Consumer Bankruptcy Law and Practice: 8.4.2 Document Requirements
It is also necessary to assemble whatever documents are required to be provided at or before the meeting under local practice or the Bankruptcy Rules.
It is also necessary to assemble whatever documents are required to be provided at or before the meeting under local practice or the Bankruptcy Rules.
The debtor must attend the meeting of creditors.196 If the debtor cannot or does not attend, it is often possible to obtain at least one postponement of the meeting.
Another issue that has cropped up in some jurisdictions, but seems less prevalent in recent years, involves creditors who attend meetings seeking to pressure debtors into signing reaffirmation agreements.
In chapter 7 cases only, the trustee must orally examine the debtor to “ensure” that the debtor is aware of several things.213 The legislative history makes clear that the sole purpose of this examination is informational.214 Thus, there should be no consequences if the debtor expresses lack of awareness or confusion in the face of the trustee’s examination.
The meeting of creditors is a good time to check which creditors have filed proofs of claim in cases where claims will be paid, and to set up a tickler for any claims that the debtor may wish to file on behalf of creditors.
In the typical no-asset bankruptcy, there is little to be done between the meeting of creditors and the discharge. If the debtor has not yet completed the financial education course, that must be accomplished so that the certification of completion may be filed by sixty days after the first date set for the meeting of creditors. Proceedings commenced by the debtor, such as for lien avoidance or redemption, may be litigated, as well as proceedings concerning dischargeability of debts and other matters. Amendments to the schedules or statement of affairs may be necessary.
In a chapter 13 case, the next step after the section 341 meeting is normally the confirmation hearing, which may be scheduled on the same day or any time up to forty-five days later.233 In many cases the confirmation hearing will not be concluded on that date, however.
Once the chapter 13 plan has been confirmed, the trustee usually takes over the administrative details. Although the debtor may have been making payments for some time, no distribution is made until after confirmation unless the trustee has been distributing adequate protection payments. If the time for filing claims has not yet elapsed,250 there may be further delays before all claims are determined and allowed. In the interim, objections to other claims, as well as other disputes that arise, may be litigated.
Once distribution has begun, events normally flow smoothly for the duration of the plan, with the debtor or the debtor’s employer258 sending payments regularly to the trustee for distribution. The Code provides for incorporation of certain postpetition claims (debts incurred after the petition) into the plan;259 however, such debts may also be paid outside the plan.
It is helpful to monitor whether changes in the ongoing, postpetition mortgage payments are being implemented in cases in which the debtor is curing mortgage defaults.
If the debtor’s chapter 13 plan provides for modification of a secured claim, the debtor may have obtained a determination of the value of the secured claim.278 Any determination of the secured claim amount made through confirmation of the plan is binding on the creditor, even if the creditor files a proof of claim in a different amount and no objection to the claim is filed.279 Upon completion of the chapter 13 plan or payment of the creditor’s allowed secured claim, the debtor may request unde
Debtors often need to modify their plans after confirmation, either to raise payments to accommodate postpetition claims or to lower the payments because the debtor has had a change of circumstances. One such change of circumstances may occur if the debtor loses use of a car that serves as collateral for a secured claim being paid under the plan, through its destruction, repossession, inoperability, or other cause, or if the debtor no longer needs the vehicle.
Unfortunately, many debtors encounter difficulties of various sorts in completing their chapter 13 plans as originally confirmed. These difficulties may arise due to loss of income, unexpected expenses, marital problems, or other causes.
The most preferable option when addressing a problem in completing the plan is often modification, following the procedure described above.310 Modification may allow the chapter 13 plan to proceed to conclusion by lowering the payments to a level the debtor can afford or by extending the payments, provided that the extension does not exceed the maximum sixty-month plan term.311 It may also be possible to modify the plan to terminate earlier than originally proposed.
A second possibility is to apply for a hardship discharge.
A third choice when addressing failure to complete a chapter 13 plan is conversion of the case to a chapter 7 case.
A final option is dismissal, also available to a chapter 13 debtor as of right in any case not previously converted from another chapter.324 Pursuant to Federal Rule of Bankruptcy Procedure 1017(d), the debtor may obtain a voluntary dismissal by filing a motion stating the debtor’s entitlement to dismissal. An involuntary dismissal may also occur on motion of the chapter 13 trustee, the United States trustee, or a creditor.
Once the time for objecting to a discharge has passed in a chapter 7 case and proof of the debtor’s completion of a financial education course has been filed, with a few limited exceptions, the debtor is entitled to a discharge.331
The principal stated purpose of the discharge hearing is to advise debtors of their rights, especially with regard to reaffirmation of debts. In a well-handled case, this counsel should already have been provided by the debtor’s attorney. Without doubt, the best advice in this regard is simply that reaffirmation is rarely a good idea.
If the court decides to have a discharge hearing even though there will be no reaffirmation of debts, the discharge hearing is usually a very brief affair, with nothing to be said by the debtor or the debtor’s counsel. In fact, in many jurisdictions, debtors’ counsel are not required to attend the hearing in such cases. The court usually warns the debtor about creditors trying to collect their debts or obtain reaffirmations in the future, and lets the debtor know that bankruptcy is a serious business.
Once the discharge has been granted and all related litigation has ended, one or two steps normally remain to be taken in representing the debtor. These final details may be quite important in particular cases and should not be neglected.
Once the decision to file a bankruptcy has been made and acted upon by commencement of the case, the remainder of many a routine bankruptcy case seems anticlimactic. Although numerous complications can occur, and significant steps must sometimes be taken on behalf of the debtor, quite often only a few formalities are left after the filing of the initial papers. This Chapter describes those events that occur in every case, and also how to handle some of the other proceedings that may arise during the pendency of the case.
It is important to advise the client immediately about what will occur. Clients should understand what has happened and what will happen next. They should be told about the notices that will be issued by the court.
Although all creditors should receive a notice of the automatic stay as part of the notice of the meeting of creditors, that notice may not be sufficient to protect the debtor’s rights. It may not be mailed until weeks after the petition is filed; in the meantime, creditors without notice might take action harmful to the debtor. A creditor without notice of the case will normally not be found to have willfully violated a stay it knew nothing about.
When an amendment is necessary, whether due to inadvertence, mistake, on an unexpected change in circumstances, the procedure is quite simple.