A Pittsburgh Bankruptcy Lawyer Considers Whether a New President Might Stir Changes in Bankruptcy Law
When Donald Trump takes the oath of office, he will not be the first executive to have resorted to our nation’s bankruptcy law. Some of our most venerable Presidents have been debtors in bankruptcy cases including Thomas Jefferson, James Monroe and Abraham Lincoln. However, the shape of bankruptcy law has changed dramatically since the days of Lincoln. In fact, the United States Bankruptcy Code underwent a very dramatic overhaul in 2005 with its modification through the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).
BAPCPA set in place certain restrictions for consumer debtors seeking a fresh start. Such debtors are required to undergo a course in credit counseling prior to filing a voluntary bankruptcy petition. The course must be administered by an approved agency and may vary in cost from approximately $15 to $25. The credit counseling course can generally be completed in-person or by telephone but many people find it most convenient to complete the course online. Once the course is completed, the approved counseling provider will generate a certificate of completion which it will direct to the bankruptcy lawyer for filing on the first day of the bankruptcy case. In certain rare instances, debtors may file their bankruptcy case without completing the course and then submit a certificate of exigent circumstances which could excuse tardy compliance with the pre-petition credit counseling rule.
BAPCPA also brought with it a means test that sometimes creates a rebuttable presumption of abuse when debtors in cases under chapter 7 have monthly income in excess of relevant median income for their state. Often in those cases, the Office of the United States Trustee will issue an inquiry letter upon such debtors or their counsel requesting support for the determination that a particular chapter 7 filing is not abusive.
As a matter of policy, the present design of the Bankruptcy Code encourages filing cases under chapter 13 rather than chapter 7. Through chapter 13 bankruptcy cases, debtors may pay some or all of their debts over a period of three to five years. A chapter 13 “reorganization” bankruptcy has some special attributes and it may often present a more favorable outcome for people in certain financial positions. For instance, chapter 13 may offer the best hope for a person attempting to save their home from foreclosure.
The Bankruptcy Code also places strict restrictions upon debtors’ eligibility to for a discharge for a period of time after having received a bankruptcy discharge in a prior case. The law also severely limits the applicability of a bankruptcy discharge to student loan obligations and to many kinds of tax claims. If the political appetite to expand debtors’ rights existed, even very modest adjustments to the Bankruptcy Code could result in substantial relief for many consumers.
Whether the President Elect’s bankruptcy experience will affect the development of our nation’s bankruptcy laws is not clear. A less polarized Congress could be better positioned to pass new legislation. Moreover, filing the many judicial vacancies of the United States Courts will affect how the law is interpreted—not least when at least one of those appointments will be to the United States Supreme Court. For the time being, Pittsburgh bankruptcy lawyers will anxiously monitor the development of bankruptcy law.