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- Referred to in this presentation as the “2005 Act”
- Enacted on April 20, 2005
- General effective date: October 17, 2005 for most provisions
- Other effective dates: Some provisions take effect on other dates, such
as the date of enactment (April 20, 2005) or 18 months from the date of
enactment (October 2006)
- Mark Diamond, Rev. 10/24/05
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- Since much of the 2005 Act will apply only to cases filed on or after
October 17, 2005, for a significant period of time after that date there
will still be cases – filed before that date – to which most of the
amendments will not apply.
- Going forward, always check the date of case filing to determine which
set of provisions should apply (for example, whether to apply the
provisions applicable to cases filed prior to, or on or after, October
17, 2005).
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- Makes major changes to both consumer and business bankruptcy cases.
- Replaces § 304 ancillary proceedings with new Chapter 15, “Ancillary and
Other Cross-Border Cases.”
- Makes chapter 12 permanent and now permits family fishermen to obtain
relief under ch. 12.
- Amends all chapters of title 11(the “Bankruptcy Code”) as well as making
selected amendments to other relevant titles of the United States Code (e.g.,
the title 28 provisions regarding jurisdiction, venue, appeals, US
Trustees, and bankruptcy fees).
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- Refer to the Amended Code: Within a section of the amended Code,
applicability can vary from one subsection to the next subsection (or
from one paragraph to the next). Always
refer to the amended Code to check the applicability of each specific
provision.
- Examples:
- The provision would most likely not apply to ch. 7 business debtors if
it reads: “individual debtors in cases filed under chapters 7 and 13 .
. . .”
- The provision would most likely not apply to ch. 7 involuntary debtors
if it reads: “debtors in voluntary cases filed under chapters 7 and 13
. . . .” However, such a
provision would presumably apply to ch. 7 business debtors in voluntary
cases (since there is no reference to “individual debtors” in this
example).
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- The 2005 Act makes numerous changes to existing provisions as to
relevant time periods, dollar amounts and other key components. Always refer to the amended Code to
check for these changes.
- Example of a Change in Time Period:
- “Look Back” for Applying State Exemption Laws: To determine which
state’s exemption laws are to apply to an individual debtor’s
exemptions, the determination will be based on where the debtor’s
domicile was located for the 730 days immediately preceding the date
of the filing of the petition. However,
if the debtor’s domicile was not located in a single state for such
730-day period, the determination will be based on where the debtor’s
domicile was located for the 180 days immediately preceding such
730-day period or for the greater portion of that 180-day period. [§
522(b)(2)(A)]
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- The new and amended statutory provisions will be clarified over time by:
- Judicial interpretation.
- Technical and substantive amendments made by Congress.
- The Interim Rules (to apply during the approx. 3 years it will take to
amend the FRBPs).
- New and revised Official Forms.
- Administrative Office guidelines (e.g., guidelines pertaining to the
confidentiality of tax documents filed with the court).
- Local rules and general orders.
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- September 20, 2005: Fee for filing a complaint commencing an adversary
proceeding to increase to $250.00.
- December 1, 2005: Amendments to the FRBPs to take effect (assuming no
congressional action taken before that date). One rule being amended is FRBP 1007
(described below).
- FRBP 1007, as of 12/01/05: List of creditors must be filed with the
petition and must include those listed (or to be listed) in Schedules
G* and H.** At the time of the
filing of the petition, a schedule of liabilities can no longer
substitute for the filing of a list of creditors.
- * Schedule G: Executory
Contracts and Unexpired Leases.
- ** Schedule H: Schedule of Codebtors.
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- The rest of this presentation provides a quick tour of some of the key
provisions and terms in the 2005 Act, with references to the Interim
Rules and Official Forms. Due to
space limitations, other sources will need to be consulted for a more
complete description of the amendments.
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- To file a case under any chapter of the Code, an individual debtor must
have received budget and credit counseling from an approved non-profit
agency within the 180 days prior to filing the petition. [See §§ 109(h)
and 521(b); Interim Rule 1007(b)(3) and (c).]
- A debtor may receive a 30-day exemption (with an additional 15 days if
ordered by the court for cause) by filing a certification describing
exigent circumstances meriting a waiver of this requirement and stating
that the debtor was unable to obtain counseling within the 5 days after
making the request (to receive this exemption, this certification must
be satisfactory to the court). [§ 109(h)(3)]
- This counseling requirement does not apply to a debtor residing in a
district for which no budget and credit counseling agency has been
approved by the US Trustee. [§ 109(h)(2)]
- This counseling requirement does not apply where the court determines
(after notice and a hearing) that the debtor cannot complete the
requirement due to incapacity, disability or active military duty in a
combat zone. [§ 109(h)(4)]
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- Completion of Course Required: To receive a discharge in a chapter 7 or 13
case, an individual debtor must have completed the required personal
financial management course. [See §§ 111; 727(a)(11); and 1328(g). See
also Interim Rule 1007(b)(7).]
- Entry of discharge may be delayed by the debtor’s failure to provide the
Clerk’s office with proof of completion of the course.
- Chapter 7 Cases: Pursuant to Interim Rule 4004(c)(1)(H), the court
cannot grant a discharge in a ch. 7 case where the debtor has not filed
with the court a statement regarding completion of the personal
financial management course required by Interim Rule 1007(b)(7).
- “If a debtor fails to file the required statement . . . the clerk will
close the bankruptcy case without entry of a discharge.” Advisory Committee Note to Interim
Rule 4004. See Interim Rule
4006 (clerk must promptly give notice where an individual debtor’s
case is closed without the entry of a discharge).
- Debtors Must Certify That They Completed the Course: Debtors are to use Official
Form 23 (“Debtor’s Certification of Completion of Instructional Course
Concerning Financial Management”).
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- Applies only to individual ch. 7 debtors whose debts are primarily
consumer debts.
- Abuse under § 707(b)(1): Court may dismiss or, with the debtor’s
consent, convert to ch. 13 where granting relief under ch. 7 would be an
abuse of that chapter.
- Presumption of Abuse under § 707(b)(2): The court must presume that
abuse exists where the calculation under the means test yields a
specific dollar threshold; this threshold appears to be the amount that
Congress has determined is needed to fund a ch. 13 plan. After deducting monthly expenses from
“current monthly income” [defined in § 101(10A)*], how much money would
remain to pay nonpriority, unsecured creditors on a monthly basis under
a ch. 13 plan over five years?
- *[NOTE: Under the § 101(10A) definition, the debtor must compute the average
monthly income (from all sources and regardless of whether it is taxable
income) earned during the six months ending on the last day of the month
immediately preceding the date of commencement of the case (e.g., for a
case filed on October 17th, it would be an average of what
was earned during the six months from April 1st through
September 30th).]
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- Formula: Calculation of the means test must be made pursuant to the
complex formula outlined in § 707(b)(2)(A).
- This formula substitutes IRS standard expenses* for certain real
expenses of the debtor while permitting other specified real expenses such
as school tuition (up to $1,500 per year for each child) or expenses
paid by the debtor for the care of an elderly or sick family member.
- The formula also includes deducting from income the monthly payments
made for secured debt and for priority claims.
- See Official Form 22A and Interim Rule 1007(b)(4).
- *[NOTE: For the IRS standard expenses, debtors are required to use a
combination of: 1) Local Standards (which vary, depending on the cost
of living where the debtor resides) for certain expenses like housing
and transportation, and 2) National Standards (having no local
variation) for other expenses (such as food and clothing).
