Credit reports falsely lead the consumer into believing information on the reports is accurate, or that a creditor is required to make sure the data on the credit report is accurate.
The following is for the exclusive use of attorneys. This firm does not make any representations as to the accuracy or current status of any case cited herein.
On a question where the courts are divided, Bankruptcy Judge Mary Ann Whipple of Toledo, Ohio, took sides with the Seventh Circuit and held that the claim filing deadline in Bankruptcy Rule 3002(c) applies to secured creditors in chapter 13 cases, even though secured creditors are not required to file claims in chapter 13 cases.
In chapters 7 and 13, secured creditors are not required to file claims. After bankruptcy, they may enforce their liens against the debtor’s property, although they would have waived any unsecured deficiency claims and retained no claims against the debtor personally. Secured creditors will often refrain from filing claims to avoid submitting to the jurisdiction of the bankruptcy court and the possibility of having consented to entry of a final order in bankruptcy court.
In In re Pajian, 785 F.3d 1161 (7th Cir. 2015), the bankruptcy judge believed that a secured creditor could file a claim in a chapter 13 case at any time before confirmation. On direct appeal, the Seventh Circuit reversed in May 2015, holding that secured creditors must file claims in chapter 13 cases by the same deadline that applies to unsecured creditors.
In re Dumbuya, 15-33176 (Bankr. N.D. Ohio Feb. 6, 2017) Judge was persuaded by the Seventh Circuit’s conclusion that “principles of sound judicial administration” call for making the deadline applicable to secured claims, otherwise a secured creditor could “swoop in at the last minute and upend a carefully constructed payment schedule.”
Eleventh Circuit holds that filing a proof of claim in bankruptcy on a time-barred debt violates the FDCPA. In Crawford v. LVNV Funding, LLC, the Eleventh Circuit became the first federal circuit court of appeals to hold that filing a proof of claim on a time-barred debt in a bankruptcy case violates the Fair Debt Collection Practices Act (“FDCPA”). See No. 13-12389,__ F.3d __, 2014 WL 3361226 (11th Cir. July 10, 2014). The case arose when LVNV filed a proof of claim in Crawford’s bankruptcy case on a debt for which the statute of limitations had expired. In response, Crawford filed an adversary proceeding against LVNV, alleging that LVNV routinely filed proofs of claim on time-barred debts and that LVNV’s actions violated the FDCPA.
The Court concluded that “a debt collector’s filing of a time-barred proof of claim creates the misleading impression to the debtor that the debt collector can legally enforce the debt.” Id. at 4. The “least sophisticated consumer” may therefore fail to object to the claim, and, due to the Bankruptcy Code’s automatic allowance provision, the claim will be paid out of the debtor’s wages. For these reasons, the court found that filing a proof of claim on a time-barred debt was unfair, unconscionable, deceptive, and misleading, in violation of §§ 1692e and 1692f of the FDCPA.
In re: Los Gatos Lodge, Inc. (01/17/02 – No. 00-16916) (9th Cir. Ct App) bankruptcy trustee may not surcharge a creditor for expenses in preserving a property under 11 USC 506(c) after the secured creditor’s claim has been disallowed, even if the claim was deemed an “allowed secured claim” afterwards.
In Re J.H. Investment Services, Inc., (11/22/11 – Ct of Appeals 11th Cir) held that the IRS had waived its right to an unsecured deficiency by filing a proof of claim that evidenced a secured claim but failed to note that a portion of the claim may be unsecured. The court held that the latter set of rights, plan voting and distribution towards the unsecured portion of an otherwise secured claim, could be waived if not pursued through express reference in a proof of claim.
Can a debtor file a proof of claim for the creditors? Yes, the debtor may file a claim for a creditor up to 30 days after the claims bar date. See BR 3004.
December 1, 2011: rule changes related to proofs of claim: Pursuant to Rule 3001(c), proofs of claim must be made in writing. Official Form B-10 is the proof of claim form. Official Form B-10 has changed and the instructions for completing the proof of claim have changed. Creditors must now include information about the interest rate, each creditor must now sign off on a statement that it has attached documentation that is evidence of the creditor’s perfected security interest, and the signature block of Official Form B-10 has changed.
