Whatever Else It Is, It Is Poorly Written
Here is my entry for biggest understatement on the Credit Slips blog: the 2005 bankruptcy amendments have drawn some criticism. Regardless of one's views about the substance of the amendments, most everyone seems to agree that the legislative drafting left something to be desired. An example is with involuntary petitions. Because section 109(h) requires credit counseling for all consumer debtors in the 180 days preceding or (in some circumstances) the 30 days after the bankruptcy petition, a consumer debtor could defeat an involuntary petition by simply not getting credit counseling. Does that mean that the 2005 amendments eliminated involuntary bankruptcy petitions against consumer debtors?
A bankruptcy court in New Jersey has reached the sensible conclusion, "of course not." (In re Fagan, No. 06-14863 NLW (Bankr. D.N.J. Aug. 14, 2006). In amending the Bankruptcy Code, Congress left in place the section that authorizes involuntary petitions (section 303). If Congress had wanted to except consumer debtors from involuntary petitions, it simply could have amended the list of debtors ineligible for involuntary relief. Moreover, an "individual" must get consumer credit counseling before a bankruptcy petition "by such individual" (section 109(h)). Because an involuntary petition is filed by creditors and not "by such individual," the credit counseling requirements do not apply.
All of this hair-splitting could have been avoided if the credit counseling requirements had simply started with "Except in the case of an involuntary petition," but is there a larger point here other than the hair splitting? I think so. The 2005 bankruptcy amendments were the most sweeping changes to the federal bankruptcy law since 1978 when congressional staffers worked closely with professional experts to draft the Bankruptcy Code. Since 1978, we have seen a steady erosion of congressional willingness to involve bankruptcy experts in legislative drafting. The result was that special interests and their paid lobbyists had a major role in drafting the 2005 amendments.
That's not surprising. Most legislation is drafted, at least initially, by lobbyists. In 1978, there were around 200,000 total bankruptcy filings, and in 2005, there were over 2,000,000. I don't expect to see a return to the days when Congress looked to bankruptcy experts for advice in how to draft the bankruptcy law. The stakes are higher than they were in 1978.
The same thing can be said about 707(b). It applies only in a case "filed by an individual." Involuntary cases are not covered.
Posted by: Marc S. Stern | August 17, 2006 at 02:07 PM
Bob's post raises a lot of issues that have been festering for a while. Folks should check out Nourse and Schacter's article on the politics of legislative drafting that was in NYU Law Review a few years back. They interviewed judiciary committee staffers, who, if I recall correctly, suggested that bankruptcy was a particularly extreme case of deferring to lobbyists. In any event, I don't think bankruptcy experts are the only ones capable of writing clear and effective legislation. Lobbyists undoubtedly are capable of doing so especially when they end up having almost a decade to work on it. They just choose not to for various reasons. Many have suggested that writing unnecessarily complicated and ambiguous legislation seems intended to make the process more complicated and less transparent and thus to deter usage. Of course, this could backfire. The more it becomes impossible to follow the Code literally, the further untethered to the Code the bankruptcy system becomes and the more leeway is given to the day-to-day actors to shape the system to their ways of thinking. I don't endorse this process, but just see it as inevitable under the circumstances.
-Melissa
Posted by: Melissa Jacoby | August 18, 2006 at 07:05 AM
Certainly the exception to the principle of statutory construction that a statute should be interpreted according to its plain, literal meaning unless it would lead to an absurd result has taken on new importance. Courts are now faced with having to define absurdity much more frequently in light of many of the curiously drafted or pasted together provisions of BAPCPA. It is a difficult choice to have to choose between (1) a literal application that leads to an absurd result, (2) finding ambiguity without the guidance of any clear legislative history, or (3) crafting a decision founded on pragmatism and a desire to do the least harm to the bankruptcy system. It's more difficult these days for a judge to look in the mirror and say I know that my role is to interpret the law not to make law. Is judicial activism now unavoidable?
Posted by: Thomas Perkins | August 18, 2006 at 02:20 PM