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- Calculation would look something like this:
- First:
- + current monthly income [§ 101(10A)]
- – monthly IRS standard expenses
- – monthly specified real expenses [e.g., tuition, up to $1,500 per
child]
- – monthly payment on secured claims [total amount divided by 60]
- – monthly payment on priority claims [total amount divided by 60]
- net monthly amount (that could be used to pay nonpriority, unsecured
claims)
- Then:
- net monthly amount (from above) x 60 months = 5-year total amount
- [Compare this resulting total amount with § 707(b)(2)(A)(i). That section states, in part, that the
court should presume that abuse exists where the amount is “ . . . not
less than the lesser of –
- (I) 25 percent of the debtor’s nonpriority unsecured claims in the
case, or $6,000, whichever is greater; or
- (II) $10,000.”]
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- Exemption from Means Test Where Income Is At or Below the Median Income:
Where the combined income of a debtor and his or her spouse – either a debtor
spouse or a non-debtor spouse – is at or below the median income in that
debtor’s state (for a family of similar size), the means test will not apply.
- Note that, for this calculation, the spouse’s income will be taken into
account even where the spouse has not sought bankruptcy relief. The exception would be where the
debtor and spouse are legally separated [under applicable nonbankruptcy
law] or are living “separate and apart” [other than for the purpose of
evading the provisions of § 707(b)(7)(A)].
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- Debtor May Rebut the Presumption: Where the presumption of abuse has
arisen, the debtor may rebut the presumption by furnishing evidence that
demonstrates special circumstances.
- Court May Still Find Abuse Where There Is No Presumption: Where the
presumption does not arise* or is successfully rebutted, the court – in
determining whether abuse exists under § 707(b)(1) – shall consider the totality
of the circumstances of the debtor’s financial situation or whether the
debtor filed the petition in bad faith. [§ 707(b)(3)]
- * [NOTE: The presumption does not arise where, for example, the combined
income of the debtor and spouse is at or below the median income for
that state (for a family of that size).]
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- Standing:
- No One Has Standing – § 707(b)(7): Where the current monthly income of
the debtor and debtor’s spouse (including the income of a non-debtor
spouse) combined is at or below the median income, the means test does not
apply and no one [no judge, US Trustee, trustee nor any party in
interest] would be permitted to raise an issue relating to the presumption
of abuse under the means test set forth in § 707(b)(2); thus, no one
would be able to bring a presumptive abuse motion.
- Judge or US Trustee Has Standing – § 707(b)(6): Where the current
monthly income of the debtor or, in a joint case, the debtor and
debtor’s spouse, is at or below the median income, only the judge or US
Trustee may file a motion under § 707(b).
- Thus, under § 707(b)(6), US Trustees could bring an abusive filing
motion under § 707(b) in the case of a debtor whose income is at or
below the median, but trustees and parties in interest could not bring
such motion.
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- Role of US Trustee: Under § 704(b), the US Trustee, after reviewing the
ch. 7 debtor’s filed documents, must:
- Not later than 10 days after the date of the first meeting of creditors,
file a statement as to whether the presumption of abuse exists [the clerk
must provide (by mail) notice of this statement not later than 5 days
after receiving it, pursuant to § 704(b)(1)(B) and Interim Rule
2002(f)(10) – this notice is in addition to the notice that the clerk
must send (under § 342(d) and Interim Rule 5008) earlier in the case as
to the debtor’s statement regarding the presumption]; and
- Not later than 30 days after the filing the statement, either 1) file a
motion to dismiss or convert the case to ch. 13, or 2) file a statement
setting forth why the filing of such motion would be inappropriate.
- Time for Motion to Dismiss: Interim Rule 1017(e)(1), while expressly
excepting from its provisions the time requirements imposed on US
Trustees under § 704(b)(2) (see above), provides that a motion to
dismiss a ch. 7 case for abuse under § 707(b) or (c) may be filed only within
60 days after the first date set for the § 341(a) meeting of creditors.
- Dismissal or Conversion under § 707: Under Interim Rule 1017(e), the
court may dismiss or, with the debtor’s consent, convert a case for
abuse under § 707(b) only on motion and after a hearing on notice to the
debtor, the trustee, the US Trustee, and any other entities as the court
directs. NOTE that both § 707(b)
and Interim Rule 1017(e) require the debtor’s consent for conversion to
ch. 13!
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- New Filing Requirements under § 521(a)(1)(B):
- Certificate must be filed in cases filed by individual debtors whose
debts are primarily consumer debts.
The debtor should file either:
- Certificate of attorney or bankruptcy petition preparer (whose
signature appears on the petition) indicating that the notice required
by § 342(b) was delivered to the debtor; or
- Certificate of debtor (who filed a petition without the assistance of
an attorney or petition preparer) indicating that the debtor received
and read the § 342(b) notice.
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- All debtors* must file:
- Copies of all payment advices (pay stubs) or other evidence of payment
received by the debtor from any employer within 60 days prior to
filing. See IR 1007(b)(1)(E), which permits redaction of the debtor’s
social security number.
- A statement of the amount of monthly net income, itemized to show how
the amount is calculated. This requirement appears to be addressed by
revised Schedules I and J [see, e.g., lines ## 14 (new) and 15
(revised) of Schedule I and line # 20(c) (new) of Schedule J.]
- This requirement should be distinguished from the statement of current
monthly income that is required to be filed in cases under chapter 7
[Official Form 22A], individual debtors’ cases under chapter 11
[Official Form 22B] and cases under chapter 13 [Official Form 22C].
- A statement disclosing any reasonably anticipated increase in income or
expenditures over the 12-month period following the date of filing. Official
Forms: This requirement appears to be addressed by line # 17 (revised)
of Schedule I and line # 19 (new) of Schedule J.
- * [NOTE: Amended statute does not expressly limit these filing
requirements to individual debtors only.]
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- § 521(b) & IR 1007(b)(3): Individual debtors must file with the
court:
- A certificate – from approved nonprofit budget and credit counseling
agency – indicating debtor’s completion of budget and credit counseling
course.
- A copy of the debt repayment plan developed as part of budget and
credit counseling.
- § 521(c) & IR 1007(b)(1)(F): Debtors must file with the court a
record of any interest that the debtor has in an education individual
retirement account (as defined in Internal Revenue Code) or under a
qualified state tuition program.
- § 541(b)(5) excludes from property of the estate certain education
individual retirement accounts.
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- Interim Rule 1007(b)(1): Unless the court orders otherwise, the debtor
(except ch. 9 debtors) must file – in addition to the schedules and
statements that are already required – the following documents:
- Copies of all payment advices or other evidence of payment, if any, with
all but the last four digits of the debtor’s social security number
redacted, received by the debtor within 60 days prior to filing;
[Interim Rule 1007(b)(1)(E)]
- A record of any interest that the debtor has in an account or program
of the type specified in § 521(c) [i.e., education individual
retirement account* (as defined in Internal Revenue Code) or under a
qualified state tuition program]. [Interim Rule 1007(b)(1)(F)]
- Filings under IR 1007(b)(1) must
be prepared as prescribed by the appropriate Official Forms (if any).
- * [NOTE: Certain education individual retirements accounts may be excluded
from property of the estate under the provisions of § 541(b)(5).]
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- Interim Rule 1007(b)(3): Unless the US Trustee has determined that the §
109 credit counseling requirement does not apply in the district, the
debtor must file:
- As required by § 521(b), the certificate and debt repayment plan, if
any, from an approved credit counseling agency that provided such
counseling to the debtor;
- A § 109(h)(3) certification that describes exigent circumstances
meriting a waiver of the credit counseling requirement (where debtor
was not provided with counseling within the 5-day period after
requesting such counseling); or
- A request for a determination by the court [under § 109(h)(4)] that the
debtor is unable to complete the requirement due to incapacity, disability
or active military duty in a combat zone.
