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Consumer Bankruptcy Law and Practice: 12.8.3 Payments to Personal Property Lessors

Debtors are required to make scheduled lease payments to personal property lessors for the portion of the obligation that becomes due after the order for relief.462 The debtor must deduct such payments from the plan payments to the trustee and provide evidence of the lease payments to the trustee, including dates and amounts.463 Although this provision was undoubtedly meant to protect automobile lessors, it applies to all personal property leases.

Consumer Bankruptcy Law and Practice: 12.8.5 Vesting of Property Upon Confirmation

Once a chapter 13 plan is confirmed, property of the estate vests in the debtor unless the plan or order confirming the plan provides otherwise.468 Some courts have held that this causes the property to lose the protection of the provisions of the automatic stay that protect property of the estate.469 However, other courts have adopted the better view that the property continues to retain the character of property of the estate, albeit vested in the debtor, after confirmation.

Consumer Bankruptcy Law and Practice: 12.8.6 Possible Duty to Disclose Property Acquired After Confirmation

Although there is no basis for doing so in the Bankruptcy Code or in the Federal Rules of Bankruptcy Procedure,476 some courts have held that debtors must disclose to the trustee, or even amend their schedules to list, property interests and causes of action acquired after the petition is filed, under a theory that the acquisitions are property of the estate under section 1306.477 If the debtor discloses the acquisition of significant amounts of property, the trustee may attempt to obtain a plan

Consumer Bankruptcy Law and Practice: 12.9.3.1 Generally

Problems are less likely to arise when the debtor chooses to reject an executory contract. This choice may be advantageous in a variety of situations, as many of the types of executory contracts listed above are unfair and burdensome to consumers. As discussed above,526 it may also be possible to reject contracts imposing restrictions on the debtor, such as a covenant not to compete with a former employer or business in which the debtor was involved.

Consumer Bankruptcy Law and Practice: 12.9.3.2 Residential Leases

The rejection of a residential lease in chapter 13 is advantageous to a debtor mainly when the debtor plans to move or has vacated the premises prior to the end of the lease term. The unpaid rent from the period prior to the bankruptcy usually becomes a general unsecured claim,532 which is often paid little or nothing during the case.

Consumer Bankruptcy Law and Practice: 12.9.5.1 2005 Amendments

Although assumption of leases was historically only a concern of the debtor in chapter 13 cases, the 2005 amendments added provisions permitting a debtor to assume a lease of personal property. Also added were provisions terminating the automatic stay with respect to leased personal property in certain circumstances.

Consumer Bankruptcy Law and Practice: 12.9.5.2 Effect of Lease or Executory Contract Rejection in Chapter 7

Section 365(d)(1) provides that if the trustee does not assume or reject an executory contract or an unexpired lease of personal property within sixty days after the filing of the petition, or such longer time as the court orders, the lease or contract is deemed rejected. Under the Code as it existed prior to the 2005 Act, if a lease was rejected and the lessor of personal property wanted to take action against the property before the case was closed, the lessor was required to seek relief from the stay.

Consumer Bankruptcy Law and Practice: 12.9.5.3 Lease Assumption by the Debtor in a Chapter 7 Case

Prior to the 2005 amendments, the power to assume or reject an unexpired lease was given only to the trustee in chapter 7 cases.568 Under the 2005 Act, the debtor is given the right to assume a lease of personal property in a chapter 7 case.569 Under section 365(p)(2) of the Code the debtor may notify the lessor in writing that the debtor desires to assume the lease.570 Upon being notified the lessor may, at its option, notify the debtor that it is

Consumer Bankruptcy Law and Practice: 12.10.2 Determining Whether a Prior Discharge Was Under Chapter 7 or Chapter 13

Because the time periods restricting a subsequent discharge differ depending on whether the prior discharge was under chapter 7 or under chapter 13, it is important to be able to distinguish between the two. The language of section 1328(f), taken literally, seems to look to the chapter under which the case was originally “filed,” rather than the chapter under which the discharge was granted. Thus, if a case was originally filed under chapter 13 and then converted to chapter 7, a debtor can argue that the two-year limit should apply.580

Consumer Bankruptcy Law and Practice: 12.10.3 Repeat Filing Still Permissible Even If Discharge Unavailable

It is important to recognize that it is still possible for a debtor to file a case even if a discharge cannot be granted. The ability to obtain a discharge is not an eligibility requirement for chapter 13.583 There are a number of circumstances in which a bankruptcy filing can be useful to a debtor even though a discharge cannot be granted. For example, a debtor may file a chapter 13 bankruptcy case to cure a mortgage default or other default.

