§ 19.3 — Certificate from NBCCA: 11 U.S.C. § 521(b)
Revised: May 1, 2017
Debtors not eligible for a temporary exemption1 or permanent waiver2 of the § 109(h) briefing3 must complete a prepetition briefing to be eligible for Chapter 134 and then must satisfy the certificate requirement in § 521(b)(1). Section 521(b) imposes a duty that the debtor file a “certificate” from the approved nonprofit budget and credit counseling agency (NBCCA) that provided the § 109(h) prepetition briefing together with a copy of any “debt repayment plan” developed through that NBCCA.5
Part of the “we don’t trust debtors” mentality6 Congress exhibited in 2005, this duty was implemented by Interim Bankruptcy Rule 1007(b)(3), which mimicked the statutory requirement that an individual debtor must file the certificate and debt repayment plan if any.7 Prior to October 2006, Interim Rule 1007(c) mandated that the briefing certificate and debt repayment plan (if any) “shall be filed with the petition” in a Chapter 13 case.8 As amended in October 2006, Interim Rule 1007(c) together with revised Exhibit D to what was then Official Form 1 offered options with respect to filing the § 521(b) certificate. If the debtor received a prepetition briefing and had a § 521(b) certificate from the NBCCA, there was a check box on (former) Exhibit D by which the debtor certified “I have a certificate,” and the Exhibit instructed to attach a copy of the certificate together with a copy of any debt repayment plan developed through the NBCCA.
If the debtor completed a prepetition briefing but did not have a § 521(b) certificate from the NBCCA, then a separate check box on (former) Exhibit D signaled that the debtor must file the § 521(b) certificate within 15 days after the petition, unless the court ordered otherwise.9 This 15-day period became 14 days in 2009. This 14-day deadline should not be confused with the 30 days in § 109(h)(3)(B) in which a debtor granted an “exigent circumstances” temporary exemption must obtain a briefing after filing a petition.10 After December 1, 2015, the certificates contemplated by § 521(b) are found in Part 5 to Official Form 101.
Interim Rule 1007 was replaced with a permanent rule in 2008 and in its current form, Bankruptcy Rule 1007(b)(3) has this to say about the prepetition briefing certificate requirement in § 521(b):
(3) Unless the United States trustee has determined that the credit counseling requirement of § 109(h) does not apply in the district, an individual debtor must file a statement of compliance with the credit counseling requirement, prepared as prescribed by the appropriate Official Form which must include one of the following:
(A) an attached certificate and debt repayment plan, if any, required by § 521(b);
(B) a statement that the debtor has received the credit counseling briefing required by § 109(h)(1) but does not have the certificate required by § 521(b);
(C) a certification under § 109(h)(3); or
(D) a request for a determination by the court under § 109(h)(4).11
With respect to timing, the filings described above in Bankruptcy Rule 1007(b)(3) must be filed as follows under Bankruptcy Rule 1007(c): “[T]he documents required by paragraphs (A), (C), and (D) of subdivision (b)(3) shall be filed with the petition. Unless the court orders otherwise, a debtor who has filed a statement under subdivision (b)(3)(B), shall file the documents required by subdivision (b)(3)(A) within 14 days of the order for relief.”12
The gist of Bankruptcy Rules 1007(b)(3) and (c) as now formulated requires a debtor who has completed the prepetition briefing and who has the certificate required by § 521(b) to attach that certificate and any debt repayment plan to the petition. This is accomplished by checking the first box in Part 5 to Official Form 101. If the debtor received a prepetition briefing but does not have the § 521(b) certificate from the NBCCA, then the debtor must file a statement to that effect with the petition. The debtor then has 14 days in which to get the certificate and file the certificate under Bankruptcy Rule 1007(c). This is check box 2 in Part 5 to Official Form 101. If the debtor did not complete a prepetition briefing but claims the temporary exemption from the prepetition briefing in § 109(h)(3),13 then the debtor must file with the petition a certification; this certification is now found at the third check box in Part 5 of Official Form 101. A debtor who claims a right to the permanent waiver of the prepetition briefing requirement in § 109(h)(4)14 must check two boxes in Part 5 to Official Form 101 and file a motion for determination by the court when waiver is claimed based on incapacity, disability or active military duty in a combat zone.
This flyover of Bankruptcy Rule 1007 and Part 5 of the petition (Official Form 101) is enough to tell any reader that the briefing certificate requirement in § 521(b) has morphed into a nasty series of traps for Chapter 13 debtors. The cases discussed below bear out this sense.