- Official Form 1: See the new box
in the middle of the second page of the petition as to the required
certification [“Certification Concerning Debt Counseling by
Individual/Joint Debtor(s)”].
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- Statements of Current Monthly Income Under Interim Rule 1007(b)(4), (5)
& (6):
- Chapter 7 – IR 1007(b)(4): Unless the provisions for disabled veterans
under § 707(b)(2)(D) apply, an individual ch. 7 debtor with primarily
consumer debts shall file a statement of current monthly income (using
the appropriate Official Form) and, if the debtor’s currently monthly
income is greater than the applicable median family income (for the
applicable state and household size), the “means test” calculations
under § 707(b) (using the appropriate Official Form). See Official Form
22A.
- Chapter 11 – IR 1007(b)(5): An individual ch. 11 debtor shall file a statement
of current monthly income (using the appropriate Official Form). See
Official Form 22B.
- Chapter 13 – IR 1007(b)(6): A ch. 13 debtor shall file a statement of
current monthly income (using the appropriate Official Form) and, if
the debtor’s currently monthly income is greater than the median family
income (for the applicable state and household size), a calculation of
disposable income under § 1325(b)(3) (using the appropriate Official
Form). See Official Form 22C.
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- VOLUNTARY CASES:
- File With the Petition: The documents pertaining to the new credit
counseling requirement – filed under IR 1007(b)(3) – must be filed with
the petition.
- File Either With the Petition or Within 15 Days: The following documents
must be filed within 15 days of filing (if not filed with the petition):
- Documents required under IR 1007(b)(1), i.e., all schedules, the
statement of financial affairs, payment advices (pay stubs), and any
records of an interest in education individual retirement accounts. [In
an involuntary case, these documents must be filed within 15 days of
the entry of the order for relief, along with the list required under
FRBP 1007(a)(2).]
- Documents required under IR 1007(b)(4), (5) or (6), i.e., the
statements of currently monthly income (where required to be filed in
ch. 7, 11 and 13 cases) and any required calculations for means testing
(ch. 7) or disposable income (ch. 13). See Official Form 22A for ch. 7;
Official Form 22B for ch. 11; and Official Form 22C for ch. 13.
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- Filing of Statement under IR 1007(b)(7): The debtor must file the statement
pertaining to the debtor’s completion of a course in personal financial
management (see Official Form 23) –
- In a chapter 7 case: within 45 days after the first date set for the §
341(a) meeting of creditors.
- In a chapter 13 case: no later than the last payment made by the debtor
as required by the plan or the filing of a motion for entry of a
“hardship” discharge under § 1328(b).
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- Statement of Intention under § 521(a)(2): The 2005 Act makes several
changes to the provision requiring individual debtors to file a statement
of intention; among the changes are:
- Deletion of the word “consumer” indicates that the statement must be
filed where the schedules include any debt (consumer or otherwise)
which is secured by property of the estate.
- Debtors now must perform their intention within 30 days after the first
date set for the § 341(a) meeting of creditors (no longer 45 days after
the filing of the notice of intent, as the pre-amended provision
permitted).
- Termination of Automatic Stay under § 362(h): The § 362(a) automatic
stay is terminated with respect to personal property securing in whole
or in part a claim, or subject to an unexpired lease, and such property
shall no longer be property of the estate, where the debtor fails to
comply with § 521(a)(2) by filing the statement of intention and performing
the debtor’s intention within the time constraints provided in §
521(a)(2).
- Official Form 8 has been revised to reflect the relevant amendments.
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- Duty to Redeem or Reaffirm Under New § 521(a)(6): Under new § 521(a)(6),
individual ch. 7 debtors must – not later than 45 days after the first
meeting of creditors – either redeem (§ 722) or reaffirm (§ 524) debt
where the creditor has an allowed claim for the purchase price secured (in
whole or part) by an interest in personal property (otherwise, the
debtor cannot retain possession of the personal property).
- Pursuant to § 521(a)(6), failure to act within the 45-day period
results in the termination of the § 362(a) automatic stay with respect
to that personal property (also results in the property no longer being
property of the estate) [unless there is a determination by the court
on motion of the trustee filed within the 45-day period].
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- Court’s Duties under § 521(e)(1) and (3): If a creditor files with the
court (at any time) a request to receive: 1) a copy of the petition,
schedules and statement of financial affairs filed by an individual
debtor in a ch. 7 or 13 case, or 2) a copy of the plan filed by a chapter
13 debtor, the court shall make a copy of the requested documents
available to that creditor [where the request is to receive a ch. 13
plan, the plan must be made available not later than 5 days after the
request is filed].
- Debtor’s Duty under § 521(e)(2) and Interim Rule 4002(b)(3) and (4): The
debtor must provide 1) to the trustee – not later than 7 days prior to
the date first set for the first meeting of creditors – a copy of the
Federal income tax return (or a transcript of such return) for the most
recent year ending prior to case commencement; and 2) at the same time,
a copy of such return (or transcript) to any creditor that has made a
timely request for such copy.
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- § 521(f): An individual debtor – at the request of the court, US Trustee
or any party in interest in a ch. 7, 11 or 13 case – must file with the
court:
- A copy (or transcript) of each Federal income tax return required with
respect to each tax year ending while the case is pending;
- A copy (or transcript) of each Federal income tax return that had not
been filed with the tax authority prior to the filing of the petition,
and that was subsequently filed for any year ending within 3 years
prior to the filing of the petition;
- A copy of each amendment to any Federal income tax return or transcript
already filed; and
- A statement – in a ch. 13 case – of the debtor’s income and
expenditures during the tax year most recently concluded, and of the
debtor’s monthly income, filed: 1) on the date that is either 90 days
after the tax year’s end or 1 year after case commencement, whichever
is later, if a plan is not confirmed before the later date; and 2)
annually after plan confirmation and until case closing.
- § 521(g)(2): The tax returns, amendments, and statement of income and
expenditures – described in § 521(e)(2)(A) and (f) – shall be available
to the UST, the trustee or any party in interest for inspection and
copying, subject to § 315(c) of the 2005 Act.
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- § 521(i): An individual debtor’s voluntary case under ch. 7 or 13 shall
be automatically dismissed on the 46th day after filing where
the debtor has failed to file all of the information required under §
521(a)(1) within 45 days after the date of filing of the petition.
- If, within the 45-day period, the debtor makes a request for more time,
the court may permit the debtor an additional period (but not exceeding
45 days) to file the information [required under § 521(a)(1)] if the
court finds justification for granting the extension.
- On or after the 46th day, the court must enter an order of
dismissal not later than 5 days after a request is made by any party in
interest to enter such order.
- On the trustee’s motion filed before the expiration of the applicable
period (either the initial 45-day period or any granted extension), the
court may decline to dismiss the case if the court finds 1) the debtor
attempted in good faith to file the required information and 2) the best
interests of creditors would be served by administering the case.
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- § 342(b) – Changes to Pre-Commencement Notice: The clerk’s
pre-commencement notice to an individual debtor whose debts are
primarily consumer debts must now include:
- A brief description of: 1) chapters 7, 11, 12 and 13 and the general
purpose, benefits, and costs of proceeding under each chapter, and 2)
the types of services available from credit counseling agencies; and
- Statements specifying that: 1) a person who knowingly and fraudulently
conceals assets or makes a false oath or statement in connection with a
bankruptcy case shall be subject to fine, imprisonment, or both; and 2)
all information supplied by a debtor in connection with a bankruptcy
case is subject to examination by the Attorney General.
