Incarcerated Ch. 7 Debtor Not Exempt From Credit Counseling

Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...

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

To contact the editor responsible for this story: Jay Horowitz at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Bankruptcy Law News on Bloomberg Law