Rule 3001(c)(2) has been amended and is now entitled “Additional Requirements in an Individual Debtor Case; Sanctions for Failure to Comply”. The changes require a claimant to include an itemized statement of the prepetition interest, fees, expenses or charges with a proof of claim, as well as a statement of the amount necessary to cure a default as of the petition date. If the mortgage payments include an escrow payment, an escrow statement must also be attached to the proof of claim. These requirements can be partially fulfilled by the completion and filing of new Official Form B10, Attachment A.
To complete Official Form B10, Attachment A, Part 1, the mortgage creditor must itemize the amount of principal and interest due as of the date of the filing of the bankruptcy petition, and the total interest due as of the petition date must be broken down by interest rate and the corresponding time periods. Part 2 requires a description of the fees, expenses and charges incurred in connection with the claim, as of the petition date, the dates these charges were incurred and the amounts of these charges.
Part 3 requires a statement of the amount necessary to cure the default as of the petition date. It is in this section that a mortgage creditor will check off the box indicating whether or not the mortgage payments that are in arrears include an escrow component. If so, the mortgage creditor must include a copy of an escrow statement. Also required in Part 3 is the date the last payment was received by the creditor, the number of payments due, and the amount of the payments due which the mortgage creditor must further analyze by adding the total of prepetition fees and expenses to the overdue payments and subtracting the total of any unapplied funds, resulting in an amount which is the total amount necessary to cure the default as of the petition date.
The bankruptcy court can impose sanctions against a creditor who files a proof of claim, but fails to provide the documentation and information required by Rule 3001(c). Those sanctions can be evidentiary, monetary or punitive.
Proofs of claim must be signed under penalty of perjury that the statements in the claim are “true and correct and to the best of my knowledge, information and reasonable belief.” The penalty for presenting a fraudulent claim is a fine of up to $500,000 or imprisonment for up to five years, or both. The changes to Rule 3001 and the addition of Rule 3002.1 are designed to respond to cases with facts and circumstances that bankruptcy courts found to be unacceptable. The liability for attorneys and proof of claim preparers who sign inaccurate forms can be substantial.
The changes also require an ongoing requirement for claimants in Chapter 13 cases. Creditors in Chapter 13 cases whose claims are secured by a security interest in a debtor’s principal residence and whose claims are for arrearages being cured through a Chapter 13 plan, are required to file a Notice of Payment Change (Official Form B10, Supplement 1) no later than 21 days before the new amount is due. This consists of a change in the mortgage payment amount, including those changes which arise from escrow adjustments or from interest rate changes. The Notice of Payment Change must be served upon the debtor, the debtor’s counsel and the Chapter 13 trustee. The Notice of Payment Change must be filed as a proof of claim supplement in the proof of claims registry.
The consequences for the mortgage creditor who fails to file a timely Notice of Payment Change will render the payment change ineffective. Mortgage creditors who fail to comply can expect evidentiary sanctions, where the court can prohibit a creditor from presenting evidence in a dispute about the claim. The court also has discretion to “award appropriate relief, including reasonable expenses and attorneys’ fees”.
Mortgage creditors in Chapter 13 cases whose claims are secured by a security interest in a debtor’s principal residence and whose claims are being paid through a Chapter 13 plan, are required to file a Notice of Fees, Expenses and Charges (Official Form B10, Supplement 2) every 180 days (the “Notice of Fees”) while the Chapter 13 case is ongoing. The Notice of Fees must be filed as a supplement to the mortgage creditor’s proof of claim in the bankruptcy court’s claims registry, and it must be served on the debtor, the debtor’s attorney and the Chapter 13 trustee within 180 days of when the charges were incurred. Failure to timely file the Notice of Fees will result in the inability for the creditor to collect the fees and expenses which should have been disclosed in the Notice of Fees.
Fees, expenses and charges include late fees, attorneys’ fees, inspection fees, taxes advanced, property preservation fees and forced place insurance. The trustee and/or the debtor have up to one year after the filing of the Notice of Fees to file a motion requesting a hearing on whether or not the payment of the fees and charges in the Notice of Fees are lawful.