- Certificate: Where § 342(b) applies, one of the following certificates
must be filed:
- Certificate of attorney or bankruptcy petition preparer (whose
signature appears on the petition) indicating that the notice required
by § 342(b) was delivered to the debtor; or
- Certificate of debtor (who filed a petition without the assistance of
an attorney or petition preparer) indicating that the debtor received
and read such notice. [§ 521(a)(1)(B)]
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- § 342(c) – Updated Requirements for Debtors When Providing Notice to
Creditors:
- Where the debtor* is required to give notice to a creditor, such notice
must contain the debtor’s name and address and the last four digits of
the debtor’s taxpayer identification number.
- When sending notice after adding a creditor to the schedules, the
debtor shall include the full taxpayer identification number in the
notice sent to the newly-added creditor, but the version of the notice
that is filed with the court should include the last four digits only.
- If – within 90 days prior to a voluntary case filing (or prior to 90
days if the creditor would be in violation of nonbankruptcy law by
sending a communication within 90 days) – a creditor supplies the
debtor – in at least 2 communications – with the account number and the
address to which the creditor is requesting to receive notice, any
notice required to be sent by the debtor to such creditor shall be sent
to such address and include such account number.
- * [NOTE: § 342(c)(1) does not appear to limit to individual debtors only
the right of debtors to redact their taxpayer identification numbers.]
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- § 342(d) & Interim Rule 5008 – Clerk’s Duty to Send Notice: Where
the § 707(b) presumption of abuse arises in a ch. 7 case of an
individual debtor, the clerk must give notice – to all creditors not
later than 10 days from the date of filing of the petition – that the
presumption of abuse has arisen.
- Notice (with respect to the presumption) will be based on which of the
two boxes is checked (by the debtor) at the top of Official Form 22A,
indicating whether the presumption arises (or does not arise).
- Notice (with respect to the presumption) will be provided as part of
Official Form 9 (i.e., the notice of case commencement often referred
to as the “§ 341(a) notice”). For
an example of this notice, see the middle of the first page of Form
B9A.
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- Interim Rule 5008: Where, on filing, the debtor does not file a
statement indicating whether the presumption has arisen [e.g., the
debtor did not file Official Form 22A with the filing of the petition]:
- The clerk’s notice will state that the debtor did not file a statement
and that further notice will be given if a later filed statement
indicates that the presumption has arisen.
- The clerk must send a second notice where the debtor later files a
statement indicating that the presumption has arisen.
- Interim Rule 5008 states that the notice must be in accordance with
Rule 2002. See Interim Rule
2002(f)(9), requiring notice by mail.
- Clerk’s Duty: In addition to the clerk’s duty to provide notice of the
debtor’s statement under § 342(d) and IR 5008, the clerk also has a
duty (as discussed in a prior slide) – pursuant to § 704(b)(1)(B) and
IR 2002(f)(10) – to provide notice of the US Trustee’s statement as to
whether the debtor’s ch. 7 case would be presumed to be an abuse under
§ 707(b).
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- § 342(e) – Creditor’s Choice of Address for Receiving Notice in Specific
Case:
- In an individual debtor’s ch. 7 or 13 case, a creditor (at any time)
may file with the court and serve on the debtor a notice of address to
be used to provide notice in the case (to that creditor).
- Both the court and the debtor must use the address provided in the notice
of address when sending notice to that creditor, for any notice
required to be sent later than 5 days after receipt of the notice of
address.
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- § 342(f) – Entity’s Choice of Address for Receiving Notice in the Ch. 7
and 13 Cases of All Courts or Selected Courts:
- An entity may file with any bankruptcy court a notice of address – to
be used by all bankruptcy courts or selected bankruptcy courts – to
provide notice to such entity in all pending ch. 7 and 13 cases in
which such entity is a creditor.
- Where notice is to be provided to such entity later than 30 days after
the filing of the notice of address, the address provided in the notice
of address must be used to send notice to such entity, unless, in a
particular case, such entity filed – under § 342(e) – a notice of
address to be used in that particular case.
- Compare application of § 342(e) with that of § 342(f):
- Based on its language, § 342(e) applies to the ch. 7 or 13 cases of individual
debtors (see previous slide).
- § 342(f), however, provides that it applies to ch. 7 and 13 cases, without
making any reference to individual debtors.
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- § 342(g) – Consequences of Noncompliance With the Provisions of § 342:
- Where the court or the debtor does not provide notice in accordance
with the provisions of § 342(a) through (f), the notice shall not be
effective notice until it is brought to the attention of the creditor.
- Where a creditor designates a person or organizational subdivision to
receive notice and establishes reasonable procedures for receiving
notice, any notice that is not sent in accordance with the provisions
of § 342(a) through (f) shall not be considered to have been brought to
the attention of that creditor until received by the designated person
or organizational subdivision.
- Consequences: A monetary penalty may not be imposed on a creditor for violation
of the § 362(a) automatic stay or for failure to comply with the
turnover provisions of §§ 542 and 543 unless the conduct (on which the
violation or failure is based) occurs after the creditor receives
notice – effective under § 342 – of the order for relief.
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- § 1514 applies in cases under all chapters of title 11 [see § 103(k)(1)]
and provides, in subsection (d), that any procedural rule or court order
as to notice of the filing of a proof of claim must provide additional
time to creditors with foreign addresses (as is reasonable under the
circumstances).
- Interim Rule 2002(p)(2) provides that – unless the court orders
otherwise – a creditor with a foreign address to which notices under
Rule 2002 are mailed shall be given at least 30 days’ notice of the
time fixed for filing a proof of claim under Rule 3002(c) or
3003(c). According to the
Advisory Committee Note, “the court may also shorten this additional
notice time if circumstances so warrant.”
- Pursuant to Interim Rule 2002(p)(1), the court may order that the
notice may be supplemented by other means or that the prescribed time
for the notice by mail be enlarged where the court finds a notice
mailed within the prescribed time to be insufficient in terms of
providing reasonable notice.
- Application of Interim Rule 3002(c)(6) in Ch. 7, 12 and 13 Cases: Where
notice of the time for filing a proof of claim was mailed to a creditor
at a foreign address, the court – on motion filed by the creditor before
or after the expiration of the time – may extend the time by not more
than 60 days (if the court finds the notice to be insufficient in
providing reasonable time to file).
Interim Rule 3003(c)(3) makes these provisions applicable to ch.
9 and 11 cases.
- Information for foreign creditors has been added to Official Form 9.
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- Clerk to Maintain List: Under new § 505(b), the clerk shall maintain a
list under which a governmental unit – Federal, State or local –
responsible for the collection of taxes within the district may:
- Designate an address for service of requests under § 505(b); and
- Describe where further information concerning additional requirements
for filing such requests may be found.
- Statement Designating Address: Under Interim Rule 5003(e), a
governmental unit – US, state, territory or local – responsible for the
collection of taxes within the district in which the case is pending may
file a statement designating an address for service of requests under §
505(b).
- The designation shall describe where further information concerning
additional requirements for filing such requests may be found.
- The register maintained by the clerk must include the mailing addresses
designated under Interim Rule 5003(e) (but the clerk is not required to
include more than one mailing address for each taxing authority).
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- Required Documentation for Individual Debtors at the § 341 Meeting –Interim
Rule 4002(b):
- Personal Identification: Photo ID issued by a governmental unit (or
other personal identifying information establishing identity) PLUS evidence
of debtor’s social security number (or a written statement that the
documentation does not exist).
- Financial Information:
- Evidence of current income (e.g., most recent pay stub),
- Statements for each depository or investment account, and
- Documentation of monthly expenses claimed by the debtor [when required
under § 707(b)(2)(A) or (B)].
