Used to be, bankruptcy law was organized to encourage debtors to file Chapter 13 and repay some part of their debts. Some part of that encouragement came in the form of the Super Discharge: the ability to discharge debts incurred by bad acts; unfiled tax debt from long past tax years; and unfiled claims in the bankruptcy case. Most of that departed with BAPCPA.
I’ve adapted Chapter 13 became more like the alternative dumping ground if the means test closed off Chapter 7. Often, the differing allowable deductions on B-22C meant the debtor foreclosed from 7 made minimal payments in 13.
But what galls me these days is the impact of the 9th Circuit BAP decisions of Smith and Martinez which disallow deductions for debt contractually due in the upcoming 60 months on liens to be stripped in the Chapter 13 and for property to be surrendered. The result is that Chapter 7 becomes more attractive because there, the prevailing case law hews close to the statutory language that allows means test deduction for debts due over the life of a Chapter 13 plan. What a blow to the sponsors of BAPCPA who were intent on forcing more debtors into Chapter 13 repayment plans. (This has to be the only time I’ve mourned the thwarting of the intentions of the BAPCPA proponents. Remember the line from the Grinch Who Stole Christmas that the Grinch’s heart was just so many sizes too small)
Very soon after BAPCPA was effective, I argued the Pak case to the BAP concerning whether the statutory look back period in B-22 was conclusive when the debtor’s future income was not only different but larger. I argued that the law was to be applied the way it was written: that Congress, in its infinite wisdom (and I tried not to giggle) thought it could write a formula to find the “can pay” debtors and that it intended to cut off judicial discretion to assess the allowance of expenses or the income to be available to fund the plan. I lost and came away after oral argument with the sense that the judges on the panel wanted the old days back, when their judgment and good sense were the last word. That was a perfectly fine world, but not the world after enactment of BAPCPA.? (Kagenveama from the 9th Circuit some months later vindicated the argument I made unsuccessfully to the BAP.)
With Smith and Martinez, I again sense that the BAP is chafing at the idiocy found in BAPCPA. I chafe too, but I don’t want to see a legal atmosphere where the words of the statute can be ignored if the judges see a way to “get” a debtor or to return to a world where their judgment is valued. I treasure predictability, and if BAPCPA gets applied as written(mean though it is), then I’ll figure out how to get my clients the best deal available under the law. If however we have courts finding interpretations that carry them back to preBAPCPA days, then I feel like the Light Brigade: ” canon to the right of them, canon to the left of them…” hoping I can ride boldly and well, into the mouth of hell,…
In the mean time, I’m filing more Chapter 7’s.