Pursuant to Rule 3002.1(f) – (h), within 30 days after a debtor completes all Chapter 13 plan payments, the trustee must file and serve a notice stating the debtor has paid in full the amount required to cure the default on the creditor’s claim (the “Final Cure Notice”). The Final Cure Notice must include a statement that advises mortgage creditors of their obligation to file a response within 21 days after the Final Cure Notice. Failure to file the written response within this time period may be fatal to the creditor’s position.
The mortgage creditor’s response must state: (1) whether it agrees with the assertion that the debtor has paid the amount needed to cure the default on the creditor’s claim; (2) whether the debtor is otherwise current; or (3) if the creditor asserts the debtor has not cured the default, the creditor must provide an itemization of the cure amount. The mortgage creditor’s required response also must be filed as a supplement to the mortgage creditor’s proof of claim in the claims registry, in addition to being served on the debtor, debtor’s attorney and the Chapter 13 trustee.
The following is for the exclusive use of attorneys. This firm does not make any representations as to the accuracy or current status of any case cited herein.
Comparison between chapter 11 (individual) and chapter 13: (from Iain A. Macdonald, MACDONALD & ASSOCIATES – 8-2015)
In Hamilton v. Lanning, 130 S. Ct. 2464 (2010), the Supreme Court summarized the key features of a Chapter 13 bankruptcy proceeding: Chapter 13 . . . provides bankruptcy protection to “individual[s] with regular income” whose debts fall within statutory limits. 11 U.S.C. §§ 101(30), 109(e). Unlike debtors who file under Chapter 7 and must liquidate their nonexempt assets in order to pay creditors, see §§ 704(a)(1), 7126, Chapter 13 debtors are permitted to keep their property, but they must agree to a court-approved plan under which they pay creditors out of their future income, see §§ 1306(b), 1321, 1322(a)(1), 1328(a). A bankruptcy trustee oversees the filing and execution of a Chapter 13 debtor’s plan. § 1322(a)(1); see also 28 U.S.C. § 586(a)(3).
[I]f a trustee or an unsecured creditor objects to a Chapter 13 debtor’s plan, a bankruptcy court may not approve the plan unless it provides for the full repayment of unsecured claims or “provides that all of the debtor’s projected disposable income to be received” over the duration of the plan “will be applied to make payments” in accordance with the terms of the plan. 11 U.S.C. § 1325(b)(1); see also § 1326(b)(1) (2000 ed.). Id. at 2468-69.
Supreme Court’s recognition that bankruptcy courts possess flexibility to look beyond a mechanical application of § 1325(b)’s calculations in order to account for variations readily apparent in the record, even after the BAPCPA. See In Hamilton 130 S. Ct. at 2471-78; see also id. at 2478 (“[W]hen a bankruptcy court calculates a debtor’s projected disposable income [under § 1325(b)], the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation.”).
Ransom v. FIA Card Services, N.A (aka Ransom vs MBNA)., 131 S16, 178 L. Ed.2nd 603 (2011) (2011 BL 6640) (9th Cir.) the Supreme Court’s decision, while referencing the IRS’s explanatory guidelines to clarify a point regarding how another aspect of § 1325(b) should be interpreted, expressly “emphasize[d] . . . that the statute does not ‘incorporate’ or otherwise ‘import’ the IRS’s guidance.” Id. at 726 n. 7. The Supreme Court found that the Chapter 13 debtor in this case could not take a vehicle ownership deduction on the bankruptcy “means test” that is required in order to determine the amount of disposable income that a debtor has available to repay debt. The debtor in this case owned his car outright and did not have car loan; thus, the Court found that there was no ownership expense and any excess income that would have gone towards a vehicle ownership expense had to be paid to creditors. On the other hand, if a debtor has a car loan, he or she is allowed to take the vehicle ownership deduction on the means test under the theory that such a car payment reduces the amount of disposable income available to repay creditors.
A debtor in bankruptcy who does not make loan or lease payments may not take the deduction that is otherwise available for ownership of an auto.
