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Reprinted from the November 2005 ABI Journal November 1, 2005

Web posted and Copyright © November 1, 2005, American Bankruptcy Institute.

U.S. Trustee Program Relaxes Enforcement for Hurricane Victims

he U.S. Trustee Program (USTP) announced a series of steps in early October to address the impact of BAPCPA on victims of recent natural disasters.

  • Document Requirements. Under current law and BAPCPA, debtors provide documents such as payment advices and statements of income. U.S. Trustees will not file enforcement motions against debtors who cannot produce documents due to natural disasters if they are otherwise eligible for bankruptcy relief.
  • Means Test. Under BAPCPA, individual debtors undergo a "means test" to determine whether they are eligible for chapter 7 relief or whether chapter 7 relief is presumed abusive. Generally speaking, BAPCPA permits a debtor to rebut that presumption of abuse by showing "special circumstances." In determining whether to file an enforcement motion on grounds of presumed abuse, the USTP will consider income loss, expense increase and other adverse effects of a natural disaster to constitute "special circumstances."
  • Attendance at Creditors' Meetings. U.S. Trustees will exercise flexibility and provide alternative means for a debtor to attend the mandatory meeting of creditors if, due to the adverse effects of a natural disaster, the debtor cannot appear personally and testify under oath in the district where the case is filed.
  • Venue. U.S. Trustees will not raise or support venue objections in cases in which the debtor was displaced due to a natural disaster, unless the filing constitutes a systemic abuse or presents extraordinary circumstances.
  • Small-business Chapter 11 Bankruptcies. U.S. Trustees will not take enforcement actions against chapter 11 small-business debtors who, as a result of a natural disaster, cannot reasonably be expected to perform statutory duties such as attending an initial debtor interview and filing financial reports. U.S. Trustees will not seek conversion or dismissal of a small-business chapter 11 case if the grounds for filing the case are attributable to a natural disaster and there are reasonable prospects for reorganization. U.S. Trustees will not oppose reasonable and necessary extensions of time to file a disclosure statement and confirm a reorganization plan if a small business debtor cannot comply with the deadlines because of a natural disaster.
BAPCPA requires individual debtors to undergo credit counseling before filing for bankruptcy, and authorizes U.S. Trustees to approve credit counseling agencies according to criteria set forth in the law. On Oct. 4, the USTP announced a temporary waiver of the statutory requirements for credit counseling for bankruptcy filers in Louisiana and the Southern District of Mississippi due to the effects of Hurricane Katrina. The USTP subsequently announced a temporary waiver for the debtor financial-management education requirement.

 

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