§ 21.1 — In General

Revised: February 26, 2017

[1]

To be eligible for Chapter 13, § 109(h)(1) requires every individual to receive a briefing from a nonprofit budget and credit counseling agency (NBCCA) before filing the petition.1 Although not completely clear from the statute, there are two permanent waivers2 and one temporary exemption3 from the prepetition briefing requirement.

[2]

Section 109(h)(1) states that the prepetition briefing requirement for eligibility is “[s]ubject to paragraphs (2) and (3).”4 The paragraph (3) referred to in § 109(h)(1) is the temporary exemption from the prepetition briefing requirement when the debtor certifies exigent circumstances that merit a waiver,5 the debtor requests a prepetition briefing but is unable to obtain that briefing during the seven6 days after the request7 and the debtor’s certification is satisfactory to the court.8 The temporary exemption in § 109(h)(3)(A) applies for only 30 days after the petition is filed, unless the court for cause grants an additional 15 days.9 Although not perfectly clear, qualifying for temporary exemption buys the debtor a maximum of 45 days after the petition10 during which the debtor must obtain a briefing from an NBCCA that satisfies § 109(h)(1) else the debtor is not eligible and the consequences of ineligibility apply.11

[3]

The cross-reference to paragraph (2) in § 109(h)(1) creates an oddly worded permanent waiver of the prepetition briefing requirement when the U.S. trustee (or bankruptcy administrator) determines that the approved NBCCAs in the district where the debtor resides are “not reasonably able” to provide adequate services to the “additional” individuals seeking counseling because of § 109(h).12 This permanent exception to the prepetition briefing requirement is of limited use. Given that briefings over the Internet or by telephone can satisfy the eligibility requirement in § 109(h)(1),13 the supply of NBCCA services has been deemed sufficient everywhere by the U.S. trustee except (temporarily) in areas affected by Hurricane Katrina.14

[4]

The second permanent waiver of the prepetition briefing requirement is curiously placed in § 109(h)(4).15 The briefing requirement “shall not apply” under the circumstances in subparagraph (4). As originally enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),16 subparagraph (4) was ambiguously not listed in § 109(h)(1) as a permanent waiver of the prepetition briefing requirement. The phrase “notwithstanding any other provision of this section” in the 2005 version of § 109(h)(1) was easily read to neutralize the waiver of the briefing requirement in § 109(h)(4). As observed by the Bankruptcy Appellate Panel for the Eighth Circuit:

[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) seem to preempt each other’s applicability.17
[5]

Read literally, the purpose of subparagraph (4) was opaque altogether—but for its function as an exception to the unrelated instructional course requirement in § 1328(g)(2).18 Most likely, subparagraph (4) was omitted by mistake in BAPCPA from the list of permanent waivers of the prepetition briefing requirement in § 109(h)(1).19

[6]

In 2010, Congress acted to address the confusing language in § 109(h)(1) with respect to the permanent waiver of the prepetition briefing requirement in § 109(h)(4). Eschewing the obvious fix of adding “(4)” to the first phrase of § 109(h)(4), the Bankruptcy Technical Corrections Act of 201020 instead changed the succeeding phrase, “notwithstanding any other provision of this section” to the phrase “notwithstanding any other provision of this section other than paragraph (4) of this subsection.” The best that can be said for this is that Congress seems to have wanted § 109(h)(4) to be read as an available permanent waiver of the prepetition briefing requirement in § 109(h)(1). It just gets there in an odd way.

[7]

A debtor claiming the permanent waiver in § 109(h)(4) is required by Bankruptcy Rule 1007(b)(3) and (c) to file with the petition a request for a determination that the debtor is unable to complete the briefing because of incapacity, disability or active military duty in a combat zone.21 Exhibit D to the October 2006 version of Official Form 1 contained a check box 4 to signal that § 109(h)(4) applied.22 If the U.S. trustee or bankruptcy administrator had determined that approved NBCCAs for a district were not reasonably able to provide adequate briefing services, then the debtor was instructed to check box number 5 on Exhibit D to (former) Official Form 1.23

[8]

The current version of the petition, Official Form 101, in Part 5 contains a check box in which the debtor claiming permanent waiver of the briefing requirement under § 109(h)(4) is instructed to indicate the grounds—incapacity, disability or active duty military—and told “you must file a motion for waiver of credit counseling with the court.” Part 5 of Official Form 101 makes no mention of the permanent waiver of the prepetition briefing requirement in § 109(h)(2)—when the U.S. trustee (or bankruptcy administrator) has determined that NBCCA services are insufficient in a district.24 Unfortunately, the “you must file a motion” instruction in Part 5 of Official Form 101 is broadly worded, “if you believe you are not required to receive a briefing”—leaving open the possibility that the instruction on the Official Form will be interpreted to require debtors to file motions when any ground for exemption or waiver of the § 109(h)(1) prepetition briefing requirement is asserted by the debtor. The words are broad enough to even include the temporary exemption in § 109(h)(3).25


 

1  11 U.S.C. § 109(h)(1), discussed in § 18.1  In General, § 19.1  What is a Briefing? and § 19.2  Timing of Briefing.

 

2  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.

 

3  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.

 

4  11 U.S.C. § 109(h)(1).

 

5  See 11 U.S.C. § 109(h)(3)(A)(i), discussed in § 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  Prior to December 1, 2009, the seven-day period in § 109(h)(3) was five days. See Statutory Time-Periods Technical Amendments Act of 2009, Pub. L. No. 111-16, 123 Stat. 1607 (May 7, 2007).

 

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

 

8  See 11 U.S.C. § 109(h)(3)(A)(iii).

 

9  See 11 U.S.C. § 109(h)(3)(B), discussed in § 20.5  Briefing after Temporary Exemption.

 

10  There is some controversy whether the temporary exemption from the prepetition briefing requirement in § 109(h)(3)(B) is a maximum of 45 consecutive days or 30 days perhaps separated from 15 “additional” days. See § 20.5  Briefing after Temporary Exemption.

 

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

 

12  11 U.S.C. § 109(h)(2)(A), discussed in § 21.3  11 U.S.C. § 109(h)(2): Inadequate NBCCA Services.

 

13  See 11 U.S.C. § 109(h)(1), discussed in § 19.1  What is a Briefing?.

 

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

 

15  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.

 

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

 

17  Dixon v. LaBarge (In re Dixon), 338 B.R. 383, 386 (B.A.P. 8th Cir. Feb. 17, 2006) (Kressel, Federman, Mahoney).

 

18  See 11 U.S.C. § 1328(g)(2), discussed in § 156.5  Instructional Course Requirement.

 

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

 

20  Pub. L. No. 111-327, 124 Stat. 3557, 3558 (Dec. 22, 2010).

 

21  Fed. R. Bankr. P. 1007(b)(3) & (c), discussed in § 21.2  Timing, Procedure and Form and § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

22  See Exhibit D to Official Form 1 (Oct. 2006), discussed in § 21.2  Timing, Procedure and Form, § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty and § 36.25  Briefing Requirement and Certificate.

 

23  See Exhibit D to Official Form 1 (Oct. 2006), discussed in § 21.2  Timing, Procedure and Form, § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty and § 36.25  Briefing Requirement and Certificate.

 

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

 

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