Cite as: Keith M. Lundin, Lundin On Chapter 13, § 20.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
The prepetition briefing requirement in § 109(h)(1)1 is subject to two permanent waivers2 and one temporary exemption.3 An individual is eligible for Chapter 13 without a prefiling briefing in any district in which the U.S. trustee (or the bankruptcy administrator) determines that the approved nonprofit budget and credit counseling agencies (NBCCAs) “are not reasonably able to provide adequate services.”4 The prepetition briefing requirement in § 109(h)(1) does not apply if the court determines that the debtor is unable to complete a briefing “because of incapacity, disability, or active military duty in a military combat zone.”5 These two waivers of the prepetition briefing requirement are permanent: if either condition is present, the debtor is never subject to the prepetition briefing requirement during the Chapter 13 case.
The temporary exemption in § 109(h)(3) is different because it does not excuse the debtor from the briefing requirement; it just permits the debtor to obtain the briefing after the petition if the debtor satisfies the conditions in § 109(h)(3):
(3)(A) Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to the court a certification that—
(i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1);
(ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 7-day6 period beginning on the date on which the debtor made that request; and
(iii) is satisfactory to the court.7
If the conditions in § 109(h)(3)(A) are satisfied, § 109(h)(3)(B) grants the debtor 30 days after the petition in which to receive a § 109(h)(1) briefing. For cause, the court can extend the 30-day exemption period an additional 15 days.
There are five8 conditions buried in the portion of § 109(h)(3) quoted above:
1. Debtor must submit a “certification.” There is controversy with respect to almost every aspect of form and procedure for this “certification.” The courts have been unable to agree whether a motion for extension of time can be a certification, or whether some other form is required.9 Can the certification be signed by an attorney or only by the debtor?10 What notice is required that the debtor is seeking a temporary exemption from the briefing requirement?11
2. Certification must describe “exigent circumstances.” “Exigent circumstances” is an undefined term. Reported decisions do not agree whether the focus of exigent circumstances is on barriers to briefing or on financial circumstances of the debtor.12 Decisions are fractured whether an impending foreclosure or repossession constitutes an exigent circumstance.13
3. Exigent circumstances must merit a waiver. Not all exigent circumstances support temporary exemption from the briefing requirement. The statute provides no guidance as to which exigent circumstances have legs. Reported decisions find this lack of guidance invites the exercise of discretion by bankruptcy courts.14
4. Debtor must have requested “credit counseling services” from an approved NBCCA but been unable to obtain services during the seven-day period beginning with the request. The statute asymmetrically requires at least one prepetition request for “credit counseling services.” A certification without mention of a prepetition request is dead on arrival.15 There is disagreement whether the seven days stated in the statute are a waiting period between the request and the petition.16
5. Certification must be “satisfactory to the court.” Certification of exigent circumstances that merit a waiver, coupled with a prepetition request and seven-day unavailability of services, can nonetheless fail to qualify the debtor for temporary exemption if the certification is not satisfactory to the court. No one knows what this condition means, until they see it.17
1 See § 18.1 In General.
3 See below in this section, and see § 20.2 Timing, Procedure and Form for Certification of Exigent Circumstances, § 20.3 Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?, § 20.4 Prepetition Request and § 20.5 Briefing after Temporary Exemption.
4 11 U.S.C. § 109(h)(2)(A), discussed in § 21.3 11 U.S.C. § 109(h)(2): Inadequate NBCCA Services.
5 11 U.S.C. § 109(h)(4), discussed in § 21.4 11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.
6 Between October 17, 2005, and December 1, 2009, the seven-day period in 11 U.S.C. § 109(h)(3)(A)(ii) was five days. See Statutory Time-Periods Technical Amendments Act of 2009, Pub. L. No. 111-16, 123 Stat. 1607 (May 7, 2009).
7 11 U.S.C. § 109(h)(3)(A).
8 Some courts have said there are three conditions in § 109(h)(3). See, e.g., Dixon v. LaBarge (In re Dixon), 338 B.R. 383, 385 (B.A.P. 8th Cir. Feb. 17, 2006) (Kressel, Federman, Mahoney) (Section 109(h)(3)(A) contains three statutory requirements for the 30-day exception to the prepetition briefing requirement.).
15 See § 20.2 Timing, Procedure and Form for Certification of Exigent Circumstances and § 20.4 Prepetition Request. See, e.g., Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston), rev’g on other grounds sub nom. Adams v. Finlay, No. 06-06040, 2006 WL 3240522, at *2–*3 (S.D.N.Y. Nov. 3, 2006) (unpublished) (Brieant) (“Congress has, by its terms, so constructed § 109[(h)] that it is impossible to relieve non-compliance even in the most compelling situation, where no credit counseling has been obtained or certified to have been timely sought and not obtained within five days of a request for same. This is so even where credit counseling would be an empty charade, for example, where sudden illness, loss of employment, divorce, incarceration of the breadwinner or any number of causes not related to fiscal irresponsibility, compel a person to seek refuge in the bankruptcy court. The draconian consequences of a dismissal could include a resultant limited applicability of the fundamental protection of the automatic stay under § 362(c), in subsequent filings, merely for an initial failure to comply properly with the credit counseling requirement. This Court is loath[ ] to believe that those drafting this ‘reform’ legislation, in this nation whose westward expansion was largely facilitated by those fleeing debtor’s prison, intended such a consequence.”), aff’g sub nom. In re Elmendorf, 345 B.R. 486 (Bankr. S.D.N.Y. July 18, 2006) (Morris).); In re Bartlett, No. 07-63647-fra13, 2008 WL 337380 (Bankr. D. Or. Feb. 5, 2008) (unpublished) (Alley) (There are no “equitable” exceptions to strict compliance with § 109(h)(3); briefing 185 days before petition is not in compliance with § 109(h) and cannot be remedied by a briefing after the petition when debtors do not allege a timely prepetition effort to obtain a briefing and offer no other exigent circumstance.).
16 See § 20.4 Prepetition Request.
17 See § 20.3 Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?. See, e.g., Dixon v. LaBarge (In re Dixon), 338 B.R. 383, 385 (B.A.P. 8th Cir. Feb. 17, 2006) (Kressel, Federman, Mahoney) (That exigent circumstances must be “satisfactory to the court”—means that “Congress wanted the court to exercise its discretion in making the determinations[.]”).