§ 21.4     11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 21.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Congress probably intended all along that the prepetition briefing requirement for eligibility in § 109(h)(1)1 does not apply under the circumstances stated in § 109(h)(4):

The requirements of paragraph (1) shall not apply with respect to a debtor whom the court determines, after notice and hearing, is unable to complete those requirements because of incapacity, disability, or active military duty in a military combat zone. For the purposes of this paragraph, incapacity means that the debtor is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities; and “disability” means that the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing required under paragraph (1).2
[2]

The equivocal statement is necessary because as originally enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)3 § 109(h)(4) was omitted from the cross-references in § 109(h)(1). Mentioned above,4 between October 17, 2005, and December 22, 2010, § 109(h)(1) began, “Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, . . . ”5 an individual is not eligible for Chapter 13 without a prepetition briefing from an approved nonprofit budget and credit counseling agency (NBCCA) during the 180 days preceding the petition.6 The cross-reference to paragraph (2) captured the permanent waiver of the prepetition briefing requirement under § 109(h)(2) when the U.S. trustee or bankruptcy administrator determines that the approved NBCCAs for a district are not reasonably able to provide adequate prepetition briefing services.7 The cross-reference to paragraph (3) incorporated the temporary exemption from the prepetition briefing requirement under § 109(h)(3) when the debtor has described exigent circumstances that merit a waiver, the debtor requested credit counseling services from an approved NBCCA but was unable to obtain the services during the five-day period after that request and the debtor files a certification that is satisfactory to the court.8

[3]

Missing from § 109(h)(1) was any cross-reference to “paragraph (4)”—§ 109(h)(4), quoted above. The phrase “notwithstanding any other provision of this section” in § 109(h)(1) could be read to preclude § 109(h)(4)—a “provision of this section”—from having effect as a permanent waiver of the prepetition briefing requirement. As stated by the Bankruptcy Appellate Panel for the Eighth Circuit in Dixon v. LaBarge (In re Dixon):9 “[W]hile the requirements of subdivision (h)(1) specifically excuse people who meet the requirements of subsections (2) and (3), it explicitly provides that the briefing requirement applies ‘notwithstanding any other provision of this section.’ Thus, the language of § 109(h)(1) and (4) seemed to preempt each other’s applicability.”10

[4]

Employing familiar techniques of statutory interpretation, if the original version of § 109(h)(1) did not allow § 109(h)(4) to function as an exception to the prepetition briefing requirement, § 109(h)(4) was a substantial chunk of surplusage unless some other statutory purpose could be found for paragraph (4). This avenue of attack produced less or more discomfort, depending on your perspective. There is another statutory use for § 109(h)(4): It is a cross-referenced exception to the postpetition instructional course requirement for discharge in § 1328(g)(2).11 There was no rush of reported judicial decisions finding that the missing cross-reference to paragraph (4) in § 109(h)(1) was an oversight within the corrective powers of the judiciary.

[5]

The enigmatic missing cross-reference to § 109(h)(4) in § 109(h)(1) as originally enacted was awkwardly corrected by the Bankruptcy Technical Corrections Act of 2010.12 Instead of the obvious fix—adding “(4)” to the list of exceptions in the opening phrase in § 109(h)(1)—the sharp pens constructed a double negative in the second phrase of § 109(h)(1): “notwithstanding any other provision of this section other than paragraph (4) of this subsection.13 No one seriously doubts that this “technical correction” was intended to eliminate any ambiguity with respect to whether subparagraph (4) is an exception to the prepetition briefing requirement. Why Congress has to make simple things difficult remains an issue.

[6]

In Chapter 13 cases filed after December 22, 2010, it is certain that the briefing requirement in § 109(h)(1) does not apply if the bankruptcy court determines that the debtor is unable to complete a briefing “because of incapacity, disability or active military duty in a military combat zone.”14 The debtor invokes this permanent waiver of the prepetition briefing requirement by checking box 4 in Part 5 of the petition, Official Form 101, and, as instructed by the form, filing a motion.15 It is not clear whether bankruptcy courts will routinely schedule hearings on motions under § 109(h)(4) or whether hearings will be scheduled only upon objection.

