§ 20.5     Briefing after Temporary Exemption
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 20.5, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Chapter 13 debtors who do not receive the prepetition briefing in § 109(h)(1)1 and who are not eligible for permanent waiver of the prepetition briefing requirement under § 109(h)(2)2 or § 109(h)(4)3 must submit the certification in support of temporary exemption from the prepetition briefing requirement in § 109(h)(3).4 If the certification satisfies the conditions in § 109(h)(3)(A),5 the debtor is temporarily exempt from the prepetition briefing requirement, but not out of the woods: The debtor must either receive a timely briefing after the petition or establish entitlement to a permanent waiver of the prepetition briefing requirement.

[2]

The temporary exemption from the prepetition briefing requirement in § 109(h)(3)(A)6 is time-limited by § 109(h)(3)(B):

With respect to a debtor, an exemption under subparagraph (A) shall cease to apply to that debtor on the date on which the debtor meets the requirements of paragraph (1), but in no case may the exemption apply to that debtor after the date that is 30 days after the debtor files a petition, except that the court, for cause, may order an additional 15 days.7
[3]

It is easier to guess what § 109(h)(3)(B) is trying to do than it is to make sense of the words. It looks like this subsection was intended to limit the temporary exemption in § 109(h)(3)(A) to a maximum of 45 days after the petition. In other words, the eligibility requirement in § 109(h)(1)–that the debtor receive a prepetition briefing–has a temporary exemption in § 109(h)(3)(A) that expires 30 days after the petition (45 days if extended for cause) unless the debtor “meets” the briefing requirement in § 109(h)(1). If only the words in § 109(h)(3)(B) just said so.

[4]

What does it mean that the temporary exemption from the prepetition briefing requirement “shall cease to apply” when the debtor “meets the requirements of paragraph (1)”? “Paragraph (1)” is § 109(h)(1)–the subsection that contains the prepetition briefing requirement. If the debtor receives a temporary exemption under § 109(h)(3)(A) and files the petition without a briefing under § 109(h)(1)–exactly what § 109(h)(3)(A) contemplates–the debtor will never be able to “meet the requirements of paragraph (1)” because one of those requirements is a briefing “during the 180-day period preceding the date of filing the petition.”8 Of course, the prepetition briefing requirement in § 109(h)(1) is “subject to paragraph[ ] . . . (3),” but it’s not helpful to know that the prepetition briefing requirement is subject to the temporary exemption in § 109(h)(3) when the temporary exemption ceases to apply when the prepetition briefing requirement is satisfied.

[5]

To make sense of subparagraphs (A) and (B) of § 109(h)(3), it has to be true that a debtor with a temporary exemption under subparagraph (A) can receive a briefing from an approved nonprofit budget and credit counseling agency (NBCCA) after filing the petition and be eligible under § 109(h)(1). Courts will just have to say so because § 109(h)(3)(B) doesn’t.

[6]

This still leaves the question, what does the first part of § 109(h)(3)(B) mean? Does it really just say that the temporary exemption from the prepetition briefing requirement applies until the debtor receives a briefing after the petition? In other words, the temporary exemption applies until the debtor doesn’t need it anymore? Optimistically, it is just that silly. More hopefully, no one will interpret § 109(h)(3)(B) to require a prepetition briefing when the debtor has already filed the petition.

[7]

The rest of § 109(h)(3)(B) is only a little more straightforward. The temporary exemption from the prepetition briefing requirement stops applying “after the date that is 30 days after the debtor files a petition.” If the petition is filed on July 1, 30 days after the date of the petition would be July 31. “After” that date would be on or after August 1–the 31st calendar day after the filing date of the petition.