The certificate required by § 521(b)(1) is not an eligibility requirement under § 109(h). Section 521(b)(1) is clear that the certificate must come “from the approved nonprofit budget and credit counseling agency” that provided the prepetition briefing—which means the prospective debtor must physically (electronically, at least) obtain the certificate from the NBCCA in a form that can be filed. The certificate is signed by the NBCCA, not necessarily by the debtor.15
Physically getting the certificate has turned out to be much more difficult than it should be. One bankruptcy court concluded a facsimile from an NBCCA reciting that the debtor completed a briefing but would not receive the certificate until a $50 fee was paid was not a “certificate” for purposes of § 521(b).16 This court found this punitive outcome by reasoning that a § 521(b) certificate must comply with the formalities found in 28 U.S.C. § 1746.17 Given that the debtor had unquestionably satisfied the briefing requirement in § 109(h), the court treated the facsimile as a motion for more time to get the actual certificate or as a motion to compel the NBCCA to deliver a certificate.18 Along the way, the court made the important point that “Section 521(b) of the Bankruptcy Code contains no express provisions setting forth the time period in which a debtor . . . must file the certification evidencing completion of the credit counseling briefing.”19
For most Chapter 13 debtors, getting the prepetition briefing certificate means paying whatever fee the NBCCA charges for the briefing. When the debtor in In re Warren20 was unable to make a prepaid credit card work and the NBCCA refused to deliver the certificate, the bankruptcy court appropriately concluded that the failure to file a § 521(b) certificate with the petition21 did not require dismissal of the Chapter 13 case. As stated by the Warren court, “the absence of a credit counseling certificate . . . is a matter of form not substance.”22
Unfortunately, not all courts have been so charitable. In In re Sukmungsa,23 the debtor received a briefing six days before filing a Chapter 13 case. Foolishly, the debtor did not check any box on the petition (2005 version) with respect to that prepetition briefing. By local rule, the Bankruptcy Court for the District of Utah instructed the clerk of the bankruptcy court to enter an order dismissing the case when the debtor failed to certify compliance with § 109(h)(1). The debtor’s failure to check a box on the petition triggered dismissal by the clerk.
Debtor’s counsel in Sukmungsa tried to fix the problem with a Rule 60 request for relief from the clerk’s order of dismissal. The bankruptcy court acknowledged that the debtor completed a prepetition briefing but held that neither the debtor nor debtor’s counsel demonstrated excusable neglect: “No sufficient ‘reason’ for the failure to timely certify completion of the prepetition briefing requirement has been presented.”24
Sukmungsa is a harsh result for a debtor eligible for Chapter 13 but short one check box. Perhaps the October 2006 and subsequent versions of Rule 1007 and the December 1, 2015, version of the certifications in Part 5 of Official Form 101 will minimize dismissals based on missing certificates.25
The Rules for NBCCAs finally promulgated by the Justice Department in March 2013,26 require approved agencies to “send” the certificate “no later than one business day after the client completed counseling services.”27 The Rules state blankly: “If a client has completed counseling services, an agency may not withhold certificate issuance for any reason.”28 When the briefing is by Internet or automated telephone, completion of counseling services includes that the client “has engaged in interaction with a counselor . . . by electronic mail, live chat, or telephone.”29 But an agency is forbidden to consider counseling incomplete “based solely on the client’s failure to pay the fee.”30 These Rules should encourage courts to soften some of the hard outcomes in the earlier cases just discussed.
The § 521(b) certificate from an NBCCA with respect to the prepetition briefing required by § 109(h) should not be confused with the instructional course that a Chapter 13 debtor must complete to get a discharge.31 In In re Fuller,32 the debtor completed a § 109(h) briefing before the petition but filed a certification of completion of an instructional course consistent with § 1328(g)(1), instead of the certificate from the NBCCA required by § 521(b). The bankruptcy court held that the Instructional Course Certificate did not satisfy the § 521(b) briefing certificate requirement. The certification was stricken and the debtor instructed to file the correct document. The punishment in Fuller more appropriately fit the crime than dismissal in Sukmungsa.
Forgery has figured prominently in several cases involving the § 521(b) prepetition briefing certificate. In In re James,33 the debtors obtained credit counseling within 180 days prior to the petition, but for some reason did not obtain certificates from the NBCCA. The “control number” from the NBCCA expired before debtors’ counsel set about to file the Chapter 13 petition. Apparently, a paralegal for the debtors’ attorney solved the problem by taking an online, prepetition briefing course for the debtors, altered a time entry and falsified § 521(b) certificates that were then filed with the bankruptcy court. Debtors’ attorney had no knowledge of the paralegal’s action, but the bankruptcy court found the attorney was the professional ultimately responsible. A $2,500 sanction was imposed and counsel was ordered to reimburse fees paid by the debtors.
Along the same lines, in Goldberg v. Pagaduan (In re Pagaduan),34 a debtor’s attorney was sanctioned when the attorney, or someone in the attorney’s office, forged signatures of debtors to credit counseling certificates. The debtors in Pagaduan testified that they were in Canada and did not participate in a prepetition briefing. The bankruptcy court found that an attorney or someone in the attorney’s office impersonated the debtors online to complete the prepetition briefing class and that this forgery was a potential crime requiring referral to the United States Attorney. The bankruptcy court noted that Bankruptcy Rule 9010 authorizes actions by an attorney-in-fact, but the rule does not give a debtor’s counsel authority to take the prepetition briefing class on behalf of a debtor.35
On the other hand, mentioned elsewhere,36 the Justice Department in 2013 declined to issue Rules prohibiting third parties from completing the prepetition briefing on behalf of a future debtor. The possibility remains that a debtor could be entitled to a valid briefing certificate when the actual briefing was obtained by an attorney or other surrogate with proper authorization by the debtor.
