E.D. Tenn. Bankruptcy Court Notes and Weighs in on Split of Authority Re Timing of Bankruptcy Code's Credit Counselling Requirement

Per In re Moore, --- B.R. ----, 2006 WL 3692640 (Bkrtcy.E.D.Tenn. Dec. 14, 2006):

In Mr. Moore's bankruptcy case, the chapter 13 trustee Gwendolyn M. Kerney filed a motion to dismiss on August 23, 2006, and a brief in support thereof on October 2, 2006, asserting that Mr. Moore is ineligible to be a debtor under 11 U.S.C. § 109(h)(1) because he received his credit counseling briefing on the same day that he filed for bankruptcy relief. In Ms. Seabolt's case, the United States trustee filed a similar motion to dismiss on September 8, 2006, and subsequently filed a statement adopting and incorporating the brief filed by Ms. Kerney in Mr. Moore's case. The position of both the chapter 13 trustee and the United States trustee is that 11 U.S.C. § 109(h)(1) requires an individual to obtain credit counseling on any day within 180 days prior to, but not including, the day upon which the bankruptcy petition is filed and that because the debtors herein obtained their briefings on the same day as their bankruptcy filings, albeit prior to the filings, their cases must be dismissed.

Resolution of the motions to dismiss turns on the interpretation of 11 U.S.C. § 109(h)(1), which was enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub.L. No. 109-8, § 106, 119 Stat. 23, 37. This provision states in part:

[A]n individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.

Not surprisingly, there is already a split of authority on the issue at hand. The trustees urge this court to adopt the decision by Bankruptcy Judge Richard Stair Jr. of this district, In re Cole, 347 B.R. 70 (Bankr.E.D.Tenn.2006), along with those of the court in In re Murphy, 342 B.R. 671 (Bankr.D.D.C.2006), and In re Mills, 341 B.R. 106 (Bankr.D.D.C.2006), both authored by the same judge. The debtors' position, on the other hand, rests upon the holdings of In re Warren, 339 B.R. 475 (Bankr.E.D.Ark.2006); In re Hudson, ___ B.R. ___, 2006 WL 2689699 (Bankr.D.Md. Sept. 16, 2006); In re Spears, B.R. ___, 2006 WL 3017364 (Bankr.E.D. Wis. June 19, 2006), and In re Toccaline, No. 06-20218, 2006 WL 2081517 (Bankr.D.Conn. July 17, 2006).

. . .

After careful consideration, this court finds itself in agreement with Hudson, Warren and Spears and respectfully disagrees with Cole, Murphy and Mills. . . .

[T]he "180-day" phrase must be read in context with the clause that proceeds it: "an individual may not be a debtor under this title unless such individual has, during the 180-day ...." This language is instructive because it reminds us that this is an eligibility provision, just like other eligibility requirements in § 109 of the Bankruptcy Code, defining who is eligible for bankruptcy relief. Eligibility is determined as of the filing of the petition. See, e.g., In re Global Ocean Carriers Ltd, 251 B.R. 31, 37 (Bankr.D.Del.2000) ("The test for eligibility is as of the date the bankruptcy petition is filed."). . . .

Thus, considered in its context of § 109's eligibility requirements, the more likely plain meaning of "date" as used in § 109(h)(1) appears to be the less common, but still often used definition, that of moment or specific time. . . . Similarly, the now infamous "hanging paragraph" at the end of 11 U.S.C. § 1325(a) refers to debts "incurred within the 910-day [period] preceding the date of the filing of the petition." . . .

Furthermore, although this court believes that the appropriate reading of § 109(h)(1) is ascertainable from both its language and context, the sparse legislative history to the provision also supports the determination that rather than mandating an artificial time frame period during which credit counseling must occur, Congress' focus in § 109(h)(1) was on imposing a new eligibility requirement which must be satisfied at the bankruptcy filing deadline.