David R. Bricksin and Vivian M. Bricksin

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UNITED STATES BANKRUPTCY COURT

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GPO

Entered on Docket
July 27, 2006

GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re Case No. 05-59499-ASW
David R. Bricksin and Chapter 7

Vivian M. Bricksin,

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Debtors. ]
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MEMORANDUM DECISION

ON THE UNITED STATES TRUSTEE’S MOTION TO DISMISS

Before the Court is the motion of the United States Trustee
(“Trustee”) to dismiss the chapter 7 case of David R. Bricksin and
Vivian M. Bricksin (“Debtors”). Trustee brought this motion
pursuant to 11 U.S.C. §§ 707(a), 109(h) and 521(b) and Interim Rule
1007 (b) (3) asserting that Debtors failed to file certificates from
an approved credit counseling agency evidencing Debtors’ receipt of
credit counseling within the 180-day period preceding the date of
filing the petition.

This Memorandum Decision constitutes the Court’s findings of
fact and conclusions of law, pursuant to Rule 7052 of the Federal

Rules of Bankruptcy Procedure.

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UNITED STATES BANKRUPTCY COURT

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I.

PROCEDURAL BACKGROUND

Debtors filed a voluntary petition under chapter 7 of the
Bankruptcy Code (“Petition”) on November 22, 2005. On December 2,
2005, Trustee filed a “Motion by United States Trustee to Dismiss
Chapter 7 Case” (“Motion to Dismiss”).

On January 9, 2006, Debtors filed “Debtor’s Response to United
States Trustee’s Motion to Dismiss Chapter 7 Case” (“Debtor’s
Response”), along with the “Declaration of David Bricksin, with
Exhibits, in Support of Debtor’s Response to United States
Trustee’s Motion to Dismiss Chapter 7 Case” (“Declaration of David
Bricksin”). On February 22, 2006, Trustee filed a “Memorandum of
Law in Further Support of the Motion by United States Trustee to
Dismiss Chapter 7 Case” (“Trustee’s Memorandum of Law”). On March
20, 2006, Debtors filed “Debtor’s Supplemental Response to United
States Trustee’s Motion to Dismiss Chapter 7 Case and Debtors
Response to Memorandum of Law in Further Support of the Motion by
United States Trustee to Dismiss Chapter 7 Case: Declaration of
David Bricksin” (Debtors’ Supplemental Response”).

On April 3, 2006, Trustee filed a “Reply to Debtors’
Supplemental Response to United States Trustee’s Motion to Dismiss
Chapter 7 Case” (“Trustee’s Reply to Debtor’s Supplemental
Response”) and an accompanying “Declaration of Shannon L. Mounger
in Support of Reply to Debtor’s Supplemental Response to United
States Trustee’s Motion to Dismiss Chapter 7 Case” (“Declaration of
Mounger”).

The matter was fully briefed and argued on May 4, 2006.

Cc

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Debtors appeared in propria persona. Trustee was represented by
Shannon L. Mounger, Esq. The Court heard testimony from the
Debtors at the hearing.

Il.

STATEMENT OF FACTS?

The facts of this case are undisputed.

Debtors’ financial difficulties began when, sometime in 20047,
David Bricksin lost a relatively high-paying job. As a result of
this unexpected calamity, Debtors were no longer able to afford
their then-current lifestyle. Concerned about their mounting
debts, David Bricksin contacted Consumer Credit Counseling Services
(“CCCS”).

Debtors sought the professional assistance of CCCS to evaluate
their options. CCCS conducted a counseling session with Debtors.
The session was held on or about October 19, 2005.? During the

course of the counseling provided by CCCS, the Debtors received

I The information in this section comes from the

Declaration of David Bricksin dated January 8, 2006, the
Declaration of Mounger dated April 3, 2006, the Exhibits attached
to the declarations, and the testimony received at the hearing.

The actual date when Mr. Bricksin lost his job does not
appear in the record, but it can be inferred from the circumstances
that it occurred sometime in 2004. In any event, the exact date is
of no legal consequence.

3 The Trustee points to CCCS’s October 19, 2004 Letter to
David Bricksin, attached to the Declaration of Mounger as Exhibit
A, as evidence that Debtors participated in a credit counseling
session on October 19, 2004. See Trustee’s Reply to Debtor’s
Supplemental Response. However, the Declaration of David Bricksin,
indicates that the services of CCCS were sought “[eJarly in 2005”.
The Court finds that the Trustee’s account is correct, and that Mr.
Bricksin must have been mistaken as to the date of the counseling
session.