- Tax Return (subject to the Administrative Office’s procedures for
safeguarding confidentiality):
- To the Trustee: A copy of the Federal tax return (and any attachments)
or a transcript of the return [or a written statement that the
documentation does not exist] must be provided to the trustee at least
7 days prior to the first date set for the § 341 meeting.
- To a Creditor: Where a creditor requests at least 15 days prior to the
first date set for the § 341 meeting, the debtor must provide that
creditor with a copy of the Federal tax return (and any attachments) or
a transcript of the return [or a written statement that the
documentation does not exist] at least 7 days prior to the first date
set for the § 341 meeting.
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- § 727(a)(8) – Revision of Existing Ground for Denying Discharge: Under §
727(a)(8), as amended, an individual debtor may not receive a ch. 7
discharge if the debtor had been granted a ch. 7 or 11 discharge in a
case commenced within 8 years* before the date of filing of the petition
in the present case.
- * [NOTE: The amendment changes the “look-back” from 6 years to 8 years. Official Form
1 has been amended – at the top of the second page – to reflect this
change; debtors must now list on the petition any prior bankruptcy case
filed within the last 8 years.]
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- New Exception to Discharge Added to § 727(a):
- § 727(a)(11) & Interim Rule 4004(c)(1)(H): A discharge will not be
granted where the debtor fails to complete the personal financial
management course described in § 111, unless: 1) the debtor is a person
described in § 109(h)(4) [court determines that failure to complete
course is due to incapacity, disability, or active military duty in a
combat zone]; or 2) the debtor resides in a district for which no
budget and credit counseling agency has been approved by the US
Trustee.
- Interim Rule 4004(c)(1)(H): Discharge cannot be granted where the
debtor has not filed with the court a statement regarding completion
of the financial management course. [The debtor must file Official
Form 23 (“Debtor’s Certification of Completion of Instructional Course
Concerning Financial Management”).]
- Interim Rule 4006: The clerk must promptly give notice to all parties
in interest where an individual debtor’s case is closed without the
entry of a discharge. This will occur where, for example, the debtor
fails to complete the course or, instead, the debtor does complete the
course but fails to file the statement (certifying completion).
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- New Exception to Discharge Added to § 727(a):
- § 727(a)(12): A discharge will not be granted where the court – after
notice and a hearing held not more than 10 days before the date of
entry of the discharge order – finds that there is reasonable cause to
believe that: 1) § 522(q)(1) may be applicable to the debtor; and 2)
there is a pending proceeding in which the debtor may be found guilty
of a felony [of the kind described in § 522(q)(1)(A)] or liable for a
debt [of the kind described in § 522(q)(1)(B)]. [NOTE: This provision
applies in cases commenced on or after the date of enactment, April 20,
2005.]
- Interim Rule 4004(c)(1)(I): Discharge cannot be granted where there is
a pending motion to delay or postpone discharge under § 727(a)(12).
- The time for filing a § 522(q) objection to an exemption is governed
by Interim Rule 4003(b)(2) (the objection must be filed before the
case is closed).
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- Interim Rule 4004(c)(1)(J): Discharge cannot be granted where a presumption
has arisen that a reaffirmation agreement is an undue hardship under §
524(m).
- § 1228(a) of 2005 Act and Interim Rule 4004(c)(1)(K) – A New Ground for
Not Granting Discharge: Although not amending § 727, the 2005 Act – in §
1228(a) – provides that the court shall not grant a discharge in an
individual debtor’s ch. 7 case unless requested tax documents have been
provided to the court. Pursuant
to Interim Rule 4004(c)(1)(K), a discharge should not be entered where a
pending motion to delay discharge is based on the allegation that the
debtor has not filed with the court all tax documents required to be
filed under § 521(f).
- § 727(d)(4) – A New Ground for Revoking Discharge: Under new paragraph
(4) of § 727(d), the court – on request and after notice and a hearing –
shall revoke a ch. 7 discharge where the debtor has failed to explain
satisfactorily 1) a material misstatement in an audit [28 U.S.C. §
586(f)], or 2) a failure to make available for inspection accounts,
papers, documents, files, etc. – belonging to the debtor – that are
requested for such audit.
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- New Exceptions Added to § 1328(a) Reduce the Scope of a Ch. 13 Discharge:
In addition to what is excepted from discharge under the pre-amended
version of § 1328(a), new exceptions are:
- Certain tax debts having a priority under § 507(a)(8)(C);
- Debts excepted under the following paragraphs of § 523(a): (1)(B),
(1)(C), (2), (3) and (4)*; and
- Debts for restitution or damages awarded in a civil action against the
debtor as a result of willful or malicious injury by the debtor that caused
personal injury to, or the death of, an individual.
- * [NOTE: The paragraph numbers of § 523(a) listed above are in addition
to the § 523(a) paragraphs already excepted from discharge in the
pre-amended version of § 1328(a), that is, paragraphs (5), (8) and (9)
of § 523(a). Also, the exclusion from discharge still applies to
certain long-term debts {under § 1322(b)(5)} and debts for restitution,
or a criminal fine, included in a sentence on the debtor’s criminal
conviction.]
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- § 1328(a) – New Condition to Receiving Discharge: To receive a discharge
under § 1328(a), a debtor required (by statute or judicial or
administrative order) to pay a domestic support obligation must certify that
all amounts payable (under order or statute) and due on or before the
date of certification have been paid (including prepetition amounts, but
only to the extent provided for by the plan).
- This new condition to obtaining a discharge also applies in chapter 12
cases; see § 1228(a).
- For individual debtors in chapter 11, a similar condition now exists as
a requirement for confirmation of the plan; see § 1129(a)(14).
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- Three New Grounds for Not Granting a Ch. 13 Discharge:
- 1. § 1328(f) – Repeat Filers: The court shall not grant a discharge if
the debtor has received a discharge 1) in a case filed under ch. 7, 11
or 12 during the 4-year period preceding the date of the order for
relief under ch. 13; or 2) in a case filed under ch. 13 during the 2-year
period preceding the date of such order.
- 2. § 1328(g) – Personal Financial Management Course: The court shall not
grant a discharge unless the debtor, after filing, has completed the personal
financial management course described in § 111. However, two exceptions exist: 1) the
debtor is a person described in § 109(h)(4) [court determines that
failure to complete course is due to incapacity, disability, or active
military duty in a combat zone]; or 2) the debtor resides in a district
for which no budget and credit counseling agency has been approved by
the US Trustee.
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- Three New Grounds for Not Granting Discharge (continued):
- 3. § 1328(h) – Pending Proceeding Related to § 522(q): A discharge will
not be granted unless the court – after notice and a hearing held not
more than 10 days before the date of entry of the discharge order – finds
that there is no reasonable cause to believe that: 1) § 522(q)(1) may
be applicable to the debtor; and 2) there is a pending proceeding in
which the debtor may be found guilty of a felony [of the kind described
in § 522(q)(1)(A)] or liable for a debt [of the kind described in §
522(q)(1)(B)].
- NOTE: This provision applies in cases commenced on or after the date
of enactment, April 20, 2005.
- Similar amendments have been placed in the discharge provisions for chapter
7 debtors [see § 727(a)(12)], chapter 12 debtors [see § 1228(f)] and individual
debtors in chapter 11 [see § 1141(d)(5)(C)].
- Interim Rule 4003(b)(2): A party filing a § 522(q) objection to an
exemption must do so before the case is closed. If an exemption is
first claimed after a case is reopened, an objection must be filed
before the reopened case is closed.
