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Consumer Bankruptcy Law and Practice: 17.4.1.1 Role and Standing of the Trustee

The chapter 12 trustee is an administrative officer with duties similar to those of chapter 13 trustees. The chapter 12 trustee may be the United States trustee, a standing chapter 12 trustee appointed by the United States trustee who serves in all chapter 12 cases, or a disinterested person appointed by the United States trustee.229 Most districts have appointed a special standing chapter 12 trustee for administration of family farmer cases.

Consumer Bankruptcy Law and Practice: 17.4.1.2.1 Introduction

The compensation of chapter 12 trustees and their offices, like those administering chapter 13 cases, is derived from payments made through the chapter 12 plan.242 A percentage fee is charged against “all payments received by such individual” under the chapter 12 plan.

Consumer Bankruptcy Law and Practice: 17.4.1.2.4 Does the trustee receive a fee on its fee?

Another trustee compensation issue producing significant litigation and causing a split in authority is whether the chapter 12 trustee should receive their ten percent commission only on payments made by the debtors to their creditors, or whether the ten percent fee also should be computed on the money paid to the trustee herself. It again turns on an interpretation of section 586(e), which provides that the trustee shall collect “such percentage fee from all payments received.”264

Consumer Bankruptcy Law and Practice: 17.5.5.4 Treatment of Priority Unsecured Creditors

Section 507 sets forth several categories of unsecured indebtedness that are accorded priority treatment. Attorneys should always review this section for applicability to their client’s individual situation. Section 1222 sets forth the appropriate treatment of these claims in a chapter 12 bankruptcy, with the general rule being that such claims are entitled to full payment.585

Consumer Bankruptcy Law and Practice: 17.5.6.1 Generally

Generally claims of equal rank concerning the same property (whether as collateral or as distribution upon or in lieu of liquidation from general assets) should be included in the same class. Claims of different rank or of the same rank concerning different property should be separately classified. Classification of claims should not be arbitrary, should not do substantial violence to the nature and rights inherent in the claims, and should not uselessly increase the number of classes of creditors.600

Consumer Bankruptcy Law and Practice: 17.5.7.1 Good Faith Test

Section 1225 also includes a “good faith” test for plan confirmation. The plan must have been proposed in good faith, that is, the debtor must have a sincere intention to reorganize the farming operation according to the plan. Chapter 12 is not to be used solely to delay creditors from enforcing their legal rights.628

Consumer Bankruptcy Law and Practice: 17.5.7.2.1 General observations

Section 1225 also contains a feasibility requirement.641 The debtor must be able to show the court that the plan is feasible, that is, that they can afford to make all of the payments that are required under the plan. This requirement is independent of the requirements for secured and unsecured claims, implying that courts can make an independent inquiry even if creditors do not raise an objection.

Consumer Bankruptcy Law and Practice: 17.5.7.2.2 Determination of feasibility

The determination of feasibility for a chapter 12 plan requires an evaluation of the best indicia of plan success—or failure—available to the decision-maker at the time plan confirmation is sought. It is an issue for consideration at confirmation; consideration prior to confirmation would be premature even though a plan’s lack of feasibility may be grounds for a chapter 12 case’s dismissal.650

Consumer Bankruptcy Law and Practice: 2016 Advisory Committee Note on Form 410S2

Form 410S2, Notice of Postpetition Mortgage Fees, Expenses, and Charges, is amended in the instructions in Part 1 to clarify how to report previously approved fees, expenses, or charges. The following language is added: “If the court has previously approved an amount, indicate that approval in parentheses after the date the amount was incurred.” This amended language replaces the prior instruction not to report any amounts previously ruled on by the bankruptcy court.

Consumer Bankruptcy Law and Practice: 2011 Advisory Committee Note on Form 10 (Supplement 2)

This form is new and applies in chapter 13 cases. It implements Rule 3002.1, which requires the holder of a claim secured by a security interest in the debtor’s principal residence—or the holder’s agent—to file a notice of all postpetition fees, expenses, and charges within 180 days after they are incurred. The notice must be filed as a supplement to the claim holder’s proof of claim, and it must be served on the debtor, debtor’s counsel, and the trustee.

Consumer Bankruptcy Law and Practice: About the Form

This form sets out the caption for the case. Pursuant to Federal Rules of Bankruptcy Procedure 9004(b) and 1005, Official Form 416A (formerly Form 16A) includes the title of the case, the debtor’s name, all names the debtor used within eight years prior to the commencement of the case, and the last four digits of the debtor’s Social Security or tax identification numbers. The full caption form also notes the chapter of the Bankruptcy Code under which the case is filed.

Consumer Bankruptcy Law and Practice: 2005–2007 Advisory Committee Note on Form 16A

The form is amended to require that the title of the case include all names used by the debtor within the last eight years in conformity with § 727(a)(8) as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (April 20, 2005), extending from six years to eight years the period during which a debtor is barred from receiving successive discharges. In conformity with Rule 9037, the filer is directed to provide only the last four digits of any individual debtor’s taxpayer-identification number.