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Getting a Waiver for a Credit Counseling Certificate

In my May 5, 2006, article, I admonished people not to wait until the last minute to file bankruptcy because they could get tripped up by the bankruptcy code's requirement to obtain a Certificate of Credit Counseling before filing, as extensions of time are rarely given by the court. However, the requirement can be waived entirely under §109(h)(2)(A) where the approved credit counseling services in the debtor's area "are not reasonably able to provide adequate services to the additional individuals who would otherwise seek credit counseling from such agencies." This is discussed in my article of July 20, 2006.

In addition, a waiver can be obtained under §109(h)(4), which states that the counseling requirements do not apply to a debtor who "is unable to complete those requirements because of incapacity, disability, or active military duty in a military combat zone." The section defines "incapacity" as meaning that the debtor "is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities;" and "disability" as meaning that the debtor "is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing required under paragraph (1)."

As to the "disability" waiver, a May 22, 2006, decision by a Colorado bankruptcy court, In re Tulper, helps us to see what courts are looking at in determining whether to grant a waiver under these circumstances. In that case, it was established that the 60-year-old Mrs. Tulper suffered from many medical ailments, including heart problems, tremors, asthma, a bad lung, arthritis, a disintegrated spine, and a plate in her right ankle. She was also taking approximately 17 prescribed medications.

Whereas 81-year-old Mr. Tulper could not hear or had little hearing capability even with the use of a hearing aid. He also had 40% disability with respect to use of hands and feet, and neither of them had any computer skills. Clearly this showed disability, and the court granted the waiver. In doing so, the court created a three-prong test to satisfy the disability requirement:

  • the debtor is severely physically impaired;
  • the debtor has made a reasonable effort, despite the impairment, to participate in the pre-petition credit counseling; and
  • the debtor is unable, because of the impairment, to participate meaningfully in an in person, telephone, or Internet briefing pre-petition.

The court further observed, "If a debtor goes to credit counseling and, because of a significant impairment, cannot participate in the credit counseling such that he or she can understand what is conveyed during the credit counseling session, so as to be able to have the ‘opportunity to learn about the consequences of bankruptcy,' then the prepetition credit counseling becomes meaningless."

The next question becomes, what must be presented to the court at the time of the hearing to meet the requirements of this test? Well, according to the April 27, 2006, decision of a Vermont Bankruptcy Court in In re: Stockwell, the debtor must provide sufficient evidence; mere allegations are not enough. The debtor ran into a problem when the attorney merely submitted a medical report in response to the court's request for a hearing. On the one hand, the court did not reject the report as evidence. On the other, it found that the content of the report did not provide enough evidence of disability. The court observed that the report

"[did] not describe a person who ‘is impaired by reason of mental illness or mental deficiency so that [she] is incapable of realizing and making rational decisions with respect to [her] financial responsibilities' nor ‘so physically impaired as to be unable, after reasonable effort, to participate in' a personal financial management course."

In addition,

"there [was] nothing in the record to verify that the Debtor is blind, nor to affirm that there are no personal financial management courses available in which she could, after reasonable effort, participate, e.g., courses designed for persons who are visually impaired."

Therefore, the court was saying that it is not enough to allege certain facts to meet the test; supporting, admissible evidence must be presented to the court.

An argument for disability that did not work can be found in the Virginia Bankruptcy Case of In re Star decided on April 24, 2006. In that case, an incarcerated debtor argued that his present confinement rendered him "disabled." He claimed that because of the specific restrictions of his environment, he was "physically prevented" from participating in any credit counseling classes, and that no such courses are available for him to attend in person, by phone or via internet. Although the court ruled against him on a disability waiver, it did find the exigent circumstances necessary to grant him extra time to complete the counseling course.

Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.