{"id":4693,"date":"2025-03-14T02:28:23","date_gmt":"2025-03-14T02:28:23","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/bankruptcy-dismissal-credit-counseling\/"},"modified":"2025-03-14T02:28:23","modified_gmt":"2025-03-14T02:28:23","slug":"bankruptcy-dismissal-credit-counseling","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/bankruptcy-dismissal-credit-counseling\/","title":{"rendered":"Bankruptcy \u2013 Dismissal \u2013 Credit counseling"},"content":{"rendered":"\n
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Listen to this article<\/div>\n<\/div>\n

Where a U.S. Bankruptcy Court judge dismissed a debtor\u2019s Chapter 7 case, that decision should be upheld because the judge did not clearly err in finding that the debtor failed to comply with the pre-petition credit counseling requirement and the record supports the judge\u2019s finding that the debtor was not excused from satisfying that requirement.\n<\/p>\n

\u201cThe bankruptcy court dismissed Charles Muszynski\u2019s chapter 7 case on several grounds, including his failure to complete the credit counseling required under \u00a7109(h)(1) within the prescribed period, and Muszynski appealed. \u2026\n<\/p>\n

\u201cThe Debtor asserts that \u2018all parties\u2019 \u2014 including the Creditors \u2014 waived the credit counseling requirement. He further maintains that he timely obtained credit counseling on May 13, 2023. The Debtor adds that the [Puerto Rico] Bankruptcy Court \u2018ignored\u2019 that \u2018no counseling exists\u2019 where he resides \u2014 Nevis and St. Kitts \u2014 and the credit counseling requirement was, therefore, inapplicable under Taal v. Sumski<\/i> (In re Taal<\/i>), 504 B.R. 682 (B.A.P. 1st Cir. 2014). \u2026<\/p>\n

\u201cSection 109(h)(1) \u2018requires, as a condition to eligibility for bankruptcy relief, that within 180 days prior to an individual debtor\u2019s bankruptcy filing, the debtor receive (1) a briefing as to available opportunities for credit counseling, and (2) assistance in performing a budget analysis from a nonprofit credit counseling agency, approved ordinarily by the United States Trustee (collectively, \u2018credit counseling\u2019).\u2019 \u2026\n<\/p>\n

\u201c\u2026 First, pursuant to \u00a7109(h)(2)(A), if the United States trustee or bankruptcy administrator determines that there are no approved agencies \u2018reasonably able to provide adequate services\u2019 in a district, then debtors who reside in that district are excused from complying with the requirements of \u00a7109(h)(1). \u2026\n<\/p>\n

\u201cSecond, \u00a7109(h)(3) provides for a deferment of the credit counseling requirement (of up to 30 days) where a debtor \u2018submits to the court a certification that \u2014 (i) describes exigent circumstances that merit a waiver\u2019 of the requirement; (ii) \u2018states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services \u2026 during the 7-day period beginning on the date on which the debtor made that request;\u2019 and (iii) \u2018is satisfactory to the court.\u2019 \u2026<\/p>\n

\u201cThird, \u00a7109(h)(4) sets forth exceptions to the credit counseling requirement for debtors who are unable to complete credit counseling \u2018because of incapacity, disability, or active military duty in a military combat zone.\u2019 11 U.S.C. \u00a7109(h)(4). The \u00a7 109(h)(4) exceptions are not implicated in this appeal. \u2026\n<\/p>\n

\u201cThe Bankruptcy Code is silent regarding the consequence for failing to comply with the pre-petition credit counseling requirement. \u2026 \u2018The majority of courts considering the issue have found that dismissal of the case is mandatory if the debtor failed to comply with the credit counseling requirement of \u2026 \u00a7109(h).\u2019 \u2026\n<\/p>\n

\u201cIn dismissing the Debtor\u2019s case, the P.R. Bankruptcy Court concluded that he was ineligible to be a debtor under \u00a7109(h)(1). The record reflects that the Debtor obtained the required credit counseling two days after the filing of his petition without having obtained a deferral of the requirement. Thus, the P.R. Bankruptcy Court\u2019s finding that the Debtor did not satisfy the credit counseling requirement is not clearly erroneous. The next question becomes whether the record supports the P.R. Bankruptcy Court\u2019s finding that the Debtor was not excused from satisfying the requirement.\n<\/p>\n

\u201cHere, the Debtor did not properly or timely invoke any of the statutory exceptions to the credit counseling requirement below; nor does the record suggest that he qualified for them. \u2026\n<\/p>\n

\u201cNot only are the statutory exceptions inapplicable, but there is also nothing in the record to suggest either the Texas Bankruptcy Court or the Creditors waived the credit counseling requirement, notwithstanding the Debtor\u2019s assertions to the contrary. \u2026\n<\/p>\n

\u201cNothing in the record suggests that the P.R. Bankruptcy Court clearly erred in finding that the Debtor failed to satisfy the credit counseling requirement or abused its discretion when it found that the Debtor failed to satisfy the requirements that would have entitled him to a temporary waiver of the pre-petition credit counseling requirement under \u00a7109(h)(3).\n<\/p>\n

\u201cThe Debtor\u2019s argument that he was entitled to an evidentiary hearing under \u00a7707(a) does not alter our analysis. \u2026\n<\/p>\n

\u201cBased on the above analysis, we conclude that the P.R. Bankruptcy Court did not abuse its discretion in deciding not to hold an evidentiary hearing and properly determined that the Debtor did not qualify to be a debtor. \u2026\u201d\n<\/p>\n

In Re: Muszynski, Charles (Lawyers Weekly No. 03-004-25) (18 pages) (Cary, J.) (BAP No. PR 24-011) (March 7, 2025).<\/i>\n<\/p>\n

Click here to read the full text of the opinion.\n<\/p>\n

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