A debtor in bankruptcy who does not make loan or lease payments may not take the deduction that is otherwise available for ownership of an auto.
Johnson v. Zimmer, — F.3d —-, 2012 WL 2819463 (4th Cir., July 11, 2012) Affirming In re Johnson, 2011 WL 5902883 (Bankr. E.D. N.C., July 21, 2011) on direct appeal, the Fourth Circuit Court of Appeals, in a matter of first impression for the circuit courts, held, in a 2-1 panel decision, that the bankruptcy court did not err in employing the “economic unit” approach to determine a Chapter 13 debtor’s “household” size for the purpose of Code § 1325(b), and in counting children who were part-time residents of the debtor’s household as fractional persons for the purpose of the calculation. Under this method, a debtor’s “household” would include individuals who operate as an “economic unit” with the debtor: those the debtor financially supports and those who financially support the debtor. In other words, persons whose income and expenses are interdependent with the debtor’s are part of his or her “household” for purposes of § 1325(b). The dissent, by Circuit Judge Wilkinson, objects to the “startling conclusion” that the statutory terms “individuals” and “dependents” “can encompass fractional human beings.”
In re Ragos (5th Circuit)– Holding that social security benefits are not disposable income in chapter 13 and it is not bad faith to exclude such income from calculating disposable income. In re Cranmer (10th Circuit) – Same as Ragos.
Valuing of Property in 13 Differing opinions on whether to use date of filing or date of plan confirmation: In a real estate climate where values are quickly changing, the question arises when is the value of the residence determined? The date of filing of the Chapter 13 petition, the date of confirmation, the date of the hearing on for determining the value or some other day?
§ 506(a) provides: “Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.” The various approaches all prefer their approach as meeting this standard.
For the proposition that the date of valuation is the date of hearing/confirmation see In re Crain, 243 B.R. 75 (Bankr. C.D. Cal 1999); In re Boyd, 410 B.R. 95, 100 (Bankr.N.D.Cal. Aug 04, 2009). See also In re Zook, 2010 WL 2203172 (Bankruptcy D. Ariz. 2010) [Chapter 11 proceeding in front of Judge Haines.]
For the date of filing, see In re Dean, 319 B.R. 474 (Bankr.E.D.Va.2004) In re Young, 390 B.R. 480 (Bankr.D.Me.2008).
Some Courts ruled in favor a “flexible approach” or a determination of the “totality of circumstances.” In re Aubain, 296 B.R. 624, 636 (Bankr.E.D.N.Y.2003); Wood v. LA Bank (In re Wood), 190 B.R. 788, 794-96 (Bankr.M.D.Pa.1996) [Using an eleven factor analysis].
In re Boukatch, 2:14-bk-04721-EPB, BAD AZ-14-1483 (July 9, 2015) Debtor could not strip off valueless lien on home in “chapter 20” case. BAP overturned: We conclude that § 1328(f)(1) does not prevent Debtors’ ability to strip off MidFirst’s wholly unsecured junior lien in heir chapter 13 plan, because nothing in the Bankruptcy Code prevents chapter 20 debtors from stripping such liens off their principal residence under §§ 506(a)(1) and 1322(b)(2). We further conclude that plan completion is the appropriate end to Debtors’ chapter 20 case. Unlike a typical chapter 13 case, the lien avoidance will become permanent not upon a discharge, but rather upon completion of all payments as required under the plan. In re Davis, 716 F.3d at 338; In re Frazier, 469 B.R. at 900; In re Blendheim, 2011 WL 6779709, at *6; In re Okosisi, 451 B.R. at 99-100; In re Frazier, 448 B.R. at 810; In re Tran, 431 B.R. at 235.
We conclude that the bankruptcy court erred when it denied the Lien Strip Motion on the basis that Debtors were not eligible for a chapter 13 discharge.
VI. CONCLUSION For the foregoing reasons, we REVERSE the decision of the bankruptcy court and REMAND for further proceedings consistent with this opinion.
