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Other Hot and Not-so-Easy Issues in Consumer Cases. Consumer Bankruptcy in Practice: A Webinar Series Explore current developments with experts in consumer bankruptcy. Chapters 7 and 13 Discharges *Generally*. See sections I.A., B. and C. in materials
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Other Hot and Not-so-Easy Issues in Consumer Cases Consumer Bankruptcy in Practice:A Webinar Series Explore current developments with experts in consumer bankruptcy.
Chapters 7 and 13 Discharges*Generally* • See sections I.A., B. and C. in materials • Chapter 13 discharge is not “super” any more • 523(a)(1) - tax or customs duty • 523(a)(2) - money, property, etc. obtained by fraud, false statements, etc. • 523(a)(3) - unscheduled debt • 523(a)(4) - fiduciary fraud, embezzlement or larceny • 523(a)(5) - domestic support obligation • 523(a)(6) - willful and malicious injury • 523(a)(7) - governmental fine, penalty, etc. • 523(a)(8) - educational loan
Chapters 7 and 13 Discharges*Generally* • See sections I.A., B. and C. in materials • 523(a)(9) – death or personal injury because of intoxicated operation of vehicle • 523(a)(10) – debt from previous case with no discharge • 523(a)(11) – final judgment, etc. by Federal depository institutions regulatory agency • 523(a)(12) – malicious or reckless failure to fulfill commitment to Federal depository institutions regulatory agency • 523(a)(13) – restitution • 523(a)(14) – debt incurred to pay nondischargeable federal tax
Chapters 7 and 13 Discharges*Generally* • See sections I.A., B. and C. in materials • 523(a)(14B) – Federal election fines or penalties • 523(a)(15) – non-DSO debt from divorce or separation • 523(a)(16) – post-petition membership association fee or assessment • 523(a)(17) – filing fee or expense imposed on prisoner • 523(a)(18) – ERISA or TSP loan • 523(a)(19) – securities law violation or fraud
Chapters 7 and 13 Debtor Discharges*Time Limits* • Chapter 7 to Chapter 7 • See section I.D.1. in materials • Eight years • Filing to filing • Chapter 7 to Chapter 13 • See section I.D.2. in materials • Four years • “Filed under” apply to original or converted case? Probably converted
Chapters 7 and 13 Debtor Discharges*Time Limits* • Chapter 13 to Chapter 7 • See section I.D.3. in materials • Six years • Meaning of “payments under the plan” – probably means just that, not payments to unsecured creditors • Chapter 13 to Chapter 13 • See Section I.D.4. in materials • Two years • Filing to filing even though unlikely event • Can still file, but cannot get discharge (same with chapter 7 to 13)
Chapter 13 Discharge Requirements • See section I.F. in materials • 1328(a) – debtor certification that all DSOs due on or before date of certification (including pre-petition, as provided in the plan) have been paid • 1328(g) – debtor education certificate • 1328(h) – finding of no reasonable cause to believe 522(q)(1) is applicable or that there is pending proceeding charging such a felony or liability for such kind of debt
Effect of Audit on Chapter 7 Discharge • See section I.G. in materials • 727(d)(4)(A) –discharge revocation if debtor fails to explain satisfactorily a material misstatement in audit • 727(d)(4)(B) –discharge revocation if debtor fails to explain satisfactorily his failure to make requested audit documents and information available for inspection • USTP suspended audits due to budgetary constraints January 2008; resumed audits May 2008 (random audits @ 1 per 1,000)
Debtor Audits Public Report FY 2007 • Public Report filed in April 2008 • Material misstatements reported in 30% of audited cases • Report available at: http://www.usdoj.gov/ust/eo/public_affairs/reports_studies/index.htm