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- Statement Must Be Filed Under Interim Rule 1007(b)(8): Where a ch. 11,
12 or 13 individual debtor’s claimed exemption [under § 522(b)(3)(A)]
exceeds the $125,000 amount [§ 522(q)(1)] in property of the kind
described in § 522(p)(1), the debtor shall file a statement as to
whether there is a pending proceeding in which the debtor may be found
guilty of a felony [of the kind described in § 522(q)(1)(A)] or found
liable for a debt [of the kind described in § 522(q)(1)(B)].
- Interim Rule 1007(c): The debtor
must file the 1007(b)(8) statement by not earlier than the date of the
last payment made under the plan or the date of filing of a motion for
entry of a discharge under §§ 1141(d)(5)(B), 1228(b) or 1328(b).
- Clerk Must Send Notice Under Interim Rule 2002(f)(11): The clerk must
give notice by mail [to the debtor, all creditors and indenture
trustees] of the time to request a delay in the entry of a discharge
under §§ 1141(d)(5)(C), 1228(f) or 1328(h).
- Discharge Delayed Under Interim Rule 4004(c)(3): If the debtor is
required to file a statement under Rule 1007(b)(8), the court shall not
grant a discharge earlier than 30 days after the filing of the
statement.
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- Several changes to the Ch. 11 Discharge of an Individual Debtor:
- § 1141(d)(5)(A) – No Discharge Until Individual Debtor Has Completed
Making All Payments: Plan confirmation does not discharge any debt
(provided for in the plan) until the court grants a discharge on
completion of all payments under the plan [unless the court – after
notice and a hearing – orders otherwise for cause].
- Official Forms 9E and 9E(Alt.) have been revised to state that an
individual debtor’s discharge is not effective until the completion of
all payments under the plan (unless the court orders otherwise).
- § 1141(d)(5)(B) – Where Individual Debtor Has Not Completed Payments: The
court – at any time after plan confirmation and after notice and a
hearing – may grant a discharge to an individual debtor who has not completed
payments under the plan if 1) the distribution under the plan to
unsecured creditors is not less than what they would have received in a
chapter 7 liquidation, and 2) plan modification is not practicable.
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- Several changes to the Ch. 11 Discharge of an Individual Debtor (continued):
- § 1141(d)(5)(C) – Pending Proceeding Related to § 522(q): A discharge
will not be granted to an individual debtor unless the court – after
notice and a hearing held not more than 10 days before the date of
entry of the discharge order – finds that there is no reasonable cause
to believe that: 1) § 522(q)(1) may be applicable to the debtor; and 2)
there is a pending proceeding in which the debtor may be found guilty
of a felony [of the kind described in § 522(q)(1)(A)] or liable for a
debt [of the kind described in § 522(q)(1)(B)]. [NOTE: This provision
applies in cases commenced on or after the date of enactment, April 20,
2005.]
- See Interim Rules 1007(b)(8) and (c) [debtor must file statement], 2002(f)(11)
[clerk must send notice] and 4004(c)(3) [discharge delayed].
- The time for filing a § 522(q) objection to an exemption is governed
by Interim Rule 4003(b)(2).
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- § 1228(b) of 2005 Act – A New Condition to Confirming a Plan: Although
not amending § 1129 or § 1325 of the Bankruptcy Code, the 2005 Act – in
§ 1228(b) – provides that the court shall not confirm a plan in an individual
debtor’s ch. 11 or 13 case unless requested tax documents have been
filed with the court.
- Document Retention under § 1228(c) of 2005 Act: § 1228(c) states that
“[t]he court shall destroy documents submitted in support of a
bankruptcy claim not sooner than 3 years after the date of the
conclusion of a case filed by an individual under chapter 7, 11, or 13
. . . . In the event of a
pending audit or enforcement action, the court may extend the time for
destruction of such requested tax documents.”
- See the prior slide on Chapter 7 Discharge regarding the provisions of §
1228(a) of the 2005 Act (prohibiting the court from granting a ch. 7
discharge where requested tax documents have not been filed).
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- Individual Debtor’s Modification of a Ch. 11 Plan After Confirmation:
See § 1127(e) and Interim Rule 3019(b) pertaining to an individual
debtor’s modification of a plan after confirmation.
- Interim Rule 3019(b): After the debtor makes a request to modify, the
clerk must give not less than 20 days’ notice by mail of the time fixed
for filing an objection and, if an objection is filed, the hearing to
consider the proposed modification.
- Property of the Estate: Pursuant to new Code § 1115, property of the
estate – in an individual debtor’s ch. 11 case – includes:
- All property specified in § 541 acquired after case commencement but
prior to the case’s closing, dismissal or conversion (to ch. 7, 12 or
13), whichever occurs first.
- Earnings from services performed by the debtor after case commencement
but prior to the case’s closing, dismissal or conversion (to ch. 7, 12
or 13), whichever occurs first.
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- New § 1308 – Filing of Tax Returns with Taxing Authorities: Chapter 13
debtors are now required to file their Federal, State and local tax
returns with the appropriate taxing authorities, pursuant to the
provisions contained in new § 1308.
- Interim Rule 3002(c)(1): To be considered timely filed, a proof of
claim filed by a governmental unit for a claim resulting from a tax
return filed under § 1308 must be filed not later than 180 days after
the date of the order for relief or 60 days after the date of the
debtor’s filing of the tax return, whichever is later.
- New § 1324(b) – When To Hold Confirmation Hearing: The confirmation
hearing “may be held not earlier than 20 days and not later than 45 days
after the date of the meeting of creditors under section 341(a), unless
the court determines that it would be in the best interests of the
creditors to hold such hearing at an earlier date and there is no
objection to such earlier date.”
- Amended § 1322(d) – Length of Plan: Where the combined income of the
debtor and the debtor’s spouse is:
- Not less than the applicable median income: The plan may not provide
for payments over a period that is longer than 5 years.
- Less than the applicable median income: The plan may not provide for
payments over a period greater than 3 years (unless, the court, for
cause, approves a longer period, but the court may not approve a period
greater than 5 years).
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- Enforceability Dependent on Receipt of New Subsection (k) Disclosures: §
524(c)(2) has been revised to make the reaffirmation agreement
enforceable only if the debtor received – at or before the time of
signing the agreement – the disclosures described in new § 524(k).
- § 524(m) – Presumption of Undue Hardship: For 60 days after the signing
of the agreement (or such additional period as the court orders during
the 60 days), a presumption of undue hardship will exist if the amount
computed by deducting the debtor’s monthly expenses from the debtor’s
monthly income is less than the scheduled payments on the reaffirmed
debt.
- [monthly income – monthly expenses < payments on the reaffirmed
debt]
- Interim Rule 4008: The debtor’s statement under §524(k) shall be accompanied
by a statement of the total income and total expense amounts as stated
on Schedules I and J. The accompanying
statement shall include an explanation of any difference if the income
and expense amounts stated on Schedules I and J differ from those
appearing on the § 524(k) statement.
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- Rebuttal: While the debtor may submit a written rebuttal of the
presumption, the court may disapprove the agreement if the presumption
has not been rebutted to the court’s satisfaction.
- Discharge: No agreement shall be disapproved without notice and a
hearing (to both the debtor and creditor), and such hearing must be
concluded before the entry of the debtor’s discharge. See Interim Rule
4004(c)(1)(J) [debtor cannot receive a discharge where the § 524(m)
presumption of undue hardship has arisen].
- Exception: § 524(m) does not apply where the creditor is a credit union.
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- Major Changes: The 2005 Act changes the scope and effect of the
automatic stay by extensively amending § 362 and by adding new
provisions in other Code sections.