[8]

If the “exemption” ceases to apply, it follows that the prepetition briefing requirement in § 109(h) applies and the debtor would not be eligible for Chapter 13 unless another exception to the prepetition briefing requirement is available.9 If the temporary exemption expires, the consequences of ineligibility probably intrude on the Chapter 13 case.10

[9]

But the 30-day exemption from the prepetition briefing requirement is itself subject to an exception: “ . . . except that the court, for cause, may order an additional 15 days.”11 As mentioned above, a rational Congress may have intended the 15-day “exception” to follow the 30-day exemption, but the Congress we had left the additional 15 days dangling at the end of § 109(h)(3)(B) in a way that could be read differently. The statute does not convincingly demand that the additional 15 days begin on day 31 after the petition. The additional 15 days could be ordered by the court for cause after expiration of the 30-day exemption without offending the words in § 109(h)(3)(B). Notice also that nothing in the statute requires a request for the additional 15 days before expiration of the initial 30-day exemption from the prepetition briefing requirement. Congress knew how to require an extension request before expiration of an additional time period12 but didn’t use those words in § 109(h)(3)(B).

[10]

These thoughts lead to the odd possibility that the temporary 30-day exemption from the prepetition briefing requirement in § 109(h)(3)(B) is hardly “temporary.” If the 15 additional days of exemption are available “for cause” at any time, a worthy debtor could ask for the 15 additional days, months or years after the initial 30-day exemption expired.

[11]

Bankruptcy Rule 1007(b)(3) states that a “certification under § 109(h)(3)” must be filed by any individual debtor seeking a temporary exemption from the prepetition briefing requirement, and Rule 1007(c) says that certification “shall be filed with the petition.” Part 5 of Official Form 101, the petition, contains a check box for asserting entitlement to the 30-day temporary exemption from the prepetition briefing requirement.13 But no Bankruptcy Rule or form directly addresses the form or timing of a request that the bankruptcy court grant the additional 15 days in § 109(h)(3)(B). A debtor in need of the additional 15 days should immediately file a motion–preferably before the end of the initial 30-day temporary exemption period.

[12]

“For cause” conveys that bankruptcy courts have discretion whether to allow additional time for the debtor to meet the requirements of § 109(h)(1). The for-cause condition on further extension of the temporary exemption also suggests that someone must file a request. Best guess is that this request should be by motion with notice to the U.S. trustee, to the Chapter 13 trustee and to any “other party as the court may direct,” consistent with Bankruptcy Rule 1007(c).

[13]

With any luck you won’t have to test whether a motion for additional time under § 109(h)(3)(B) can be granted after expiration of the initial 30-day temporary exemption. The statute does not preclude a motion for extension after expiration of the initial 30-day period.14 Bankruptcy Rule 1007 is silent on the issue. Strangely, Exhibit D to the October 2006 version of the petition, (then) Official Form 1, boldly instructed that “[a] motion for extension must be filed within the 30-day period.”15 This instruction on the superseded version of the petition form was not supported by the words in the statute and was eliminated by the Advisory Committee on Bankruptcy Rules in the current version of the petition, Official Form 101. Even under the prior version of the form, it could be argued that Bankruptcy Rule 9006(b) would allow a motion for the additional 15-day exemption under § 109(h)(3)(B) filed after expiration of the original 30-day period with the additional burden that the debtor prove “excusable neglect.”16

[14]

What do you suppose “cause” means in this context? Remember, it took “exigent circumstances” that merited a waiver,17 a prepetition request,18 inability to obtain a briefing for seven days19 and a certification that was “satisfactory” to the court20 to get the 30-day temporary exemption; what cause suffices for an additional 15 days? Candidates for cause include illness, military service short of active duty in a combat zone21 or perhaps a flat tire on the way to the briefing on day 29. In In re Hubbard,22 the bankruptcy court denied a motion for extension of the 30-day time period under § 109(h)(3) for several reasons including, “[I]f 30 days is not sufficient, the motion does not suggest a basis on which the Court can conclude that 45 days would solve the problem faced by the Debtor.”23

[15]

That qualifying for the temporary exemption is so difficult under § 109(h)(3)(A) may suggest to some courts that cause for extension beyond the initial 30 days is a significant burden. To avoid this possibility, any debtor filing a temporary exemption certification should act quickly after the petition to get a § 109(h)(1) briefing. Waiting until late in the initial 30-day temporary exemption to seek a briefing is an invitation to trouble with respect to the timing of the motion and the unknown meaning of cause for additional time.