Paying Debtor’s Counsel in Chapter 13 • See section II.A. in materials • How much? • See section II.A.2. in materials • District of Colorado • Presumptively Reasonable Fee (PRF) = $3,000 • PRF assumes counsel will provide all basic services, as listed in General Procedure Order 2007-2, without exception • Provides for an expedited fee award and avoids formal fee application process • PRF covers services through confirmation and excludes services related to adversary proceedings • National range $2,500 - $3,750 • When? • See section II.A.3. in materials • District of Colorado – Attorney fees can be paid first subject to trustee fee and pre/post-confirmation adequate protection • Secured and/or adequate protection payments first? (see In re DeSardi, 340 B.R. 790 (Bankr. S.D. Tex. 2006))
Paying Creditor’s Counsel in Chapter 13 • See section II.B. in materials • In re Schuessler, 386 B.R. 458 (Bankr. S.D.N.Y. 2008) • In re Stewart, 2008 WL 2676961(Bankr. E.D. La. April 10, 2008) • In re Moffitt, 2008 WL 2461494 (Bankr. E.D. Ark. 2008) • In re Parsley, 384 B.R. 138 (Bankr. S.D. Tex. 2008) • In re Sanchez, 372 B.R. 289 (Bankr. S.D. Tex. 2007) • In re Padilla, 379 B.R. 643 (Bankr. S.D. Tex. 2007) • In re Jones, 366 B.R. 584 (Bankr. E.D. La. 2007) • In re Padilla, 2008 WL 2573259 (Bankr. E.D. Pa. June 30, 2008) • In re Collins, 2007 WL 2116416 (Bankr. E.D. Tenn. July 19, 2007) • In re Watson, 384 B.R. 697 (Bankr. D. Del. 2008) • Katherine Porter, Misbehavior and Mistake in Bankruptcy Mortgage Claims (forthcoming 83 Tex.L.Rev. 2008) • John Rao, Fresh Look at Curing Mortgage Defaults in Chapter 13, 27 FEB Am. Bankr. Inst. J. 14 (2008)
Credit Counseling*General* • 109(h)(1) – an individual may not be a debtor unless he receives credit counseling from an approved provider within 180-day period preceding date of filing • Does not apply in involuntary cases • In re Allen, 378 B.R. 151 (Bankr. N.D. Tex. 2007) • In re Diloreto, 2008 WL 141922 (Bankr. E.D. Pa. Jan. 11, 2008)
Credit Counseling*General* • UST (bankruptcy administrator) approves counselors • http://www.usdoj.gov.ust/eo/bapcpa/ccde/cc_approved.htm • UST interim final rule – 28 C.F.R. 58.15-17 • UST proposed final rule – comment period ended April 1
Credit Counseling*Curriculum* • See section III.A. in materials • 109(h)(1) - “opportunities available for credit counseling” and assistance in “performing a related budget analysis” • 111(c)(2)(E) – “provide adequate counseling with respect to a client’s credit problems that includes an analysis of such client’s current financial condition, factors that caused such financial condition, and how such client can develop a plan to respond to the problems without incurring negative amortization of debt”
Credit Counseling*Timing* • 180 Days • See section III.B.1. in materials • Does court have discretion not to dismiss if this issue is raised? Probably not • In re Dyer, 381 B.R. 200 (Bankr. W.D.N.C. 2007) • In re Giles, 361 B.R. 212 (Bankr. D. Utah 2007) • But see In re Bricksin, 346 B.R. 497 (Bankr. N.D. Cal. 2006); In re Enloe, 373 B.R. 123 (Bankr. D. Colo. 2007) • UST and chapter 13 trustee have discretion not to object • Repeat Filers • See section III.B.2. in materials • No distinction in statute or reported decisions • Timely certificate may serve repeat filings but stale certificate could not
Credit Counseling*Timing* • On the Petition Date or One Day Prior • See section III.B.3. in materials • Courts go both ways • On Petition Date • One Day Prior • Again, UST and chapter 13 trustee have discretion not to object. USTP position is that debtors may obtain CC on same day so long as it is before filing of petition.