1 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.
2 See 11 U.S.C. § 109(h)(2) & (4), 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.
3 See § 18.1 In General.
5 11 U.S.C. § 521(b)(1) & (2), discussed in § 36.25 Briefing Requirement and Certificate.
7 See Interim Bankr. R. 1007(b)(3) (superseded), discussed in § 36.25 Briefing Requirement and Certificate.
8 Interim Bankr. R. 1007(c) (Oct. 2005), discussed in § 36.25 Briefing Requirement and Certificate.
10 See 11 U.S.C. § 109(h)(3)(B), discussed in § 20.5 Briefing after Temporary Exemption.
11 Fed. R. Bankr. P. 1007(b)(3).
12 Fed. R. Bankr. P. 1007(c).
13 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.
15 See Curtis v. Segraves (In re Segraves), 541 B.R. 449, 451 (B.A.P. 8th Cir. Nov. 30, 2015) (Kressel, Saladino, Shodeen) (Prepetition briefing certificate signed by NBCCA but not signed by debtor is sufficient for § 109(h)(3)(A) purposes. “[S]ection 109(h) is plain. . . . It does not require that a debtor sign a credit counseling certificate under penalty of perjury. . . . It only requires a certificate from the credit counseling agency.”).
16 In re Miller, 336 B.R. 232 (Bankr. W.D. Pa. Jan. 5, 2006) (Deller).
17 28 U.S.C. § 1746 provides:
Wherever, under any law of the United States or under any rule, regulation, order, or requirement made pursuant to law, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn declaration, verification, certificate, statement, oath, or affidavit, in writing of the person making the same (other than a deposition, or an oath of office, or an oath required to be taken before a specified official other than a notary public), such matter may, with like force and effect, be supported, evidenced, established, or proved by the unsworn declaration, certificate, verification, or statement, in writing of such person which is subscribed by him, as true under penalty of perjury, and dated, in substantially the following form:
(1) If executed without the United States: “I declare (or certify, verify, or state) under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date). _________(Signature)”.
(2) If executed within the United States, its territories, possessions, or commonwealths: “I declare (or certify, verify, or state) under penalty of perjury that the foregoing is true and correct. Executed on (date). ___________(Signature)”.
18 A reasonable conclusion given that NBCCAs are required to provide prepetition briefing services at reduced cost or at no cost to worthy debtors. The debtor in Miller was a retired widow living on Social Security who filed an emergency Chapter 13 petition to stop a foreclosure sale.
19 In re Miller, 336 B.R. at 239.
20 339 B.R. 475 (Bankr. E.D. Ark. Mar. 20, 2006) (Mixon).
21 Mentioned above in this section and discussed in § 36.25 Briefing Requirement and Certificate, prior to October 2006, Interim Rule 1007(c) required all § 521(b) certificates to be filed with the petition.
22 In re Warren, 339 B.R. at 479.
23 333 B.R. 875 (Bankr. D. Utah Nov. 23, 2005) (Boulden).
24 In re Sukmungsa, 333 B.R. at 880. See also In re Grumbkow, No. 06-13921DWS, 2006 WL 3861092 (Bankr. E.D. Pa. Nov. 13, 2006) (unpublished) (Sigmund) (Under 2005 version of Interim Rule 1007(c), bankruptcy court generated “initial order” that required filing of “certificate of credit counseling” or a request for waiver of counseling requirement within seven days after petition, else case may be dismissed without further notice or hearing; in fifth bankruptcy case, failure to file required certificate of credit counseling justified dismissal with bar to refiling of any future petition not accompanied by all required documents.).
26 See Application Procedures and Criteria for Approval of Nonprofit Budget and Credit Counseling Agencies by United States Trustees, 78 F.R. 16138, 28 C.F.R. § 58 (Mar. 14, 2013).
27 28 C.F.R. § 58.22(c).
28 28 C.F.R. § 58.22(c).
29 28 C.F.R. § 58.22(a).
30 28 C.F.R. § 58.22(c).
31 See 11 U.S.C. § 1328(g)(1), discussed in § 156.5 Instructional Course Requirement.
32 No. 05-90048, 2005 WL 3454699 (Bankr. W.D. Pa. Dec. 16, 2005) (unpublished) (Bentz).
33 No. 09-11264, 2010 WL 2107428 (Bankr. W.D.N.C. Apr. 1, 2010) (unpublished) (Hodges).
34 447 B.R. 614 (D. Nev. Mar. 25, 2011) (Dawson), aff’g in part, vacating in part, 429 B.R. 752 (Bankr. D. Nev. Apr. 12, 2010) (Markell).
35 See also In re Stewart, No. 08-30485, 2008 WL 839733 (Bankr. E.D. Tenn. Mar. 27, 2008) (Stair) (In fifth Chapter 13 case since 2004, debtor’s briefing certificate is suspect and may be forged.).
36 See 78 F.R. 16138, at 16147, discussed in § 19.1 What is a Briefing?.