Branigan v. Davis, No. 12-1184 (4th Cir. 05/10/2013) Confirmation orders entered by the bankruptcy court stripping off junior liens against debtors’ residences in so-called “Chapter 20 cases”, is affirmed, where: 1) the Bankruptcy Abuse Prevention and Consumer Protection Act does not bar the orders entered by the bankruptcy court; and 2) the stripping off of valueless liens is otherwise consistent with the Bankruptcy Code. There is a dissent. Read more…
In Re: Mansaray-Ruffin, No. 05-4790 (U.S. 3rd Circuit Court of Appeals, June 24, 2008)
A debtor in a Chapter 13 bankruptcy case did not invalidate a lien on her property by providing for it as an unsecured claim in her confirmed plan, without initiating an adversary proceeding as required by the Federal Rules of Bankruptcy Procedure.
In re Sobczak, 369 B.R. 512 (9th Cir. BAP 2007). In a case arising out of Arizona, the BAP reversed the Bankruptcy Court’s dismissal of the debtor’s case, holding that (a) the debtor in a case converted from Chapter 7 to Chapter 13 had standing to move for dismissal of his bankruptcy, but (b) dismissal of the debtor’s bankruptcy in the circumstances presented was improper. The BAP found that the debtor’s realization that in bankruptcy he was limited by §522 to Ohio’s $5,000 homestead exemption, rather than the Arizona $150,000 exemption that would apply if he were not in bankruptcy, was not a proper basis for allowing the debtor to move under §1307 to dismiss his case.
Using Till in chapter 13, shortly after discharge in chapter 7: Till could be used for the plan, but the problem is that without a discharge a lien remains in place unless the debt is paid pursuant to non-bk law. 1325(a)(5)(B)(i). Lien strip-offs are OK because there is no allowed secured claim (per 506), but here you are talking about some 506 value, so there is an allowed secured claim. Thus, you could pay Till if you need to in order to make the plan feasible, but the lien has to be retained and will be in default (for non-payment of the interest) once the plan completes. But see this additional argument: If this is a Chapter 20, the Debtor’s personal liability on the car loan was discharged in the first Chapter 7. This would include a discharge on any interest claim over and above the Till rate in the subsequent Chapter 13. Therefore it seems that one can do a cram down on the rate in the subsequent 13 without problem. But, a third thought: the issue is neither the personal discharge or the cramdown rate. The issue is whether the contract interest rate survives as a lien against the vehicle after the completion of the 13. Must the lender release the title after being paid less than whats owed under the contract ? In addition to the contract interest “surviving”, what about the lenders fees and expenses in getting advice about the surviving contract interest rate ?
In re Brown, 346 B.R. 868 (Bkrtcy.N.D.Fla. 2006) LEWIS M. KILLIAN JR., Bankruptcy Judge Creditor holding PMSI not entitled to deficiency claim in chapter 13 where debtor surrenders vehicle in full satisfaction of debt § 1325(a)5) (hanging paragraph), § 506, 502
Debtor proposed to surrender a motor vehicle subject to a PMSI and purchased for personal use within 910 days of filing the petition, in full satisfaction of the under-secured debt. Creditor objected.
The court first held that despite language in § 1325(a) (hanging paragraph) that Code § 506 does not apply to a PMSI debt, the debt is still a secured debt. The court ruled that “just because § 506 does not apply does not mean that there is no secured claim. Section 506(a) simply provides for the bifurcation of claims into secured and unsecured portions in accordance with the value of the collateral; it does not form the basis for a secured debt.” The court essentially held that § 502 is the section that determines the secured status of a claim.
The court then observed that “Secured creditors, like every other party to a bankruptcy case, have to take both the good and the bad,” held that . . . the Hanging Paragraph following § 1325(a)(9) allows the Debtor to surrender his vehicle, which is the subject of a 910 claim, in full satisfaction of the debt owed to Wells Fargo.”
