Exemption From Credit Counseling Requirement

Palm Beach County Bar Association Bulletin, November 2007

One of the many changes to the Bankruptcy Code resulting from the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) is the requirement that all individual debtors must complete a “briefing” from an approved credit counseling agency within 180 days preceding the filing of a bankruptcy petition. 11 U.S.C. §109(h)(1). A Debtor may be exempted from this requirement, but only upon written certification that describes exigent circumstances which merit waiver. Additionally, the Debtor must have requested credit counseling services, but been unable to obtain them, within five days from the Debtor’s request of the waiver. 11 U.S.C.§ 109(h)(3). Various bankruptcy courts have issued opinions interpreting what “exigent circumstance” must exist in order to be exempted from the credit counseling requirement. This article is a sampling of some of the opinions issued by Florida bankruptcy courts.

In In re Valdez, 335 B.R. 801 (Bankr. S.D. Fla. 2005) Judge Cristol from the Southern District of Florida (Miami Division) found the term “exigent circumstances” does not appear to refer to a prospective debtor’s problems or situation but, rather, it appears to refer to the circumstances preventing the person from obtaining the required budget and credit counseling and the certificate confirming same. Id. 803. In a subsequent Judge Cristol case, Judge Crisol found that a Creole speaking debtor was entitled to waiver of the credit counseling requirement based on fact that, when the petition was filed, there were no approved counseling agencies in district that offered credit counseling in Creole. In re Petit-Louis, 344 B.R. 696 (Bankr. S.D. Fla. 2006).

Judge Ray, from the Southern District of Florida (Broward Division), found that exigent circumstances existed exempting the credit counseling requirement when the Debtor’s only bank account, which was also the Debtor’s only source of funds, was frozen by a creditor. Additionally, the Debtor requested but was unable to obtain the required counseling within five days of the request because the agency was not willing to provide counseling until they were paid and the Debtor had no means of paying. In re Christopher Westengberger, BK No. 06-10477-RBR (Bankr. S.D. Fla. March 15, 2006).

Judge Isicoff, from the Southern District of Florida (Miami Division), found that a pro se debtor who was facing the imminent foreclosure of her home met the exigent circumstances requirement. However, since the pro se debtor did not state that she requested credit counseling services from an approved agency but was unable to obtain those services within the time period specified in the statute, the pro se Debtor did not qualify to be a Debtor and therefore her bankruptcy was dismissed. In re Calderon, 2006 WL 871477 (Bankr. S.D. Fla. 2006).

Judge Killian from the Northern District of Florida has determined that the credit counseling requirements of §109(h)(1), and any requests for exemptions from the requirements must be strictly construed. In Judge Killian’s case, the Debtors alleged the “exigent circumstances” of impending foreclosure of their home and repossession of their vehicle but failed to certify they had requested, but been unable to obtain, the required credit counseling within five days from their request. Judge Killian dismissed the case as having been filed by an ineligible person. In re Booth, BK No. 05-045002-LMK-13 (Bankr. N.D. Fla. Oct. 24, 2005).

The safest practice is to do everything in your power to assure that your clients comply with the credit counseling requirement. However, if circumstances make it impossible to comply, be sure that your client requests credit counseling within five days before filing the bankruptcy petition. Otherwise, the bankruptcy is surely going to be dismissed.