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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."