In re Sparks, 346 B.R. 767 (Bkrtcy.S.D.Ohio 2006) J. VINCENT AUG, JR. Bankruptcy Judge Creditor holding PMSI not entitled to deficiency claim in chapter 13 where debtor surrenders vehicle in full satisfaction of debt § 1325(a)(5)
The court held that where a vehicle is subject to a PMSI and was purchased for the debtor’s personal use within 910 days of filing the petition the Code prohibits a “cram-down” but does not prohibit the debtor from surrendering the vehicle in full satisfaction of the debt, with no unsecured portion remaining to be treated in the plan. In other words, the anti-cramdown provision acts restricts both the creditor and the debtor from treating the claim as a cram-down or strip-down for a partially secured claim
In re Pennington, 348 B.R. 647 (Bkrtcy.D.Del. 2006) MARY F. WALRATH, Bankruptcy Judge Court could dismiss chapter 13 for “abuse” notwithstanding the debtor’s income was below state median
Threshold for “abuse” where the means test per se does not apply is 25% of unsecured debt. § 707(b)(1)
Debtor’s income was below the state median but actual disposable income at the time of the hearing to dismiss or convert was sufficient to pay 42% of the unsecured debt over a 3-year plan. The court noted that the surplus income was more than enough to pay more than 25% of the unsecured debt, which was the “threshold were abuse is presumed under the means test”, even though the means test is not applicable.
◙ In re Boardwalk holds that late charges and interest must be reasonable and bankruptcy judge can reduce; any authority for once 13 filed, that no default or late fees on post-petition payments can accrue.
While criminal restitution is non-dischargeable under section 523, it is not one of the listed priority debts in section 507 (the same problem as with educational loans). Therefore, any attempt to pay that unsecured debt in full in the plan without the same percentage payback to other unsecured creditors would likely cause the trustee to object. Instead, try to get the agency to whom the restitution is owed to agree to a long term payback of the restitution–longer than the Ch 13 plan’s duration . Then, using section 1322(b)(5), pay the restitution outside the plan as a budget expense.
PROOF OF CLAIM – SECURED ON PRINCIPLE RESIDENCE AND OTHER ISSUES – Rules change 12/1/11 – see Claims
In re Weber, 719 F.3d 72 (2nd Cir. May 8, 2013): In our view, the plain language of section 542 (directing that those in custody of assets of the estate “shall deliver” them to the trustee); the approach of the Whiting Pools Court to equitable interests and bankruptcy estates; and the broad language of the 1984 Amendments enlarging the scope of the automatic stay point unmistakably away from any Congressional desire to impose such an additional burden on debtors seeking bankruptcy protection.
The loss of so many jobs in the current recession will negatively impact many debtors who are making plan payments pursuant to their confirmed Chapter 13 plans but have yet reached plan completion.
Post-confirmation Chapter 13 debtors who experience a decrease in disposable income may become eligible for either conversion to Chapter 7 or a Chapter 13 hardship discharge. In circumstances where debtors have not incurred post-petition debt that may be discharged in a case converted to Chapter 7, it is most advantageous for them to proceed with a request for hardship discharge.
Obtaining a hardship discharge under 11 U.S.C. section 1328(b) helps debtors to become eligible for a subsequent Chapter 7 or 13 discharge two (2) years earlier than they would be if they converted their case and received a Chapter 7 discharge. See Discharge Analysis article in last issue of CDCBAA’s Newsletter.
A motion brought under 11 U.S.C. section 1328(b) is made on grounds that (1) the debtors are not able to complete the payments under their Plan due to circumstances for which they should not be held accountable, (2) creditors have received more than would have been paid under a hypothetical liquidation of debtors’ estate, and (3) modification of the Plan is not practicable. Such a motion should set forth facts supporting lack of accountability on the debtors’ part for the hardship circumstances and a discharge analysis, evidenced, of course, by declarations, then quote and cite the statute, and finally, explain why debtors’ particular facts and circumstances meet each of the elements of the statute.
For example, where one spouse in a joint case (“Husband”) has lost his job, has been unable to secure replacement income and is receiving unemployment benefits that do not provide sufficient disposable income to pay the existing or a modified plan payment, an example of a format for such motion is:
I. INTRODUCTION/STATEMENT OF FACTS.
Debtors WARREN WAGE EARNER (“HUSBAND”) and SALLY SALARIED (“WIFE”) (collectively “Debtors”) filed their joint petition as husband and wife under Chapter 13. Debtors’ Chapter 13 Plan was confirmed on [date], 2008. Debtors remained current with their plan payments of $1,500.00 through [date], 2008. See Declaration of HUSBAND, attached hereto and incorporated herein by reference (“HUSBAND Dec.”).
