Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
Nov. 25 — Incarceration doesn’t exempt a debtor from the requirement of completing a credit counseling and financial management course prior to filing bankruptcy ( Black v. Eggmann , 2016 BL 389433, S.D. Ill., No. 16-cv-0867-MJR, 11/22/16 ).
Judge Michael J. Reagan of the U.S. District Court for the Southern District of Illiniois Nov. 22 concluded that the bankruptcy court was correct in dismissing the debtor’s Chapter 7 bankruptcy case.
Following amendments to the Bankruptcy Code under the Bankruptcy Abuse Prevention and Consumer Protection Act, “any individual, under any chapter, and regardless of whether he or she has primarily consumer or business debts, is required to obtain credit and budget counseling during the 180-day period preceding the filing of his or her petition,” according to Bloomberg Law: Bankruptcy Treatise, pt. I, ch. 9 (D. Michael Lynn et al. eds., 2016).
The Code provides certain exceptions to the requirement, but incarceration isn’t one of them. Courts generally conclude that “disability” doesn’t include incarceration, according to Bloomberg Law: Bankruptcy Treatise.
The credit counseling requirement under Bankruptcy Code Section 109(h)(4) doesn’t apply to a debtor who the court determines is unable to complete the requirement because of “incapacity, disability, or active military duty in a military combat zone.”
The Code defines “disability” as the debtor being “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing.”
Debtor George James Black is an inmate in the Bureau of Prisons at FCI Greenville. He filed for Chapter 7 bankruptcy and asked the court for an exemption from the rule requiring him to complete credit counseling and a financial management course because he was unable to do so while incarcerated.
In a Chapter 7 bankruptcy, a debtor’s nonexempt assets are liquidated by a trustee and the proceeds are distributed to creditors.
The bankruptcy court denied the exemption, but gave him an extension to complete the requirements. When the debtor failed to supply the required proof of completion, the court dismissed his case.
The debtor argued that his incarceration was a “disability” and that the bankruptcy court requirements are “in essence denying him access to the courts due to his status of incarceration.”
The bankruptcy court’s application of the credit counseling requirement wasn’t clearly erroneous, the court said. “The statute provides certain clearly delineated exceptions to the requirement, and incarceration is not one of them,” the court said.
The debtor could have reached out to the bankruptcy court judge regarding the oath issue or the need for further continuances, but he didn’t do so, the court said. Because the debtor didn’t communicate with the court about the problems he was facing, there was no denial of access to the courts, the court said.
Debtor/appellant George James Black, Greenville, Ill., represented himself pro se.
U.S. Bankruptcy Court, East St. Louis, Ill., represented interested party Bankruptcy Clerk.
Chapter 7 trustee Robert E. Eggmann, III, Desai Eggmann Mason LLC, Clayton, Mo., represented himself.
To contact the reporter on this story: Diane Davis in Washington, D.C. at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)