Two examples of the latter are:
- The language added as part of new § 521(a)(6) regarding termination of
the automatic stay with respect to certain personal property where the
debtor fails to either reaffirm or redeem within the 45-day period
after the first meeting of creditors; and
- The provision in § 342(g) stating that a monetary penalty may not be
imposed on a creditor for violation of the automatic stay unless the
conduct (on which the violation is based) occurs after the creditor
receives notice – effective under § 342 – of the order for relief.
- Many of the changes pertaining to the automatic stay appear to limit the
scope of the stay by creating new or expanded exceptions and
limitations. Several changes are
outlined in the following slides.
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- Repeat Filers: In a single or joint case filed by or against individual
debtor(s) in a case under ch. 7, 11 or 13:
- § 362(c)(3): The stay expires on the 30th day after the
filing of the later case – as to action taken with respect to a debt or
property securing a debt or as to any lease – if a single or joint case
of the debtor was pending within the preceding year but was dismissed
[other than a case refiled under § 707(b)]. [However, the court, on request, can
extend the stay – see § 362(c)(3)(B) & (C).]
- In a single or joint case filed by or against individual debtor(s) in a
case under title 11:
- § 362(c)(4): The stay shall not go into effect if two or more single or
joint cases of the debtor were pending within the preceding year but
were dismissed [other than a case refiled under § 707(b)]. On request,
the court shall promptly enter an order confirming that no stay is in
effect. [However, the court, on request, can order the stay to take
effect – see § 362(c)(4)(B), (C) & (D).]
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- Acts to enforce any lien against, or security interest in, real property
are excepted from the stay as follows:
- § 362(b)(20): Where a signed order under § 362(d)(4) was entered in a prior
case, the filing of the petition in the subsequent case does not
operate as a stay with respect to such acts* for a period of 2 years
from the date of entry of that order [the debtor, however, may move for
relief from such order in the subsequent case].
- § 362(b)(21): Such acts* are excepted from the automatic stay where: 1)
the debtor is ineligible under § 109(g) to be a debtor (due to a prior
case pending within 180 days prior to filing new case); or 2) the new
case was filed in violation of a bankruptcy court order (entered in a prior
bankruptcy case) prohibiting the debtor from being a debtor in another
bankruptcy case.
- * [i.e., acts to enforce any lien against, or security interest in,
real property.]
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- Exceptions to the Automatic Stay for Certain Landlord-Tenant Matters:
- § 362(b)(22) & (l): An eviction or similar proceeding against a
debtor (involving a residential rental) is excepted from the automatic
stay where the landlord had obtained a judgment for possession (in
state court) prior to the filing of the debtor’s bankruptcy case.
- However, the debtor can delay the exception from applying for 30 days
by: 1) filing with the petition a certification that, under relevant
(state) law, the debtor would be permitted to cure the default; and 2)
depositing with the Clerk the amount becoming due under the lease
during the 30 days after filing.
- Additionally, the debtor can make the exception inapplicable by making
the certification and deposit describe above plus filing a second
certification indicating that the default has been cured.
- If the court upholds the landlord’s objections after a hearing, the clerk
must serve on the landlord and the debtor a certified copy of the
court’s order.
- Official Form 1: See the new box – located at the bottom of the second
page of the petition – pertaining to whether the landlord has obtained
a judgment against the debtor for possession of the residence.
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- Exceptions to the Automatic Stay for Certain Landlord-Tenant Matters (continued):
- § 362(b)(23) & (m): Excepts from the automatic stay an eviction
proceeding against a debtor (involving a residential rental) based on endangerment
of such property or the illegal use of a controlled substance on the
premises, but only if the landlord files a certification that an
eviction has been filed or that the debtor – during the 30 days
preceding the filing of the certification – endangered such property or
illegally used (or allowed to be used) a controlled substance on the
premises.
- This exception does not begin to apply until 15 days after the filing
of the landlord’s certification.
- Exception Applies on Court Order: If the debtor files an objection
within 15 days, the exception does not apply unless the court so
orders, in which situation the clerk must serve a certified copy of
the court’s order on the landlord and debtor.
- Exception Applies Where Debtor Does Not Object Within 15 days: If the
debtor does not file an objection within 15 days, the clerk must serve
a certified copy of the court’s docket indicating the debtor’s failure
to object.
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- In Forma Pauperis:
- 28 U.S.C. § 1930(f): The district court or bankruptcy court may waive
the filing fee in an individual debtor’s chapter 7 case* if the court
determines that such individual:
- Has income of less than 150% of the income official poverty line
(applicable to a similarly-sized family), and
- Is unable to pay the fee in installments.
- “Filing fee” means filing fee required by 28 U.S.C. § 1930(a), or any
other fee [prescribed by the Judicial Conference under 28 U.S.C. §
1930(b) and (c)] payable on commencement of a chapter 7 case [for
example: the court would also waive both the $39 noticing fee and the
$15 trustee surcharge that a ch. 7 debtor would normally pay on filing].
- The district court or bankruptcy court may waive for such debtors other
fees prescribed by 28 U.S.C. § 1930(b) and (c).
- * [NOTE: In forma pauperis does not apply to chapter 13 debtors but,
instead, to chapter 7 individual debtors only. However, individuals filing under ch.
13 as well as under other chapters (7, 11 and 12) may still apply to pay
by installment. See the next
slide.]
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- In Forma Pauperis: Under Interim Rule 1006(c), an individual’s voluntary
ch. 7 petition shall be accepted for filing if accompanied by the
debtor’s application – prepared as prescribed by the appropriate
Official Form – requesting a waiver of the fee.
- In Forma Pauperis: Those seeking a waiver of the fee must complete and
file new Official Form 3B (and check the appropriate box on the
petition).
- Pay by Installment: Those seeking to pay by installment should complete
and file Official Form 3A (and check the appropriate box on the
petition).
- The Interim Rules eliminate the prohibition on paying by installment
where the debtor has already paid an attorney or petition preparer for
services in connection with the case [see Interim Rule 1006(b)(1)].
Thus, for cases filed on or after October 17, 2005, a debtor who has
already paid a fee to an attorney or petition preparer is no longer
barred from paying by installment.
- However, under Interim Rule 1006(b)(3), once the application is
granted, all installments must be paid in full before the debtor or
chapter 13 trustee may make any additional payments to an attorney or
any other person (e.g., petition preparer) who renders services in
connection with the case.
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65
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- Effective September 20, 2005:
- Complaint Commencing an Adversary Proceeding: $ 250.00.*
- Effective October 17, 2005:
- Chapter 7: Increased to $ 274.00.
- 220 ** [increased from $
155]
- 39 [noticing]
- + 15 [trustee’s surcharge]
- 274
- Chapter 13: Decreased to $ 189.00.
- 150 [decreased from $ 155]
- + 39 [noticing]
- 189
- Chapter 11: Increased to $ 1,039.00.
- 1,000 [increased from $ 800]
- + 39 [noticing]
- 1,039
- * [NOTE: The Judicial Conference
increased the amount to $250, as of 9/20/05 (this increase was not included
as part of the 2005 Act).]
- ** [NOTE: The resulting $ 220 amount is due to a technical correction
that was signed into law on May 11, 2005 as part of appropriations
legislation (Pub. L. No. 109-13); this $ 220 amount replaces the “$200”
included in § 325(a)(1) of the 2005 Act.]
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- The 2005 Act makes numerous changes to § 110 (“Penalty for persons who
negligently or fraudulently prepare bankruptcy petitions”), two of which
are noted below:
- § 110((b)(2): The bankruptcy petition preparer – before preparing any
document for filing or accepting any fees from a debtor – must provide
the debtor with a written notice which shall be an Official Form. This new form is Official Form 19B (“Notice
to Debtor by Non-Attorney Bankruptcy Petition Preparer”).
