Unintended BAPCPA consequences

John CaherNew York Law JournalSeptember 20, 2006

A Northern District of New York bankruptcy judge has refused to bail out Congress for an apparent drafting glitch in the new bankruptcy law that frequently results in creditors getting less under the "reform" measure than they got under the old version -- even though the clear intent of lawmakers and the president was to aid creditors. Chief Bankruptcy Judge Stephen D. Gerling in In re Rotunda, 06-60054, broke with the majority of his colleagues who have considered the same issue and said that if Congress is determined to replace judicial discretion with formulaic mandates, it can deal with the seemingly absurd results. "To allow a debtor with income above the state median to provide for zero payments to unsecured creditors in a chapter 13 plan ... when ... there remains sufficient funds to pay even a minimal dividend to them is contrary to the approach taken by this Court for over 20 years in considering chapter 13 plans," wrote Gerling of Utica. "Yet ... it is not for the Court to second guess Congress despite the fact that the statute, as written, may result in a confirmed plan that is contrary to the view expressed by President Bush." Gerling's decision is rooted in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.