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May 2005

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This article is in the news archives --- for current news go to the Third Branch News.


Change Comes with Bankruptcy Reform

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which became law on April 20, 2005, represents, in the words of House Judiciary Committee Chairman,

Representative F. James Sensenbrenner, the “culmination of nearly 8 years of intense and detailed consideration by this Committee.” Which is to say, the Act was a long time coming and holds many changes for the bankruptcy system.

The Judicial Conference’s Committee on the Administration of the Bankruptcy System and the Advisory Committee on Bankruptcy Rules, with the Bankruptcy Judges Division and Bankruptcy Court Administration Division of the Administrative Office, as well as other court advisory groups, are currently examining the Act for the statutory changes that will affect the courts.

Some of the changes are:

  • Rules and forms will change. Many of the changes in the bankruptcy law, such as changes to the appellate procedures, will require adjustments to the Federal Rules of Bankruptcy Procedure. Others will require changes to forms, such as revisions to the notice advising debtors of their alternatives under the Bankruptcy Code, or for creditors to designate their desired address for receiving notices. The Judicial Conference Advisory Committee on Bankruptcy Rules has initiated the process for revising the rules and forms to implement the Act. Plans call for interim rules and forms to be endorsed by the Judicial Conference for use by the courts and distributed 60 days before the Act’s general effective date on October 17, 2005.
  • Statistics collection will expand. Currently statistics are collected and published on bankruptcy cases filed, terminated, and pending in the courts, by chapter and if they are business or nonbusiness bankruptcies. The Act calls for expanded information to be collected and made available to the public on, for example, the total assets and liabilities of debtors filing under Chapter 11, their currently monthly income, average expenses, and the aggregate amount of debt discharged in cases filed. Statistics collected on debtors filing under Chapter 13 would include the number of cases in which the debtor filed another case during the 6-year period preceding the filing. The Act requires the Judiciary to report to Congress on the expanded data, with the first report due July 1, 2008.
  • Debtors will need to file copies of tax returns with the court, in certain circumstances. The court must make these returns available to creditors and other parties, but keep the returns secure from public view. The Case Management/Electronic Case Files (CM/ECF) system has “private events” capability that can be use to respond to this requirement.
  • A new in forma pauperis filing category has been established under which debtors may request that the court waive their filing fees.
  • Chapter 12 is now permanent. Once the only temporary chapter in the Bankruptcy Code, Chapter 12 has finally become permanent. The chapter now includes “family fishermen” as a group entitled to relief under the chapter.
  • A new Chapter 15 of the Bankruptcy Code was created dealing with cross-border insolvency and governing the manner in which a foreign court may enlist the aid of a U.S. bankruptcy court.
  • Bankruptcy decisions may now be appealed more often. The Act expands the circumstances under which judgments, orders, or decrees issued in bankruptcy cases may be appealed directly to the courts of appeals.
  • Audit procedures must be established to determine the accuracy, veracity, and completeness of petitions, schedules, and other information in cases filed under Chapter 7 or 13.
  • Credit counseling is now a precondition, with some exceptions, to filing a consumer petition. Post-filing debtor education is a requirement for receiving a discharge. The Act also requires bankruptcy administrators and U.S. Trustees to certify organizations that provide credit counseling.
  • Materials and training will be developed by the Federal Judicial Center with the Executive Office for U.S. Trustees “as may be useful to courts in implementing this Act.”

To meet the requirements of the Act, several changes also will be made in the coming months to the Case Management/Electronic Case Files system now used by the U.S. bankruptcy courts. CM/ECF will be configured to enable parties to file new types of categories of motions, pleadings and other papers, such as credit counseling certificates and tax returns; to generate new types of notices; and later, to collect and report statistical data.