[16]

Failing altogether to obtain a briefing or to seek additional time within 30 days after the petition is likely to be fatal to the temporary exemption in § 109(h)(3) and is likely to result in dismissal of the case.24 Getting confused and obtaining the wrong postpetition educational experience–the instructional course concerning personal financial management required by 11 U.S.C. § 1328(g)25 instead of the briefing required by § 109(h)(1)26–has been held insufficient to solidify the § 109(h)(3) temporary exemption27 notwithstanding that the instructional course on personal financial management is typically more robust than the prepetition briefing.28

[17]

Don’t forget the certificate and other materials required by § 521(b). Detailed above,29 § 521(b) requires every debtor to file a certificate from an NBCCA that describes the services provided under § 109(h) together with a copy of the “debt repayment plan, if any” developed through the NBCCA.30 There is no exception in § 521(b) for a debtor who receives a temporary exemption and then satisfies the § 109(h)(1) briefing requirement after the petition.

[18]

Failure to file the § 521(b) certificate and debt repayment plan after a postpetition briefing can cause as much trouble as not getting a briefing in the first instance.31 For example, in In re Miller,32 the debtor certified exigent circumstances that were satisfactory to the court and received a briefing within 45 days after the petition as permitted by a court order under § 109(h)(3)(B). The debtor then filed a facsimile from the NBCCA indicating the debtor was briefed but because the debtor had not paid the $50 fee, the NBCCA refused to provide a § 521(b) certificate. The bankruptcy court found the facsimile was not a surrogate “certificate” for § 521(b) purposes. The court observed: “Section 521(b) . . . contains no express provision setting forth the time period in which a debtor, falling within the exigent safe harbor provisions of Section 109(h), must file the certification evidencing completion of the credit counseling briefing.”33 The court set a further hearing to determine a reasonable time within which the debtor must file the § 521(b) certificate and to consider whether the NBCCA would be compelled to deliver a certificate. Because the debtor received the briefing after the petition, the court noted in Miller that “[t]he budget and credit counseling agency would have an administrative expense claim in this case to the extent the briefing certificate is delivered to the debtor and to the extent the fees charged by it are reasonable.”34

[19]

It seems likely that some debtors will have trouble obtaining a § 109(h)(1) briefing even after satisfying the difficult conditions for a temporary exemption under § 109(h)(3). It is easily imagined that a debtor with medical issues will become incapacitated or disabled after the petition and during a period of temporary exemption from the briefing requirement. Or a debtor granted a temporary exemption because of basic military training will be deployed to active military duty before a briefing can be obtained.

[20]

There is no obvious statutory impediment to permanent waiver of the prepetition briefing requirement during a period of temporary exemption under § 109(h)(3). If a condition for permanent waiver of the prepetition briefing requirement under § 109(h)(2)35 or (h)(4)36 manifests postpetition during a temporary exemption period, the debtor should immediately request recognition of the permanent waiver by motion.37 Qualifying for permanent waiver of the prepetition briefing requirement may be the debtor’s only avenue to eligibility when a temporary exemption is granted under § 109(h)(3)(A) but the debtor fails to meet the requirements of § 109(h)(1) during the period of temporary exemption.


 

1  See § 18.1  In General and § 19.1  What is a Briefing?.

 

2  See § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services.

 

3  See § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

4  See § 20.1  In General and § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances.

 

5  See § 20.1  In General, § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances and § 20.3  Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?.

 

6  See § 20.1  In General, § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances and § 20.3  Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?.

 

7  11 U.S.C. § 109(h)(3)(B).

 

8  11 U.S.C. § 109(h)(1).

