sufficient to qualify as exigent circumstances to waive the credit counseling requirement. See In re Dixon, 338 B.R. 383 (B.A.P. 8^th Cir. 2006); In re Talib, 335 B.R. 417 (Bankr. W.D. Mo. 2005). Additionally, if the court waives the credit counseling requirement before bankruptcy on the basis of exigent circumstances, §§ 109 and...