[7]

The court determination required by § 109(h)(4) obviously cannot be accomplished until after the petition. Presumably, the debtor files a Chapter 13 petition without satisfying the prepetition briefing requirement and the court determination with respect to the permanent waiver in § 109(h)(4) occurs postpetition, prompted by the debtor’s motion. The petition would be pending for some time before the bankruptcy court determines whether the debtor was eligible. During that period, there would be uncertainty whether the petition actually commenced a Chapter 13 case and whether an automatic stay was in effect.16

[8]

Incapacity is defined for § 109(h)(4) purposes as “impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities.”17 There is a (thoughtless) gender issue here. Unlike other parts of § 109(h), the definition of incapacity specifically uses male pronouns. Many general considerations are addressed in the rules of construction in § 102 of the Bankruptcy Code, but gender is not one. This worrisome use of words has not gone unnoticed by the bankruptcy courts.18

[9]

“Active military duty” and “military combat zone” are not defined by the statute. The use of “military” in both phrases and the conjunctive requirement that the debtor is in a “combat zone” significantly narrows this exception. Non-military personnel in a combat zone and military personnel outside a combat zone are ineligible for this waiver of the prepetition briefing requirement notwithstanding that service to the military may create the same impediments to participation in a bankruptcy case.

[10]

Incapacity requires “mental illness or mental deficiency” and reaches only debtors who are incapable of realizing or making rational decisions with respect to financial responsibilities. Incapacity is defined without reference to bankruptcy or to the prepetition briefing requirement to which it forms an exception. In contrast, disability in § 109(h)(4) specifically addresses physical barriers to participation in the briefing required by § 109(h)(1). The phrase “rational decisions” in the definition of incapacity invites the exercise of some discretion by the bankruptcy courts.

[11]

It has been held that a debtor with dementia was incapacitated and permanently excused from the briefing requirement.19 Several courts have held that incarceration is not disability or incapacity for purposes of § 109(h)(4).20 When a debtor successfully demonstrates incapacity for § 109(h)(4) purposes, there is then the question whether the debtor is competent to file and maintain the Chapter 13 case.21

[12]

Disability is defined that the debtor is “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone or Internet briefing required under paragraph (1).”22 It has been said that this definition of disability contains three elements: (1) the debtor is physically impaired; (2) the physical impairment renders the debtor unable to participate in an in person, telephone or Internet briefing; and (3) a reasonable effort by the debtor would not enable participation.23 Section 109(h)(4) could be read to require a physically disabled debtor to make a reasonable effort to participate in a briefing before filing the petition. Section 109(h)(4) does not require a debtor claiming incapacity to have made any prepetition effort to obtain a briefing.

[13]

It has been held that “severe physical disabilities” that rendered “meaningful” participation in a prepetition briefing impossible satisfy the conditions for waiver in § 109(h)(4).24 In contrast, an incarcerated debtor is not disabled when arrangements can be made that would allow the prisoner to participate in a § 109(h)(1) briefing.25 A debtor who suffered cardiac arrest just before filing the Chapter 13 petition was disabled for § 109(h)(4) purposes.26 Ongoing litigation may be distracting and stressful, but it is not an incapacity or disability for § 109(h)(4) purposes.27 Ironically, effective participation by the debtor in the Chapter 13 case itself is regularly cited by courts as evidence that the debtor is not disabled or incapacitated within the meaning of § 109(h)(4).28

[14]

The debtor who is incapacitated, disabled or on active military duty in a military combat zone is entitled to a permanent waiver of the prepetition briefing requirement. The debtor can file a Chapter 13 petition, check box 4 in Part 5 of Official Form 101,29 file the accompanying motion and be eligible without obtaining a briefing either before or after the petition. That the disability, incapacity or active military duty ends or is otherwise resolved after the petition should not resurrect the prepetition duty to obtain a briefing.

