Alexandria, Va. — The final recommendations of the ABI Commission on Consumer Bankruptcy proposes potential solutions for what needs to be done to stimulate the economy, provide debtors with fresh starts, and ensure that creditors receive what debtors can afford to pay, according to an article in the November ABI Journal. “Throughout the COVID-19 pandemic, Congress considered and passed a few quick fixes to the Bankruptcy Code to help stimulate the economy,” Chapter 13 Trustees Linda Gore (Gadsden, Ala.) and Brad Caraway (Birmingham, Ala.) write in their article, “Chapter 13 Legislative Change Is Needed for Economic Relief.” “However, last year Congress also obtained a report from the ABI Commission on Consumer Bankruptcy that proposed beneficial and more meaningful bankruptcy reform. Further changes need to be proposed and passed to give people hope of recovering from the current crisis.”

Gore and Caraway highlighted that the economy and financial state of debtors has changed in the 15 years since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed and enacted into law. “BAPCPA has failed to produce many of the expected results as envisioned at the time of its passage, perhaps due to the various provisions placed in the legislation,” they write. “And now, the economy and workforce are being ravaged by the stresses created as a result of the steps taken to cope with the COVID-19 pandemic.” Gore and Caraway said that by making it more difficult for debtors to file and get a meaningful fresh start (due to restrictions on filing, the debt limits or the type of debts deemed nondischargeable), “debtors are hindered — if not prevented — from rejoining the economy as tax-paying consumers.”

Gore and Caraway examined a few of the recommendations proposed by the Consumer Commission report that they think would help stimulate the economy, provide debtors with fresh starts, and ensure that creditors receive what debtors can afford to pay:   
 

• Student Loans: “The student loan suggestion by the ABI Commission recognizes that recent graduates should be required to pay back their student loans. However, they recommend that student loans be discharged if they were made by an entity other than a governmental unit, incurred by someone who did not receive the education, being paid through a five-year chapter 13 plan or first became payable more than seven years before the filing of a chapter 7 case.”
   
• Chapter 13 Debt Limits: “The ABI Commission also recommended that the debt limits for chapter 13 case eligibility be increased. This is especially needed due to the large student loan amounts that some potential debtors are carrying.”
   
• Elimination of Pre-Petition Counseling: “The ABI Commission advocates for an elimination of pre-petition counseling for chapter 13 debtors but supports the continuation of the requirement for a post-petition financial-management course. The discontinuation of what has become known as the “ticket in” counseling session is to lower costs, eliminate unnecessary time requirements and allow greater access to the bankruptcy courts.”
   
• Reducing the Required Documents for Below-Median Debtors: “The ABI Commission endorses reducing the required documentation the below-median-income debtors are required to produce to establish the numbers used in their means test calculations. If less work is required, less fees for attorneys would be incurred, which would save money for the debtors. This would help to eliminate unnecessary costs for the poorest of debtors.”
   
• Emergency Fund: “Working from the premise that many chapter 13 cases fail due to an unexpected expense or emergency, the ABI Commission proposes that chapter 13 debtors be encouraged and permitted to maintain a reserve to address unanticipated expenses.” Gore and Caraway point out that there are several bankruptcy jurisdictions that currently allow a bankruptcy emergency fund.

To obtain your copy of “Chapter 13 Legislative Change Is Needed for Economic Relief,” please contact ABI Public Affairs Officer John Hartgen at 703-894-5935 or [email protected].

To stay up to date on the COVID-19 pandemic, be sure to bookmark ABI’s Coronavirus Resources for Bankruptcy Professionals website (abi.org/covid19). To obtain a copy of the ABI Commission on Consumer Bankruptcy’s Final Report, please visit https://consumercommission.abi.org/.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.