Chapter 13 Interim Administration
1.0 In General
Interim administration might be defined as what occurs between the first meeting of creditors and the obtaining of a discharge. As much as five years or more may pass before you receive a discharge.
2.1 Trustee Directives
It is very important that you comply with any request made of you by the Trustee at the First Meeting of Creditors as quickly as possible. Failure to comply can result in your case being dismissed. If you have any questions about the trustees requests, be sure to consult with the Attorney.
2.21 In General
There are a number of items that may need to be resolved by a judge prior to your confirmation hearing. Motions will be filed by the attorney shortly after your case is filed, but they will usually not be heard by the judge until after your first meeting of creditors.
2.22 Lien Avoidance
These actions involve the removal of a lien or perfected security interest that may exist on certain of the debtors property under section 522(f). This can be important to the feasibility of your plan (your ability to pay the correct amounts within the 3 to 5 year time limit). If a lien is removed it becomes unsecured debt that is paid at a percentage of the obligation. If a lien is not removed it must be paid at 100% plus interest. If you would like the attorney to file such a motion you must request that he do so in writing. He will then explain to you the special notice and other requirements of such actions.
2.23 Valuation Hearings
Occasionally there will be a dispute as to the value of secured collateral. If this dispute can not be resolved voluntarily, it may be necessary to schedule a valuation hearing. At this hearing, both parties will present evidence, and the Court will make a final determination as to the amount of secured debt that the creditor is entitled to receive as part of your Chapter 13 Plan. If such a hearing becomes necessary you will be required to hire an expert witness at your own expense to testify on your behalf. If you have any questions, be sure to consult with the attorney.
2.24 Sale of Property
In the event that it is your desire to sell property as part of your Chapter 13 Plan, there is a specific procedure that must be followed. First, once you have obtained a bonafide offer for the purchase of the property, that offer should be reduced to writing. In your acceptance to the offer, you must state that the offer is accepted “contingent upon Court approval”. Next, the written offer and acceptance is provided to you attorney. Once the attorney receives that document, if it is complete, the attorney will prepare a motion for permission to sell property of the estate. If the court grants the motion and issues a written order, the property can be sold. You should be aware that this process can take between two(2) to three(3) months. Thus, any potential buyer should be warned of the time constraints imposed by the Bankruptcy Court.
Occasionally, a creditor will object to Confirmation of your Chapter 13 Plan. Usually this is because you have not properly listed the creditors claim. For example, you may have listed a secured debt as unsecured. Alternately, you may not have valued the property properly or given the correct interest rate. Most objections could have been prevented by providing accurate information to the attorney on your questionnaire. These types of problems can often be resolved by correcting your Bankruptcy paperwork, although that may delay confirmation of your case. The taxing authorities may also object to your Chapter 13 Plan if you are delinquent in the filing of tax returns or fail to make tax payments post filing.
2.4 Undelivered Mail
Based upon a new procedure, the bankruptcy court lists the debtors attorney’s address as the return address on any mail sent by the court. If an address is incorrect, mail will be returned to our office. This generally means that this particular person did not receive notice of the bankruptcy filing. As a result, it is necessary to attempt re-delivery of this mail.
The first step will be to double check the file to see if the wrong address was inadvertently entered into the bankruptcy preparation software. If this is the case we will prepare a new envelope with the correct address and re-send it. If the address on the returned envelope matches the address provided to us, we will send you a letter asking you to forward the mail. Be aware that if a creditor is not served a copy of your bankruptcy notice they may still attempt to collect from you.
The Confirmation hearing is held not less than 20 days nor more than 45 days after the first meeting of creditors. You should attend this hearing. At the hearing the trustee will make a recommendation as to whether you proposed plan of repayment should be approved or “confirmed”. The trustee will explain to the judge any problems that may exist with respect to your case and anything that you have failed to do. If a judge does not think your case is ready for confirmation and that you have not done all you could to further your case, the case will be dismissed. If the judge determines you have made a best effort and the case might be confirmable, even if not ready at the moment; your case will be continued to a later date. If everything appears to be in order, the case will be confirmed.
4.0 Post Confirmation
4.1 Business Reports
If the debtor is involved in business, the court may require the filing of monthly or quarterly reports to ensure that taxes are being paid and that the debtor is generating enough net income to make the plan payments. Failure to file these reports will result in dismissal of the case.