[15]

Arguably, the statute does not preclude the possibility that a debtor will become entitled to a permanent waiver of the prepetition briefing requirement under § 109(h)(4) after filing the petition.30 Imagine a debtor who successfully asserts exigent circumstances in support of a temporary exemption from the prepetition briefing requirement under § 109(h)(3).31 That debtor has (at least) 30 days after the petition in which to obtain a briefing under § 109(h)(3)(B).32 If the debtor becomes disabled or incapacitated or is assigned to active military duty in a military combat zone during the period of temporary exemption, the debtor should quickly file a motion under § 109(h)(4).


 

1  See § 18.1  In General, § 19.1  What is a Briefing?, and § 19.2  Timing of Briefing.

 

2  11 U.S.C. § 109(h)(4).

 

3  Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

4  See § 21.1  In General.

 

5  11 U.S.C. § 109(h)(1).

 

6  See § 18.1  In General, § 19.1  What is a Briefing?, and § 19.2  Timing of Briefing.

 

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

 

8  See 11 U.S.C. § 109(h)(3), discussed in § 20.1  In General, § 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.

 

9  338 B.R. 383 (B.A.P. 8th Cir. Feb. 17, 2006) (Kressel, Federman, Mahoney).

 

10  In re Dixon, 338 B.R. at 386.

 

11  11 U.S.C. § 1328(g)(2) states, “Paragraph (1) shall not apply with respect to a debtor who is a person described in section 109(h)(4).” See § 156.5  Instructional Course Requirement.

 

12  Pub. L. No. 111-327, 124 Stat. 3557 (2010).

 

13  11 U.S.C. § 109(h)(1), as amended by Bankruptcy Technical Corrections Act of 2010 (emphasis added).

 

14  11 U.S.C. § 109(h)(4).

 

15  See discussion of Part 5 of Official Form 101 in § 21.2  Timing, Procedure and Form and § 36.25  Briefing Requirement and Certificate.

 

16  See § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?.

 

17  11 U.S.C. § 109(h)(4) (emphasis added).

 

18  See, e.g., In re Tulper, 345 B.R. 322, 326 n.3 (Bankr. D. Colo. May 22, 2006) (Brooks) (In a footnote: “A strict construction of this statute as enacted—and, evidently, intended by—Congress would seem to limit the ‘incapacity’ exemption to a male debtor by the deliberate and purposeful use of the word ‘he’ and ‘his.’ Gender-interchangeability is not addressed in any provision of the Code.”).

 

19  In re Myers, 350 B.R. 760 (Bankr. N.D. Ohio Aug. 24, 2006) (Woods).

 

20  In re Patasnik, 425 B.R. 916 (Bankr. S.D. Fla. Apr. 2, 2010) (Olson) (Incarceration is not a disability or physical impairment contemplated by § 109(h)(4); incarceration is a ground for extension of deadline to obtain prepetition counseling. Bankruptcy court orders prison officials to allow telephone call to a counseling agency.); In re Johnson, No. 07-00465, 2007 WL 2990563 (Bankr. D.D.C. Oct. 11, 2007) (Teel) (Incarcerated, pro se debtor did not demonstrate physical impairment or disability.); In re McBride, 354 B.R. 95 (Bankr. D.S.C. Sept. 1, 2006) (Duncan) (Incarceration is not incapacity or disability for purposes of § 109(h).); In re Star, 341 B.R. 830, 831 (Bankr. E.D. Va. Apr. 24, 2006) (Tice) (Incarcerated debtor is not “disabled” for purposes of permanent exemption in § 109(h)(4); debtor granted “exigent circumstances” temporary waiver and ordered to get counseling within 45 days. “[I]ncarceration is not within the meaning of ‘disability’ intended by Congress when they drafted § 109(h)(4).”).