 

9  In addition to the temporary exemption in § 109(h)(3), there are two permanent waivers of the prepetition briefing requirement that are at least theoretically available to a debtor who has previously qualified for the temporary exemption in § 109(h)(3). See 11 U.S.C. § 109(h)(2), discussed in § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services, and 11 U.S.C. § 109(h)(4), discussed in § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

10  The consequences of § 109(h)(1) ineligibility are discussed in § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?.

 

11  11 U.S.C. § 109(h)(3)(B).

 

12  See, e.g., 11 U.S.C. § 362(c)(3)(B) (“on the motion of a party in interest . . . after notice and a hearing completed before the expiration of the 30-day period . . . .”); 11 U.S.C. § 362(c)(4)(B) (“if, within 30 days after the filing of the later case, a party in interest requests . . . .”).

 

13  See § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances.

 

14  Compare 11 U.S.C. § 362(c)(3) (Thirty-day stay can be extended only if hearing is “completed” before 30 days expires.); 11 U.S.C. § 362(c)(4) (Motion to impose stay must be filed within 30 days after petition.).

 

15  Exhibit D to Official Form 1 (Oct. 2006), discussed in § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances.

 

16  See Fed. R. Bankr. P. 9006(b)(1).

 

17  11 U.S.C. § 109(h)(3)(A)(i), discussed in § 20.3  Which Circumstances Are Exigent and Which Exigent Circumstances Merit a Waiver?.

 

18  11 U.S.C. § 109(h)(3)(A)(ii), discussed in § 20.4  Prepetition Request.

 

19  11 U.S.C. § 109(h)(3)(A)(ii), discussed in § 20.4  Prepetition Request.

 

20  11 U.S.C. § 109(h)(3)(A)(iii), discussed in § 20.2  Timing, Procedure and Form for Certification of Exigent Circumstances.

 

21  See 11 U.S.C. § 109(h)(4), discussed in § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

22  332 B.R. 285 (Bankr. S.D. Tex. Oct. 31, 2005) (Isgur).

 

23  In re Hubbard, 322 B.R. at 289.

 

24  See, e.g., In re Kelly, No. 06-71019-JB, 2006 WL 6591613, at *2 (Bankr. N.D. Ga. Nov. 28, 2006) (Bihary) (Failure to receive a briefing within 30 days after requesting a waiver under § 109(h)(3) is one reason to deny motion to reopen case that was dismissed for failure to timely pay filing fee installment. “Debtor did not complete the budget and credit counseling within thirty (30) days of requesting a waiver under § 109(h)(3). Even if debtor qualified for an exemption under § 109(h)(3), the exemption expired and debtor failed to file the required budget and credit counseling certificate from an approved agency.”).

 

25  See § 156.5  Instructional Course Requirement.

 

26  See § 18.1  In General and § 19.1  What is a Briefing?.

 

27  See, e.g., In re Holsinger, 465 B.R. 775 (Bankr. W.D. Va. Feb. 27, 2012) (Krumm) (Even if Financial Management Course Certificate filed within 30 days of petition could satisfy § 109(h) requirement, failure to allege or prove that counseling agency could not provide services within seven days of request was fatal to exemption under § 109(h)(3)(A).).

 

28  See § 156.5  Instructional Course Requirement.

 

29  See § 19.3  Certificate from NBCCA: 11 U.S.C. § 521(b).

 

30  11 U.S.C. § 521(b), discussed in § 19.3  Certificate from NBCCA: 11 U.S.C. § 521(b).

 

31  See § 19.3  Certificate from NBCCA: 11 U.S.C. § 521(b).

 

32  336 B.R. 232 (Bankr. W.D. Pa. Jan. 5, 2006) (Deller).

 

33  In re Miller, 336 B.R. at 239.

 

34  In re Miller, 336 B.R. at 239 n.7.

 

35  11 U.S.C. § 109(h)(2) is discussed in § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services.

 

36  11 U.S.C. § 109(h)(4) is discussed in § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

37  The conditions and procedure for permanent waiver of the prepetition briefing requirement are discussed in § 21.1  In General, § 21.2  Timing, Procedure and Form, § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services and § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.