Consumer Bankruptcy Law and Practice: 12.11 Confirmation of Plan Binds Debtor and All Creditors

The confirmation order is binding upon the debtor and all creditors.602 Once the appeal period has passed, it is res judicata as to all issues that could have been raised in opposition to confirmation.603 After confirmation, no creditor may take actions that are inconsistent with the plan.604 Thus, a creditor may not seek relief from the stay if the debtor is complying with the plan.605 And no credito

Consumer Bankruptcy Law and Practice: 10.1.1 Importance of the Exemption Provisions

For most consumer debtors, no section of the Bankruptcy Code is more important than section 522, which governs the debtor’s rights in relation to exempt property. It is a section that has resulted in enormous advances in debtors’ rights. With a few exceptions, the exemption provisions in the Code have made bankruptcy much more attractive to consumers than the previous law, and give better protection to their property than can be had under the law governing execution in most states.

Consumer Bankruptcy Law and Practice: 10.1.2 Definition of Exempt Property

The Code contains no formal definitions of “exemption” or “exempt property.” Fundamentally, these are the designations given to the property that the trustee is not permitted to liquidate and the debtor is permitted to retain in a chapter 7 liquidation.6 Other than the exempt property, virtually all of the debtor’s interests in property that have significant value are transferred to the trustee for the benefit of creditors.

Consumer Bankruptcy Law and Practice: 10.1.3 Purposes of Exemptions

Historically, the purpose of exemption laws has always been to allow debtors to keep those items of property deemed essential to daily life. Without this bare grubstake, it was feared that debtors could not retain the minimum of dignity and self-respect to which all members of a society are entitled. Perhaps more importantly to some, it was feared that stripping debtors of all of their property would increase the chances of their becoming public charges, unable to maintain themselves without assistance.

Consumer Bankruptcy Law and Practice: 10.2.1.2 Determining the Applicable Exemption Law

In an apparent attempt to discourage debtors from moving to states with more generous exemption laws before filing bankruptcy, the 2005 Act substantially changed the domiciliary provision found in former section 522(b)(2)(A). The new requirements are found in section 522(b)(3)(A). These domiciliary requirements also determine which state law will be used to determine whether the debtor may elect to claim the federal bankruptcy exemptions.

Consumer Bankruptcy Law and Practice: 10.2.2.13.3 Cap on certain IRA accounts

Section 522(n) imposes a $1,512,350192 cap on the value of an individual debtor’s aggregate interest that may be exempted under either section 522(d)(12) in individual retirement accounts (IRAs) established under section 408 or 408A of the Internal Revenue Code, other than a simplified employee pension account under section 408(k) or a simple retirement account under section 408(p) of the Internal Revenue Code.193 The limit does not apply to amounts attributable to rollover contributions, and an

Consumer Bankruptcy Law and Practice: 10.2.3.4.5.4 Standing to bring objection to exemption

Section 522(q)(1) does not specify who has standing to initiate a proceeding under the subsection, so presumably it would include any party in interest who timely files an objection to the debtor’s exemption based on the procedures in Bankruptcy Rule 4003(b) and (c).287 However, a creditor or other party having no relation to the felony conviction may have a difficult time proving that the bankruptcy filing was an “abuse,” particularly if the crime victim has not objected to the debtor’s exemption claim.

Consumer Bankruptcy Law and Practice: 18.7.10 Creditor’s Plan of Reorganization

The Bankruptcy Code grants a chapter 11 debtor a time period of 120 days from the entry of the order for relief during which the debtor has the exclusive right to file a plan of reorganization.691 If the debtor does not file a plan within the 120-day period or if a plan is not confirmed within a 180-day time period following the entry of the order for relief, any party in interest may propose a plan of reorganization.692 This time limit is intended to give the debtor a reasonable period of time

Consumer Bankruptcy Law and Practice: 18.7.11 The Effect of Plan Confirmation

After the chapter 11 plan is confirmed, the debtor must begin making the payments and other distributions required by the plan and carry out any other required provisions. Payments made under the plan may be funded by the operation of the debtor’s business or through the liquidation or recovery of assets. The debtor-in-possession, or a trustee if one has been appointed, must provide periodic reports on the status of implementation of the plan.704