Monday, December 05, 2005

Credit Counseling Certification Not Extended for Excusable Neglect

The recently reported case of In re Sukmungsa, __ B.R. __, 2005 WL 3160607 (Bankr. D. Utah 11/23/05) rejects yet one more effort to sidestep the new credit counseling requirements in 11 U.S.C. 109(h). In Sukmungsa, the debtor tried under Fed.R.Civ.P. 60(b), made applicable by Fed.R.Bankr.P. 9024, to vacate a dismissal order entered due to the debtor's failure to certify completion of the prepetition credit counseling, using an excusable neglect theory. As previously discussed here, BAPCPA added a new required to 11 U.S.C. 109 that prohibits an individual from being a debtor if they have not received pre-filing credit counseling from an approved agency; in addition, newly added 11 U.S.C. 521(b) requires an individual debtor to file a certificate, from the counseling agency, describing the services provided.

The court rejected the excusable neglect argument. Applying the factors outlined in Pioneer Investments Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380 (1993), the court noted that the danger of prejudice and the lack of impact on judicial proceedings weighed in favor of the debtor, and that the debtor's good faith was a "neutral" factor in the analysis. But the court found that the reason for the delay and the debtor's control over it -- that is, the failure to timely certify completion of the prefiling counseling requirements -- precluded the relief sought. While there apparently was some confusion over whether the debtor had in fact completed the counseling requirements, the court found that no sufficient reason had been presented by the debtor or its counsel to explain the failure to timely file the certification. The court did not address the question of whether or not 109(h) presents a jurisdictional bar to bankruptcy relief.

The next question many practitioners may be asking is whether Bankruptcy Rule 9006 might provide an avenue for extending the time to comply with the counseling or certification requirements for "excusable neglect." Although no case has yet addressed it, I suspect the answer would be no -- Rule 9006 applies to deadlines set by the Bankruptcy Rules, by notice, or by court order, but not by its terms to those set by statute, and the specified circumstances for waiver as described in 109(h)(3) would seem to be undermined by resort to excusable neglect. What do you think? Click on "comments" below and let us know.

1 comment:

Anonymous said...

A related issue is the late filing of a certificate pursuant to §109(h)(3)(A). Interim FRBP sets the time for filing the certificate as "with the petition". The statute does not mention a time for the filing of the certificate. Presumably, then, FRBP 9006 should allow an enlargement of the time for filing the 109(h)(3)(A) ceretificate for "exusable neglict". Issue now pending in Eastern District of Washington, case no. 06-00098-flk12, In re Erickson