MEMORANDUM DE

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instruction in financial management and actively participated in a
financial management course. They provided all of their financial
information to CCCS, including their current income, living
expenses, assets and liabilities. CCCS then analyzed the
information and provided Debtors with customized recommendations.
Based on this information, CCCS advised the Debtors that they did
not have sufficient resources to repay their debts and recommended
that they file for bankruptcy protection. Debtors were determined,
however, to make an effort to repay their creditors without the aid
of a bankruptcy filing.

With CCCS’s professional expertise, a customized action plan
was created, which contained recommendations and options for the
Debtors.* As a part of this customized plan, CCCS developed a
repayment plan for the Debtors which was designed to allow Debtors
to reimburse their creditors. The repayment plan called for
monthly payments of $2,200.00 toward their debts.

Debtors made regular and significant payments pursuant to the
repayment plan until July 2005. The total funds paid to creditors
under the repayment plan exceeded $11,000.00. Sometime in July
2005, when the Debtors were running out of money and came to the
realization that they could no longer afford to continue with the
debt repayment plan, David Bricksin contacted CCCS again in an
effort to discuss with CCCS their financial situation. During this
conversation, Mr. Bricksin was told that the repayment plan would
be discontinued and that Debtors could not contact CCCS regarding
credit counseling services for five years. On July 28, 2005, CCCS

sent a letter, addressed to David Bricksin, stating that Debtors’

4 Neither party has provided the Court with a copy of the

debt repayment plan prepared by CCCS.

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financial circumstances no longer allowed them to continue with the
repayment plan.° The Bricksins, of course, were aware of that fact
-- they had just told CCCS that they were unable to do so.

Debtors filed for bankruptcy protection on November 22, 2005.
As discussed above, before making this decision, Debtors had
consulted CCCS, a professional credit counseling agency, considered
the effect a bankruptcy filing would have on their lives, rejected
CCCS’ advice that they file for bankruptcy, developed a debt
repayment plan with CCCS, attempted to repay creditors and, in
fact, made payments to creditors in excess of $11,000.00. Their
decision to seek bankruptcy relief was clearly the result of a
well-informed, deliberate process. Debtors were in the process of
carrying out the repayment plan (i.e., making substantial monthly
payments to their creditors) within the 180-day period prior to
filing.

The second page of the Debtors’ Petition contains a section
entitled “Certification Concerning Debt Counseling by
Individual/Joint Debtor(s)”. In this section appear two boxes. To
the right of the first box is the sentence “I/we have received
approved budget and credit counseling during the 180-day period
preceding the filing of this petition”. Adjacent to the second box
is the following statement: “I/we request a waiver of the
requirement to obtain budget and credit counseling prior to filing
based on exigent circumstances. (Must attach certification
describing.)”. On the Petition, Debtors checked the first box. At
the time the Petition was filed, Debtors did not attach a

certificate regarding their receipt of credit counseling to the

5 A copy of the July 28, 2005 letter is attached to the
Declaration of David Bricksin as Exhibit 2.

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MEMO

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Petition, nor did they file one separately.

The Trustee filed the instant Motion to Dismiss on December 2,

2005. Attached to the Declaration of David Bricksin accompanying

Debtors’ Response as Exhibit 4(a) is a certificate which states as

follows:

“TI CERTIFY that on 12-22-2005, DAVID R BRICKSIN received
from Consumer Credit Counseling Service, an agency approved
pursuant to 11 U.S.C. § 111 to provide credit counseling,
an individual briefing (including a briefing conducted by
telephone or the Internet) that complied with the
provisions of 11 U.S.C. §§ 109(h) and 111. A debt
repayment plan was not prepared. If a debt repayment plan
was prepared, a copy of the debt repayment plan is attached
to this certificate.”

Exhibit 4(a) is dated December 22, 2005, and is electronically
Signed by Kathryn Gillespie, Counselor. Also attached to the
Declaration as Exhibit 4(b) is another certificate, identical in
all respects to Exhibit 4(a), except that it names “VIVIAN
BRICKSIN” as the recipient of credit counseling. According to
Exhibits 4(a) and 4(b), Debtors again received credit counseling on
December 22, 2005 -- one month after filing the Petition. Thus,

Debtors twice paid for and received credit counseling.

The Court held a hearing on the Motion to Dismiss on May 4,

2006. Both Debtors testified at the hearing.

IIl.