Unfortunately, Debtors have suffered some unexpected consequences since the filing of their case. Specifically, HUSBAND, a widget installer, was laid off from his job in late [date], 2008. He received just two weeks’ severance pay, and now receives only $1,250.00 per month in unemployment benefits. While he has been seeking, and continues to seek, gainful employment, the negative impact of the current economic crisis on the job market is evident. As of even date, HUSBAND has been unable, despite his diligent efforts, to secure new employment. HUSBAND Declaration:
HUSBAND was the primary wage earner for the household, earning base pay of $3,000.00 per month. WIFE earns a gross salary of only $2,500.00 per month. Debtors’ household expenses far exceed WIFE’s salary, and there is certainly no excess available with which to make plan payments of $1,500.00. Debtors’ plan was premised on contributions by both spouses. Without the income from HUSBAND’s employment, Debtors cannot possibly meet their obligations under their confirmed Chapter 13 Plan. HUSBAND Dec.
A liquidation analysis of the case shows that Debtors have already paid more to their unsecured creditors under their Chapter 13 Plan than such creditors would receive if the case proceeds as a Chapter 7. See Declaration of ATTORNEY FOR DEBTORS, attached hereto and incorporated herein by reference. Under these circumstances, a hardship discharge is warranted.
II. A Hardship discharge is warranted here because the debtors are not able to complete the payments under the plan,creditors have received more than would have been paid under a hypothetical liquidation of debtor’s estate, and modification of the plan is not practicable.
Under certain limited circumstances, the Bankruptcy Code provides for entry of a discharge order despite failure to pay all of the plan payments. Specifically, 11 U.S.C. section 1328(b) provides:
Subject to subsection (d)2, at any time after the confirmation of the plan and after notice and a hearing, the court may grant a discharge to a Debtor that has not completed payments under the plan only if–
(1) the Debtor’s failure to complete such payments is due to circumstances for which the Debtor should not justly be held accountable;
(2) the value, as of the effective date of the plan, or property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the Debtor had been liquidated under chapter 7 of this title on such date; and
(3) modification of the plan under section 1329 of this title is not practicable.
Debtors’ circumstances here fall squarely within the statute. First, husband was laid off by his employer. This has eliminated husband’s ability to contribute to household expenses, including the plan payments. Husband has attempted to secure new employment, but his efforts have been unsuccessful. This is certainly a situation that is beyond husband’s control, and accordingly, Debtors’ resulting inability to make their plan payments is a circumstance for which Debtors should not justly be held accountable. Thus, one condition for a hardship discharge, as set forth in 11 U.S.C. section 1328(b)(1), is met.
Second, a hypothetical Chapter 7 liquidation would yield nothing for general unsecured creditors. Thus, another condition for a hardship discharge, as required by 11 U.S.C. section 1328(b)(2), is met here.
Finally, a modification of Debtors’ plan is pointless here as their current household income falls so far below their household expenses that there is clearly no means by which to modify the Chapter 13 Plan feasibly. Thus, all conditions for hardship discharge, including impracticability of modification of the Plan, required under 11 U.S.C. section 1328(b)(3) are met here.
Under these circumstances, 11 U.S.C. section 1328(b) permits this honorable Court to enter a discharge order.
When, as here, the value paid into the plan is no less than a hypothetical Chapter 7 liquidation payment to general unsecured creditors, and Debtors’ reduced income resulting from unexpected and uncontrollable separation from employment make further plan payments and plan modification infeasible, the Bankruptcy Code permits this honorable Court to enter a discharge order. Debtors respectfully request that the Court grant them a discharge.
Respectfully submitted, COUNSEL FOR DEBTOR
In re Pattullo (11/21/01 – No. 99-17615)(9th Cir. Ct App) Appeal court lacks jurisdiction to hear appeal from a Chapter 13 proceeding when lower court dismissed the proceeding even if the court allowed debtors to file a new petition.