 

21  See § 10.9  Petitions on Behalf of Others: Incompetents, Next Friends, Powers of Attorney and the Like. See, e.g., In re Myers, 350 B.R. 760 (Bankr. N.D. Ohio Aug. 24, 2006) (Woods) (Debtor’s spouse appointed as “next friend” to sign petition and carry out administration of Chapter 13 case on behalf of codebtor determined to be incapacitated for purposes of the permanent waiver of prepetition briefing requirement under § 109(h)(4).).

 

22  11 U.S.C. § 109(h)(4).

 

23  See, e.g., In re Winston, No. 07-20593-D-13L, 2007 WL 1650926, at *3 (Bankr. E.D. Cal. June 6, 2007) (unpublished) (Bardwil) (“A disability exemption under section 109(h)(4) requires a three-prong analysis. First, the court must decide whether the debtor is disabled. Second, the court must determine whether the debtor has made a reasonable effort, despite the impairment, to participate in pre-petition credit counseling. Third, the court must determine whether the debtor is unable, because of the disability, to meaningfully participate in an in-person, telephone, or internet pre-petition briefing.”); In re Tulper, 345 B.R. 322, 326 (Bankr. D. Colo. May 22, 2006) (Brooks) (“[A] ‘disability’ exemption under 11 U.S.C. § 109(h)(4) can only apply if a debtor demonstrates that: (1) the debtor is severely physically impaired; (2) the debtor has made a reasonable effort, despite the impairment, to participate in the prepetition credit counseling; and (3) the debtor is unable, because of the impairment, to participate meaningfully in an in person, telephone, or Internet briefing prepetition.”).

 

24  In re Tulper, 345 B.R. 322, 324–28 (Bankr. D. Colo. May 22, 2006) (Brooks) (“Mrs. Tulper testified that she suffered from heart problems, extensive tremors, severe asthma, a bad lung, arthritis, a disintegrated spine (2 discs missing), and a plate in her right ankle. Her combined conditions make her wheelchair-bound. . . . [S]he is taking approximately seventeen prescribed medications per day . . . . [S]he did not own or otherwise have access to a computer, and had no computer skills. . . . [H]er mobility was severely limited by her age, physical condition, and dependence upon an oxygen compressor/ventilator. . . . Leon Tulper testified that he was 97% deaf . . . . He also had a 40% disability with respect to use of his hands and feet. . . . Because of his hearing disability, phone and in-person communications were difficult, if not impossible. . . . [B]oth Debtors have demonstrated that they are severely physically impaired. . . . [T]he Debtors appear to have made a reasonable effort to address credit counseling. . . . If a debtor goes to credit counseling and, because of a significant impairment, cannot participate in the credit counseling such that he or she can understand what is conveyed during the credit counseling session, so as to be able to have the ‘opportunity to learn about the consequences of bankruptcy,’ then the prepetition credit counseling becomes meaningless. . . . [T]hese Debtors, because of their physical condition could not meaningfully participate in the prepetition credit counseling.”).

 

25  In re Star, 341 B.R. 830 (Bankr. E.D. Va. Apr. 24, 2006) (Tice).

 

26  In re Howard, 359 B.R. 589, 590 (Bankr. E.D.N.C. Jan. 25, 2007) (Doub) (In Chapter 13 case filed on January 5, 2007, one debtor was disabled within the meaning of § 109(h)(4) based on the following: “On December 18, 2006, Mr. Howard was hospitalized . . . . On December 20, 2006, Mr. Howard suffered cardiac arrest . . . . Mr. Howard was released from the hospital on January 10, 2007. Since his release from the hospital, Mr. Howard has suffered from short-term memory loss, hearing loss, and limited mobility.”).

 

27  See Williams v. Bronitsky (In re Williams), No. NC-08-1117-DJuMk, 2008 WL 8462948 (B.A.P. 9th Cir. Nov. 26, 2008) (unpublished) (Dunn, Jury, Markell).