APPLICABLE LAW

Trustee brings its Motion to Dismiss pursuant to 11 U.S.C. §§

109(h), 521(b), 707(a) and Interim Rule 1007 (b) (3).

Congress recently enacted the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005 (“BAPCPA”). The provisions of the

BAPCPA became effective on October 17, 2005.

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Section 109(h), which was added to the Code as a part of the
BAPCPA, provides, in pertinent part, that “an individual may not be
a debtor under this title unless such individual has, during the
180-day period preceding the date of filing of the petition by such
individual, received from an approved nonprofit budget and credit
counseling agency described in section 111(a) an individual or
group briefing (including a briefing conducted by telephone or on
the Internet) that outlined the opportunities for available credit
counseling and assisted such individual in performing a related
budget analysis.” 11 U.S.C. §109(h) (1) (2005).

This Court has adopted the Interim Rules prepared by the
Advisory Committee on Bankruptcy Rules pursuant to General Order
No. 16 dated September 23, 2005. Interim Rule 1007(b) (3) states,
in relevant part, that “an individual must file the certificate and
debt repayment plan, if any, required by § 521(b).” Federal Rules
of Bankruptcy Procedure, Interim Rule 1007({b) (3) (2005). Section
521(b), also effective October 17, 2005, requires that the debtor
file with the court “(1) a certificate from the approved nonprofit
budget and credit counseling agency that provided the debtor
services under section 109(h) describing the services provided to
debtor; and (2) a copy of the debt repayment plan, if any,
developed under section 109(h) through the approved nonprofit
budget and credit counseling agency referred to in paragraph (1).”
11 U.S.C. § 521 (b) (2005).

Section 707(a) provides for dismissal of a case for cause. 11
U.S.C. § 7O7(a) (2005). The section lists a number of examples
which constitute “cause”, but this list is illustrative and not

exhaustive. In re Padilla, 222 F.3d 1184, 1191 (9th Cir. 2000).

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Trustee submits that Debtors failed to obtain credit counseling
from an approved agency within the 180-day period prior to filing
the Petition and failed to file the certificate required by
§ 521(b). Trustee argues that these failures constitute cause for
dismissal of Debtors’ case under § 707(a). Debtors contend that
they did comply with the relevant statutory requirements and,
accordingly, the Trustee’s Motion to Dismiss should be denied.

IV.

ANALYSIS

The Petition was filed on November 22, 2005, and thus all

statutory amendments contained in the BAPCPA apply in this case.

Read in tandem, §§ 109(h), 521(b), 707(a) and Interim Rule
1007 (b) (3) require the Debtors to receive credit counseling from an
approved agency within the 180-day period prior to filing the
Petition, and to file a certificate evidencing their receipt of the
pre-petition counseling in order to be eligible Debtors under the
Bankruptcy Code.

Construed strictly, Debtors have not satisfied the letter of
the statutory requirements. Debtors did receive credit counseling,
but the date of the initial session was not within the 180-day
period prior to filing. While the Debtors checked the box on the
Petition to indicate receipt of pre-petition counseling, they did

not attach the certificates required by Interim Rule 1007 (b) (3).°

6 Debtors did attach certificates which appear to show

their receipt of credit counseling to the Declaration of David
Bricksin (Exhibits 4(a) and 4(b) referenced in section II(C)
above). Both of these certificates are dated December 22, 2005,
exactly one month after the Petition date. Thus, these
certificates apparently relate to post-petition counseling, and do
not fulfill the statutory requirements.

MEMORANDUM DECISION

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However, the intent of Congress in enacting these particular
provisions of BACPCA is clear. The statutory provisions requiring
debtors to receive credit counseling before they can be eligible
for bankruptcy relief were enacted so that debtors “will make an
informed choice about bankruptcy, its alternatives, and
conseguences.” H.R. Rep. No. 109-031, at 2 (2005). As one court
has stated, “[t]he statute is clear in that it unequivocally
requires that the credit counseling be obtained prior to the filing

of the petition.” In re Warden, No. 05-23750, 2005 WL 3207630

(Bankr. W.D. Mo. Nov. 22, 2005) (emphasis added). Congress’
objective “in enacting the credit counseling requirement is that
focusing on a budget analysis with the help of a credit counseling
professional might obviate the need for seeking bankruptcy relief
for some debtors.” Id. The Warden court dismissed the debtor’s
petition for failure to obtain credit counseling pre-petition,
finding that the Congressional intent is not upheld by receiving
post-petition counseling. Id.