Credit Counseling*Eligibility and the Effect of Ineligibility* • Jurisdictional? • See section III.C.1. in materials • Majority rule is that failure to obtain CC prepetition is not jurisdictional • Application of stay? • See section III.C.2. of materials • Courts are split – majority rule is that stay was applicable
Credit Counseling*Eligibility and the Effect of Ineligibility* • Strike petition or dismiss case? • See section III.D. of materials • Another split • 362(c)(3): if petition filed within 1 year of dismissal of prior case, stay limited to 30 days • Majority rule is court should dismiss case (see In re Jones, 352 B.R. 813 (S.D. Tex. 2006))
Credit Counseling*109(h)(2) Exemption by UST* • See section III.E.1. of materials • 109(h)(2) – UST may waive CC requirement if UST determines that the approved agencies in a district are not “reasonably able to provide adequate services” to those seeking counseling • Four districts in Louisiana and Mississippi had waivers due to Hurricane Katrina, but now only Eastern District of Louisiana still has a waiver
Credit Counseling*109(h)(3) Extension-Exigent Circumstances* • See section III.E.2. of materials • Certification • Written? (yes) • Verified? • Unsigned statements are insufficient – some courts require signature be under penalty of perjury • By debtor? Counsel? • Debtor must personally verify • Specific facts as to particular debtor • In re Mingueta, 338 B.R. 833 (Bank. C.D. Cal. 2006) (debtor must substantiate and specify circumstances or steps taken to attempt to obtain credit counseling before filing) • In re Rodriguez, 336 B.R. 462 (Bankr. D. Idaho 2005) (facts must distinguish debtor from those generally expected to comply with counseling requirement)
Credit Counseling*109(h)(3) Extension-Exigent Circumstances* • See section III.E.2. of materials • Exigent Circumstances - USTP does not have per se rule on what constitutes exigency. • Foreclosure? Courts are split • In re Hedquist, 342 B.R. 295 (B.A.P. 8th Cir. 2006) (delay until eve of foreclosure, despite ample notice, not “exigent circumstance”) • In re Giambrone, 365 B.R. 386 (Bankr. W.D.N.Y. 2007) (held that imminent foreclosure sale of debtors' real property constituted “exigent circumstances” that justified an extension) • Debtor must timely seek counseling • In re Wilson, 346 B.R. 59 (Bankr. N.D.N.Y. 2006) (debtor must request counseling prepetition) • In re Randolph, 342 B.R. 633 (Bankr. M.D. Fla. 2005) (exigent circumstances exception does not extend to debtor who “simply fails to prioritize the counseling requirement”)
Credit Counseling*109(h)(3) Extension-Exigent Circumstances* • See section III.E.2. of materials • Could not obtain during five days of request made • Certification must be satisfactory to court • Again, UST and chapter 13 trustee have discretion
Credit Counseling*109(h)(4) Permanent Waiver* • See section III.E.3. of materials • Disability – debtor is so physically impaired as to be unable, after reasonable effort, to participate in required briefing • Incapacity – debtor is impaired by reason of mental illness or mental deficiency so as to be incapable of realizing and making rational decisions with respect to financial responsibilities • Active military duty in a military combat zone • Incarcerated debtors disabled or incapacitated? • In re McBride, 354 B.R. 95, 99 (Bankr. D.S.C. 2006) (no) • In re Gates, 2007 WL 4365474 (Bankr. E.D. Cal. 2007)(yes) (court applied 109(h)(4) analysis to debtor education requirement – same analysis would apply in credit counseling case)
Credit Counseling*109(h)(4) Permanent Waiver* • See section III.E.3. of materials • Dead debtors disabled or incapacitated? • In re Trembulak, 2007 WL 420188 (Bankr. D.N.J. 2007) (yes) • Other Disabilities? • In re Jarrell, 364 B.R. 899 (Bankr. M.D. Tenn. 2007) (mental illness) • In re Howard, 359 B.R. 589 (Bankr. E.D.N.C. 2007) (physical disability) • In re Tulper, 345 B.R. 322 (Bankr. D. Colo. 2006) (physical disability) • Sword or Shield? • See section III.F. of materials • In re Mendez, 367 B.R. 109 (B.A.P. 9th Cir. 2007) (debtor waived strict compliance with 109) • In re Lilliefors, 379 B.R. 608 (Bank. E.D. Va. 2007) (debtor judicially estopped from denying he completed counseling)
Debtor Education • Timing • Bankruptcy Rule 1007(b)(7) • Chapter 7 – 45 days of “first date set” for 341 • Chapter 13 – no later than last plan payment made or 1328(b) motion for discharge • Noncompliance results in closing of case with no discharge – Rules 4004, 4006 • Majority rule is that debtor must pay filing fee to reopen – see section III.G. of materials
Application of 707(b) to Converted Case • See section IV. of materials • Does it apply? • If so, as of what date? • In re Kellett, 379 B.R. 332 (Bankr. D. Or. 2007)
Chapter 13 Plan Modifications • See section V. of materials • What is the standard? Does the means test apply? • In re Disney, 386 B.R. 292 (Bankr. D. Colo. 2008) • In re Fridley, 380 B.R. 538 (9th Cir. BAP 2007) • In re Ireland, 366 B.R. 27 (Bankr. W.D. Ark. 2007) • In re Murphy, 474 F.3d 143 (4th Cir. 2007)