You must make a payment to the trustee each month (even if your case is continued rather than confirmed) in the amount set forth in your plan in the form of cashiers check or money order. Failure to make a payment will result in dismissal of your case.
Once the plan is confirmed the trustee will begin making distributions to your creditors. Once each quarter the trustee will send you a report indicating how much he has paid to each creditor. These reports also list the payments you have made. You should review them carefully to ensure that all of the payments you have made have been properly credited to you. If you neglect to put your case number on a payment you may not receive credit for having made that payment. Be sure to keep all your payment stubs in a safe place.
4.3 Claims Review
Once the date for filing claims has passed, the attorney and the trustee will review each claim for accuracy. Occasionally a creditor will file a proof of claim which is inaccurate or improper. The attorney will file objections to these claims. In some cases valid claims will be filed that are greater in amount than the client disclosed in his or her questionnaire making the plan not longer be feasible (meaning it will not pay out the required percentages to all creditors). If this happens the trustee will file a motion with the court to dismiss because the plan is not feasible. If you receive such a motion in the mail you should immediately make an appointment to see the attorney. Is some (actually very few) cases it may be possible to amend your plan. However, such amendments must be filed with the court within 10 days of receiving the motion.
4.4 Case Closing
Once the claims review period has passed and the trustee has determined that the case is still feasible, you will be sent a letter giving you two (2) weeks to obtain any documents which you may want from your file. After that date, your file may be disposed of except for the signature pages that the attorney is required to retain. If you need copies of documents after that date, the only documents that will be available are those that have been scanned into the “Pacer” system by the Court. You can obtain copies of those documents by contacting the Bankruptcy Court directly, or through your attorney. However, there is a charge for downloading these documents from the Court Website.
4.5 Conversion or Dismissal
Conversion occurs when a debtor changes from a chapter 13 to a chapter 7. You have an absolute right to convert from 13 to 7. However, you must convert prior to discharge.
Dismissal means your case has been cancelled and you are no longer under the jurisdiction of the court. You will lose any payments that you have already made to the trustee, you may have a continuing obligation for fees to the attorney, and creditors are free to collect against you. You have an absolute right to dismiss a chapter 13, unless you previously converted to 13 from a chapter 7. In that case, the court may require a conversion back to chapter 7 rather than simply allowing you to dismiss the case.
4.6 Tax Returns and Annual Budget Statement
It will be important under the new code to file any tax returns that come due after the date of filing. Failure to file such returns can result in an order of dismissal under 11 USC 521(f) and (j).
New section 521(f)(4)(B) provides that the debtor must file an annual statement of “income and expenditures” during the prior tax year. As a result, you will be required to keep good records during the term of your plan. This report is due 45 days after the anniversary date of plan confirmation.
4.7 Domestic Support Obligation
New section 1328(a) provides that a discharge will not be granted to a debtor who is not current on any Domestic Support Obligation at completion of the case.
As a result, if you have ongoing support obligations you must remain current on them.
4.91 To Dismiss
If at any time during the term of your plan you fail to comply with any part of the confirmation order, the trustee will file a motion with the court to have your case dismissed. If a written response is not filed within 20 days of the motion it will be automatically granted. If you wish the attorney’s assistance you must make an appointment to see him within 10 days of receipt of the motion and bring in proof that you are actually in compliance with the confirmation order. There is an additional cost for responding to such a motion.
4.72 To Lift the Automatic Stay
See, page 64.
4.73 To Modify the Plan
On rare occasions it may be possible to modify a chapter 13 plan after the claims review period has passed. If you find yourself in this situation you should make an appointment to see the attorney as soon as possible.
4.75 For Hardship Discharge
Section 1328(b) provides that in certain hardship circumstances the debtor may be granted a discharge prior to completing the plan. However, this is limited to cases where modifying the plan is not practical and the unsecured creditors have been paid what they would have received in a chapter 7.
4.9 Pre-Discharge Hearing
New section 1328(h) now requires a hearing 10 days prior to the issuance of the discharge to determine if the debtor is in violation of 522(q)(1). This section deals with debts that include: (1) violations of securities laws, (2) fraud in connection with a security, (3) any civil remedy under 18 USC 1964 (racketeering), or (4) serious injury or death to another person in the last 5 years.. If any of these debts exist, a discharge will not be granted.