A Bankruptcy Judge’s Perspective On Chapter 13 Under BAPCPA

I just purchased and started reading US Bankruptcy Judge Keith Lundin’s 7000+ page treatise on Chapter 13 bankruptcy after BAPCPA (the revisions made by Congress on Oct. 17, 2005). His book is extremely well-written and timely. I was astonished at his perfect description of what Chapter 13 has become. While this option is still very much available to help people with debt troubles and foreclosure problems, the entire process has been needlessly complicated by the new law. Judge Lundin’s take on the new law confirms what bankruptcy lawyers already know: a debtor who attempts a pro se Chapter 13 case will almost certainly fail. The law is a minefield with gotchas and pitfalls that await the inexperienced. Having a Chapter 13 attorney is more crucial than ever before.

Here is what I read in Judge Lundin’s intro . . .

“Randomly open Chapter 13 of the Bankruptcy Code after BAPCPA and read any changed section: you will be amazed, perhaps dumb-founded, by the mess Congress made of Chapter 13. The simple logic and consistent use of words in standard sentences that characterize the pre-BAPCPA Bankruptcy Code are gone. BAPCPA is a fundamentally new world in which the economics of debt repayment through Chapter 13 plans has been discarded in favor of mathematical formulas and imaginary “budgets” that are unrelated to the realities of individual Chapter 13 debtors and their creditors. The policing functions of Chapter 13 trustees have been neutralized by an array of new constructs, including “current monthly income”—which bears no predictable relationship to a Chapter 13 debtor’s actual income—and a disposable income test that no longer demands a Chapter 13 debtor’s best efforts at confirmation . . .

This first cut at the BAPCPA changes to Chapter 13 has been challenging and frustrating. Thirty years of working with and writing about Chapter 13 was not sufficient preparation for the BAPCPA massacre of Chapter 13. Experienced Chapter 13 practitioners will see in Chapter 13, as amended by BAPCPA, the biggest statutory mess that money could buy. The consumer credit community that paid for BAPCPA will wonder what happened between the rhetoric and the reality of BAPCPA. Future supplements to this book will be a testament that BAPCPA was the most ill-conceived and poorly executed bankruptcy legislation of our lifetimes. The saddest commentary will be the millions of dollars Chapter 13 debtors will pay, not to their creditors, but to their attorneys to sort out the mess that BAPCPA made of the really good idea that was Chapter 13.”

Lundin, Keith, Chapter 13 Bankruptcy, 3rd Edition (Bankruptcy Press, Inc. Nashville, TN 2007).