Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005. Many new requirements and restrictions were imposed with the goal of creating uniformity in the evaluation of bankruptcy cases. While there many requirements enacted that were needless and burdensome, there were also other requirements that made sense have added integrity and fairness to the bankruptcy process.
- Requiring confirmation of identification – Debtors are required to present government issued proof of their identification and social security number at their first court appearance. Consequently, most attorneys will review this information in advance to make sure that the correct number is listed on the bankruptcy petition, so that an incorrect number does not affect someone else’s credit. It also prevents someone from posing as someone else, in order to perpetrate fraud or cause harm.
- Requiring verification of income – the eligibility of a debtor to file a Chapter 7 bankruptcy, or to fund a Chapter 13 plan, requires a determination as to the debtor’s income. By reviewing the pay-stubs, bank statements or other documents confirming income, the court and other parties can reliably gauge the debtor’s ability/inability to pay their debts.
- Requiring that all tax filings are up to date – the Bankruptcy Courts are courts of equity, and are driven by the maxim that “those who seek equity must do equity”. In other words, if a consumer wants to seek the protection of the Bankruptcy Courts, they must enter with “clean hands”. Failing to timely and accurately file required income tax returns is consistent with this requirement. Additionally, it is another method of verifying income and household size, which are critical to the analysis of any bankruptcy case.
- Verifying that debtors are familiar with their bankruptcy petition – all debtors are required to truthfully and accurately provide the information which is used to prepare and file their bankruptcy petition. At Leiden & Leiden as well as most firms in the Augusta area, clients will meet with the attorneys several times before the petition is filed. However, some jurisdictions have seen numerous petitions filed with little or no attorney involvement. Some are filed without the debtors’ actual signature! Additionally, little if any information may be obtained from the debtors prior to the filing of the case. To combat such sloppiness, debtors will be asked at their first court hearing if they are familiar with the contents of their petition, and if they actually read it AND signed it.
- Safeguarding debtors from bankruptcy petition preparers – some debtors may file a bankruptcy petition on their own (“pro se”). However, others may use a bankruptcy petition preparer (“BPP”). The new rules require that a BPP must disclose their assistance to the court, or risk fines and penalty. This is to make sure that debtors are not being given legal advice by a non-attorney that may jeopardize their case. It also allows for the review of the fees charged by the BPP to make sure that they are reasonable for the amount of work to be performed. Regretfully, this is the only true and valuable “consumer protection” in the 2005 Act.