 

28  See, e.g., In re Nealen, 407 B.R. 194 (Bankr. W.D. Pa. July 9, 2009) (Deller) (Torn rotator cuff and back problems are not a “disability” for purposes of permanent waiver of prepetition briefing in § 109(h)(4); debtor demonstrated through court filings and appearances that he was physically and mentally capable of completing prepetition briefing.); In re Skinner, No. 08-62335-aer13, 2008 WL 2695650 (Bankr. D. Or. July 8, 2008) (Radcliffe) (Permanent waiver of prepetition briefing under § 109(h)(4) not available when debtor failed to demonstrate incapacity. Pro se debtor filed four previous bankruptcies, and his “codebtor” filed at least 10 previous bankruptcies. In multiple cases, debtor litigated various issues, contested relief from the stay and otherwise demonstrated ability to make rational decisions with respect to financial responsibilities. That debtor claimed to suffer from “ADD, ADHD, OCD and epilepsy” did not overcome actual performance.); In re Skinner, No. 08-60574-aer13, 2008 WL 2339798 (Bankr. D. Or. June 6, 2008) (Radcliffe) (Preliminary waiver of prebankruptcy credit briefing on grounds of disability is rescinded and case dismissed when debtor’s filing of “lucid” documents and multiple motions demonstrated mental capacity was adequate.); In re Winston, No. 07-20593-D-13L, 2007 WL 1650926, at *3 (Bankr. E.D. Cal. June 6, 2007) (unpublished) (Bardwil) (“[T]he court will accept the debtor’s assertion that she is disabled. However, . . . the debtor does not argue, nor has the debtor submitted any evidence to establish, that she made a reasonable effort to participate in pre-petition credit counseling. Further, the debtor does not argue, nor has the debtor submitted any evidence to establish, that her disability renders her unable to participate in an in-person, telephone, or internet briefing. . . . The record . . . demonstrates that the debtor is quite capable of using the internet and telephone. . . . The fact that the debtor completed the course on personal financial management through the internet makes it clear that she could have obtained prepetition credit counseling through the internet. . . . [T]he debtor made a mistake and took the course on personal financial management as required by section 1328(g)(1) of the Code instead of the course on credit counseling required under section 109(h). Such a mistake is not a basis for permanent waiver of the credit counsel [sic] requirement under section 109(h)(4).”); In re Swiatkowski, 356 B.R. 581, 584–85 (Bankr. E.D.N.Y. Nov. 16, 2006) (Cyganowski) (Official Form 23 certifying that no personal financial management course was required because of incapacity or disability was not a motion for the temporary exemption in § 109(h)(3), and facts were inconsistent with debtor’s claim of disability. “Debtor is somehow arguing that his request on Form 23 to be exempted from the personal financial management requirement on the basis of a disability or [in]capacity . . . should be deemed a request to be exempted from the credit counseling requirement as well. . . . [T]he Court is not prepared to deem the Form 23 request to be a request for exemption from the credit counseling requirement. Moreover, even if the Court were to consider the debtor’s request to be one seeking exemption from the credit counseling requirement based upon disability or incapacity, that request is belied by the facts of this case. First, the Debtor did obtain credit counseling on January 23, 2006. His argument that he was so disabled or incapacitated that he could not attend credit counseling is disingenuous in light of the fact that he ultimately did obtain that counseling. . . . The Debtor’s physical appearance at the 341 meeting and his apparent ability to respond to the Trustee’s questions is [sic] not consistent with his claim that he is so disabled or incapacitated that he could not complete the credit counseling requirement.”).

 

29  See § 21.2  Timing, Procedure and Form and § 36.25  Briefing Requirement and Certificate.

 

30  See also § 21.2  Timing, Procedure and Form.

 

31  See § 20.1  In General, § 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.

 

32  See § 20.5  Briefing after Temporary Exemption.