Posted by Curmudgeon on 2/09/06

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Judge takes Congress to task in bankruptcy case

Legal world abuzz about tirade calling act inane,
confusing.

By Robert Elder
AMERICAN-STATESMAN STAFF
Monday, February 06, 2006

FREDERICKSBURG — Alfonso Sosa, a house painter here who
made about $20,000 last year, filed for bankruptcy the
morning of Dec. 6, hoping to avoid the foreclosure on his
family's mobile home scheduled for later that day. Judge
Frank Monroe of Austin rejected the case 16 days later —
with a bang.

In his ruling, Monroe said the new federal bankruptcy law
is full of traps for consumers, calling some of its
provisions "inane," "absurd" and incomprehensible to "any
rational human being."

He stopped just short of accusing Congress of being
bought and paid for, dryly noting, "Apparently, it is not
the individual consumers of this country that make the
donations to the members of Congress that allow them to be
elected and re-elected and re-elected and re-elected."

Ordinarily, a case such as the Sosas', which primarily
concerns a mobile home and land valued at $32,840, would
quietly disappear into court archives.

But Monroe's order has caught fire in the world of
bankruptcy and consumer law. It's being debated on law
blogs and circulated across the country.

Steve Jakubowski, a bankruptcy specialist in Chicago and
creator of the Bankruptcy Litigation Blog, said Monroe's
unusually strong language represents "the pot boiling
over" in frustration at the Bankruptcy Abuse Prevention
and Consumer Protection Act, which took effect Oct.
17. "It's the kind of thing people know but that you don't
write down."

The law makes it harder for individuals to qualify for
Chapter 7 bankruptcy, which lets them erase much of their
debt, and forces them to file for Chapter 13, which means
they face longer court-ordered repayment plans. It also
requires debtors to seek credit counseling before they
file.

Alfonso Sosa said he didn't know about the requirement, so
he and his wife, Melba, didn't seek counseling. He said he
was just trying to keep his house.

Monroe's order said the law left him no choice but to
disallow the Sosas' petition. He called the counseling
requirement "one of the more absurd provisions of the new
(bankruptcy) act."

In an interview last week, Monroe said that if Congress
really wanted to help debtors, it would have required
rigorous credit counseling before they can emerge from
bankruptcy.

Instead, the act requires a few hours of counseling before
filing. "That serves no purpose," he said.

"The people who need this type of relief aren't the type
of people who have been counseling with lawyers, planning,
making sure everything is right," Monroe said. "They've
come to the end of their rope, and this is the only thing
left to save their house, car, whatever."

The Sosas, who have three children, ages 13, 12 and 1,
haven't lost their home.

Their lawyer, James Chapman of Fredericksburg, filed
another petition Jan. 27. The Sosas completed credit
counseling Dec. 16, and Chapman hopes to convince the
court that they filed the second case "in good faith," as
required by law, and should be allowed to pay off their
debt through Chapter 13 of the U.S. Bankruptcy Code.

The new filing should delay the foreclosure auction of
their home, which is scheduled for Tuesday on the
Gillespie County Courthouse steps.

Monroe isn't the first judge to tee off on the new
bankruptcy law, which was a priority of President Bush and
backed heavily by the credit industry. The industry argued
that the old law made it too easy for borrowers to avoid
paying debts and allowed frivolous filings.

Congress passed the new law in April on largely partisan
lines.

Credit card and other financial services companies had
complained for years that their costs were increased by
people who ran up debts knowing that they could file for
bankruptcy and avoid repayment.

Supporters argued that Americans would save money on
interest rates because credit card companies would no
longer have to increase their fees to recoup losses from
people who abuse the process.

Many bankruptcy lawyers, scholars and judges remain sore
that Congress didn't listen to their warnings about the
hardships the law would unfairly impose on people.

Judge Robert Mark, the chief bankruptcy judge for the
Southern District of Florida, said in an October opinion
that reading "several hundred pages" of the new act
brought him to one "inescapable" conclusion: "The new law
is not a model of clarity."

Houston-based Judge Marvin Isgur last fall called the
act "particularly difficult to parse and, at worst,
virtually incoherent."

Monroe's order, though, is in a rebellious class all its
own.

Monroe, 61, has worked in bankruptcy his entire
professional life, first at a prominent Houston bankruptcy
firm and then on the bench since 1989.

"I am an under-the-radar guy," said Monroe, exhibiting
some discomfort with the attention his opinion has
attracted.

"If I was going to write it over with a less angry frame
of mind, I'm sure I would tone down the rhetoric," he
said. But, he added, "I just couldn't contain myself."

The Sosas' financial situation is hardly remarkable.

Alfonso Sosa says he had trouble making his $700-a-month
mortgage payments because his painting business had slowed
down. Last summer, he missed four payments in a row,
prompting his lien holder, a Fredericksburg woman who sold
him the trailer, to move for foreclosure.

Sosa and his wife had other debts. Their new bankruptcy
filing lists $8,935 that he owes a paint supply store and
three recent county court-at-law judgments against him.
One is for writing a bad check.

By November, with debt piling up, Sosa says, he considered
bankruptcy and thought he could roll his other major debt —
the approximately $6,000 he owes on his 2000 Ford F-250
truck — into a court-approved payment plan. "So I missed a
few payments on the truck," he said.

The dealership in San Antonio repossessed the truck last
month after the third missed payment.

Sosa says he didn't under- stand the foreclosure warnings
sent to him by the lawyer for Reyna Garcia, who sold and
financed the home. "I didn't know what the word meant," he
said. "I thought it was another letter complaining (about
missed payments) like the other ones they had sent me."

Finally, Sosa says he didn't know that he and his wife
needed to undergo credit counseling before filing for
bankruptcy protection. He learned that as he filed Dec. 6.

By Dec. 20, when they appeared before Monroe, the Sosas
had completed their counseling. But only Alfonso Sosa's
certificate had arrived.

It hardly mattered. Because they did not request
counseling before filing, Monroe wrote in his
order, "Congress says they are ineligible for relief under
the act."

"Can any rational human being make a cogent argument that
this makes any sense at all?" he wrote.

Monroe's opinion inspired Austin lawyer Randy Howry,
president of the Austin Bar Association, to send it to all
3,700 members. He praised Monroe's order as "a reminder to
us all that as lawyers and judges, we are the protectors
of our democracy. . . . We must not sit idly by as our
constitutional rights are being shredded."

BAPCPA, 2/09/06, by Curmudgeon.

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