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LOCAL RULES AND GENERAL ORDERS

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In-re-Roseberry-Illinois-district-ct-limits-judges-use-of-local-rule-re-chapter-13-12-18-18.pdf (45 downloads) , (S.D. Illinois 12-18-18) A district court in Illinois limited the ability of bankruptcy judges to adopt local rules adding more requirements for confirming a chapter 13 plan.

According to a December 18 opinion by District Judge David R. Herndon of East St. Louis, Ill., the bankruptcy judges in his district published a notice on the court’s website having the effect of a local rule that became effective on Jan. 1, 2018. The rule required the inclusion of a lengthy paragraph in every chapter 13 confirmation order.

The new provision in confirmation orders required every chapter 13 debtor to amend his or her schedules after acquiring “any interest in property of more than nominal value.” “Absent further order of this Court,” the provision went on to say that the newly acquired property “shall constitute disposable income” that must be paid through the plan to general unsecured creditors.

Judge Herndon interpreted the provision to mean that a debtor must turn over cash to the trustee or, if it is not cash, “sell the property so that it may be turned over to the trustee.”

The husband and wife debtors filed an appeal from the confirmation order, contending that the new local rule added additional, nonstatutory requirements for confirmation of a chapter 13 plan and contravened the state exemption statute. In opposition, the U.S. Trustee argued that the new local rule did not impose “any additional duties on debtors not otherwise required by the Bankruptcy Code,” Judge Herndon said.

Judge Herndon said the new rule did not require “merely menial tasks of reporting.” He cited opinions in similar cases from the Fourth and Seventh Circuits saying that Congress specified “a finite list of six affirmative requirements [in Section 1325(a)] necessary for a plan’s confirmation.” Petro v. Mishler, 276 F.3d 375, 378 (7th Cir. 2002).