Randolph v. IMBS, INC. (05/12/04 – No. 03-1594, 03-2185, 03-2340, 03-3182, 7th Cir) The Bankruptcy Code does not “preempt” the Fair Debt Collection Practices Act (FDCPA) when the act alleged to transgress the FDCPA also violates the Code. Dunning letters issued to debtors in Chapter 13 bankruptcy must be reconsidered in light of FDCPA section 1692.
OPINION SUMMARIES ARCHIVE Findlaw archives case law summaries of opinions issues since September 2000 by the US Supreme Court, all thirteen Federal Circuit Courts, and several other courts.[/vc_column_text][/vc_column][/vc_row]
WARNING: Some of this information may not be up to date.
There are three major credit bureaus: CBI/Equifax, Experian and Trans Union, plus many smaller regional and local bureaus. If you have been denied credit you can get a free copy of the report the creditor used. In addition, once a year you can order a free credit report from each of the three credit reporting agencies: www.annualcreditreport.com. Otherwise, for a minimal amount (usually $8.00) you can obtain a copy of each credit report. To be very thorough order a report from all three credit bureaus. If possible get these as three separate reports, rather than one merged report. Sometimes it is more difficult to read the merged report. The important point to understand is that failing to list a creditor/collection company/attorney can leave you exposed to that creditor even after your bankruptcy is completed. The best philosophy is to list everyone, no matter whether or not you remember ever owing that creditor. Also make certain to list all the debts of your ex-spouse that were incurred while you were married and debts which were business obligations.
When requesting a copy of the report make sure to include your full name, prior names, spouse’s full name, all addresses used in the last 5 years, with zip codes, your social security number and date of birth. Send that information to the addresses set forth below. You also should include a copy of your driver’s license which will verify your current address and your identity. It normally takes 3-4 weeks to obtain this information.
1) Experian: PO Box 2104, Allen, TX 75013-2104.
– if denied credit in the last 60 days send letter to:
Experian, Attn: NCAC, PO Box 949, Allen, TX 75013-0949
2) CBI/Equifax: (use a credit card to pay for your report).
800-997-2493, fax: 770-375-3150, or write to CBI/Equifax, PO Box 74021, Atlanta, GA
– if denied credit in last 60 days send letter to:
CBI/Equifax, PO Box 740256, Atlanta, GA 30374-0256
3) Trans Union: PO Box 390, Springfield, PA 30374-0256
– if denied credit in last 60 days: call- 800-888-4213
Credit Scoring – 850 is the top score. FNMA has instructed that any score less than 620 dictates that the lender use extreme caution in making any loans. The odds are that those with a score of less than 500 will fail to make their first payment in one out of three loans. Knowledge is power – checkout www.myfico.com
(NOTE: If you find other resources for order credit reports please feel free to share them with our office.)
Below is a resource for more information about credit scores, but please note that I make no representations about the accuracy of information on another web site:
Pre-bankruptcy planning is the transferring of non-exempt assets into exempt assets. Exempt assets are normally those protected from seizure by unsecured creditors. Transferring non-exempt into exempt assets is a practice is not in and of itself illegal or improper. The Bankruptcy Code legislative notes specifically permit this type of activity. But, this is not to say that the procedure is without risk. The 2005 changes in the bankruptcy laws challenge the constitutional right of every person to receive adequate legal advice from their attorney regarding pre-bankruptcy transfers or incurring new debt.
In some situations, courts found the pre-bankruptcy planning to be so egregious that it justified the debtor losing his or her discharge and/or sanctioning of the debtor’s attorney. Under the prior law this result was rare, being deprived of a discharge defeats the entire reason behind bankruptcy and is disastrous for the debtor. Given the uncertainty in this area it would be advisable for debtors and their counsel to tread very carefully. The new law is so confusing that no one, judges includes, really understand how to deal with issues. My recommendation: do not be the first one to try aggressive pre-bankruptcy planning.
To lawyers: you need to make a decision whether your constitutional right and ethical duty to give your clients competent advice, is controlled by this poorly drafted attempt of the credit card industry to scare everyone, lawyers included, away from bankruptcy protection.