The Court finds that application of the statutory scheme to
dismiss this case, as the Trustee urges, would produce a result at
odds with Congressional intent. The intent behind these statutory
amendments is to encourage debtors to seek alternatives to the
bankruptcy process and to promote debtor awareness of the effects
of a bankruptcy filing by requiring pre-petition credit counseling.
Debtors had received extensive pre-petition credit counseling and
then -- during the 180-day period prior to filing for bankruptcy --
were proceeding with their repayment plan, and making very
substantial payments to creditors. While failing to comply with

the law’s technical letter, the Debtors were clearly in compliance

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with its spirit. The Court finds that the Debtors’ need for a
bankruptcy filing was not and could not have been obviated by
additional credit counseling. Debtors were keenly aware of the
implications of the bankruptcy filing. Indeed, CCCS had advised
the Debtors that their only viable option was to file for
bankruptcy.

While the credit counseling session attended by Debtors was
held outside of the 180-day period prescribed by the statute, the
Court is persuaded that Debtors’ participation in and performance
under a debt repayment plan constitutes ongoing credit counseling
sufficient to satisfy the statutory requirement on the individual
and unusual facts of this case. Debtors performed under the
repayment plan until July 2005, less than 180 days before filing
the Petition. This performance necessitated that Debtors write a
substantial check each month toward the payment of their debts.
Debtors were no less aware of their financial predicament in July
2005 than they were at the time their counseling session was held.
The Court finds that Debtors’ completion of credit counseling, and
then ongoing performance under the debt repayment plan within the
180-day period prior to filing, fulfills the spirit of the
statutory requirement. This is especially true here, where the
credit counselor advised Debtors to file for bankruptcy in the
first place. Debtors did not follow that advice and attempted to
carry out a repayment plan. Then, after making substantial
payments to their creditors, Debtors accepted the reality of their
Situation and filed for bankruptcy -- as CCCS had initially advised
them to do.

Counsel for the Trustee pointed out at the hearing that the

MEM

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agency from which Debtors received counseling was not on the
approved list of providers at that time. However, that provider
was subsequently approved in September 2005, prior to the effective
date of the BAPCPA.’ This situation is perfectly understandable in
the context of this brand new legislation. The Bankruptcy Court is
a court of equity. Debtors have already paid for and completed two
credit counseling sessions. It would be inequitable for this Court
to hold that these Debtors’ technical non-compliance with the law,
despite their very best efforts, warrants dismissal of this case,
which would require these Debtors to start all over, to pay another
$299.00 filing fee, and potentially deprive them of the protection
of the automatic stay.”

Vv.

CONCLUSION

Despite Debtors’ technical non-compliance with the statutory
scheme, Debtors clearly complied with the spirit of the rule. [In
the context of this new statute, this unique set of facts is

unlikely to present itself again. Application of the law in this

7 Counsel for the Trustee noted that the providers approved

by the Trustee were required to go through an application process
and that some providers were required to change their procedures to
receive approval. However, the Trustee does not suggest that the
Debtors in fact were improperly counseled or misled in any way. To
the contrary, all of the available evidence suggests that Debtors
acted responsibly and made every effort to comply with the spirit
of the statutory requirements. Moreover, The Trustee certainly
could have advised the Court if CCCS’s procedures had to be
revamped following BAPCPA. The Trustee presumably would have
access to that information and did not introduce any evidence to
that effect.

§ Debtors list a secured vehicle debt relating to a 2002
Chevrolet Suburban on their Schedule D which is potentially
affected by the automatic stay.

MEM

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case to dismiss Debtors’ petition would contravene Congressional
intent. Therefore, the Trustee’s Motion to Dismiss is denied.

Dated:

Cole6 ee Oa

ARTHUR S. WEISSBRODT
UNITED STATES BANKRUPTCY JUDGE

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Court Service List

David R. Bricksin
PO Box 1317
Los Gatos, CA 95031-1317

Vivian M. Bricksin
PO Box 1317
Los Gatos, CA 95031-1317

Mohamed Poonja
P.O. Box 1510
Los Altos, CA 94023-1510

Office of the U.S. Trustee
U.S. Federal Bldg.

280 S lst St. #268

San Jose, CA 95113-3004

Shannon L. Mounger

Office of the U.S. Trustee
280 S lst St. #268

San Jose, CA 95113-0002

MEMORANDUM DECISION

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