- § 110(h): The Supreme Court or the Judicial Conference may establish a maximum
allowable fee to be charged by a bankruptcy petition preparer.
- The bankruptcy petition preparer shall notify the debtor of any such maximum
amount before accepting any fee or preparing any document for filing.
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- No Redaction of Preparer’s Social Security Number: Bankruptcy petition
preparers must continue to place on the petitions (that are prepared by
them) their full (9-digit) social security numbers when signing the
petitions. [See § 110(c)(2)(A).]
- If a bankruptcy petition preparer is not an individual, the preparer
should place on the petition the social security number of the officer,
principal, responsible person or partner of the bankruptcy petition
preparer. [See § 110(c)(2)(B),
as added by the 2005 Act.]
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- New chapter 15 replaces § 304, which has been deleted by the 2005 Act.
- § 1504: A case under chapter 15 is commenced by the filing of a petition
for recognition* of a foreign proceeding under § 1515.
- Venue Under 28 U.S.C. § 1410: A ch. 15 case may be commenced in the
district court for the district in which:
- The debtor has its principal place of business or principal assets in
the USA;
- There is pending against the debtor an action or proceeding in a
Federal or State court (if the debtor does not have a place of business
or assets in the USA); or
- Venue will be consistent with the interests of justice and the
convenience of the parties (having regard to the relief being sought by
the foreign representative), in a case other than those specified in (1)
or (2) above.
- * [NOTE: “Recognition” means “the entry of an order granting recognition
of a foreign main proceeding or foreign nonmain proceeding” under
chapter 15. § 1502(7).
- See § 1502 for the definition of “foreign main proceeding,” “foreign
nonmain proceeding” and other terms used in chapter 15. See also § 101(23) and (24) for the
definitions of “foreign proceeding” and “foreign representative.”]
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- § 1515: A foreign representative may apply to the court for recognition
of a foreign proceeding by filing a petition for recognition. The petition should be accompanied by:
- A certified copy of the decision commencing such foreign proceeding and
appointing the foreign representative;
- A certificate from the foreign court affirming the existence of such
foreign proceeding and of the appointment of the foreign
representative; or
- In the absence of either of the above, any other evidence acceptable to
the court of the existence of such foreign proceeding and of the
appointment of the foreign representative.
- § 1517: The court will enter an order recognizing a foreign proceeding
if certain criteria are met.
- § 1520(a)(1): Upon recognition of a foreign proceeding that is a foreign
main proceeding, the automatic stay under § 362 applies with respect to
the debtor and the debtor’s property located within the territorial
jurisdiction of the United States.
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- § 1511(a): After obtaining a court order granting recognition, the
foreign representative may commence either:
- an involuntary case under § 303 or
- if the foreign proceeding is a foreign main proceeding, a voluntary
case under § 301 or 302.
- The filing of a case would be under one of the other operative chapters
of the Bankruptcy Code (e.g., ch. 7 or 11), assuming that the
eligibility requirements (set forth in § 109) for that particular
chapter are met.
- A case under another chapter may be commenced only if the debtor has assets
in the United States [§ 1528].
- Presumption of Insolvency: For purposes of commencing an involuntary case,
recognition of a foreign main proceeding is proof that the debtor is generally
not paying its debts as they become due (absent evidence to the
contrary) [§ 1531].
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- Official Form 1: The party filing a ch. 15 petition will check one of
two boxes, depending on whether the petition is for recognition of a foreign
main proceeding or a foreign nonmain proceeding.
- Interim Rule 1007(a)(4): Unless the court orders otherwise, a foreign
representative filing a petition for recognition must file with the
petition a list containing the name and address of:
- All administrators in foreign proceedings of the debtor,
- All parties to any pending litigation in the USA at the time of filing
of the petition where the debtor is a party, and
- All entities against whom provisional relief is being sought under §
1519.
- Interim Rule 1010: The clerk must promptly issue a summons on the filing
of a petition for recognition of a foreign nonmain proceeding. The filer
will then serve the summons with a copy of the petition on the debtor,
any entity against whom provisional relief is sought under § 1519, and
any other parties as directed by the court.
- Interim Rule 1011: A party in interest to a petition for recognition of
a foreign proceeding may contest the petition.
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- Interim Rule 2002(q):
- The clerk must promptly provide – to all parties listed in IR
2002(q)(1) – at least 20 days’ notice by mail of the hearing on the
petition for recognition of a foreign proceeding and such notice shall
state whether the filer seeks recognition of a foreign main proceeding
or foreign nonmain proceeding.
- The clerk shall also give – to all parties listed in IR 2002(q)(2) –
notice by mail of the court’s intention to communicate with a foreign
representative as prescribed by Interim Rule 5012.
- Interim Rule 5012 requires at least 20 days’ notice and mandates that
the notice shall identify the subject of the anticipated communication
and shall be given in the manner prescribed by Interim Rule 2002(q).
However, the rule excepts from the notice requirement any
communications for scheduling and administrative purposes.
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- The 2005 Act makes a number of changes – including new requirements –
for small business debtors.
- “Small business case” and “small business debtor” are defined in §
101(51C) and (51D).
- $2,000,000 debt ceiling remains (the 2005 Act did not raise it).
- Under the definition, “small business debtor” does not include any
member of affiliated debtors having a combined debt that is above the
$2,000,000 debt ceiling.
- Ability to “Elect” Eliminated: The 2005 Act appears to have removed any
statutory language indicating that the debtor may “elect” to be
considered as a small business. Thus, the small business provisions
added by the 2005 Act should apply to all debtors meeting the § 101
definition.
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- Duties: § 1116 lists – in paragraphs (1) through (7) – a number of
duties to be performed by the debtor in possession in a small business
case under ch. 11 (if a trustee is appointed, these duties would be
performed by the trustee). Some
examples of these duties are:
- Under § 1116(1), the debtor in possession must append to its voluntary
petition [or, in an involuntary case, file not later than 7 days after
entry of the order for relief]:
- The most recent balance sheet, a statement of operations, a cash-flow
statement, and its Federal tax return; or
- A statement (under penalty of perjury) that no balance sheet,
statement of operations or cash-flow statement has been prepared and
no Federal tax return has been filed.
- § 1116(3) establishes the duty to file timely the schedules and the
statement of financial affairs in a small business case. The provisions of § 1116(3) are excepted
from the provisions for extending time found in Interim Rule 1007(c). See
also Interim Rule 9006(b)(3) [court may enlarge the time for taking
action under Rule 1007(c) with respect to the time to file schedules
and statements in a small business case].
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- Interim Rule 1020:
- Voluntary Ch. 11 Case: The debtor shall state in the petition whether
the debtor is a small business [see the new box – “Chapter 11 Debtors”
– on Official Form 1).
- Involuntary Ch. 11 Case: The debtor shall file within 15 days after
entry of the order for relief a statement as to whether the debtor is a
small business.
- Interim Rule 1020(a) states that, except as provided in IR 1020(c), the
status of the case (as to whether it is a small business case) shall be
in accordance with the debtor’s statement, unless and until the court
enters an order finding the statement to be incorrect.
- Interim Rule 1020(c): Where the US Trustee has appointed an unsecured
creditors’ committee, the case shall proceed as a small business case
only if (and from the time when) the court enters an order determining
that the committee “has not been sufficiently active and representative
to provide effective oversight of the debtor” (and the debtor satisfies
all other requirements for being a small business).
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- Reporting Requirements: § 308 requires small business debtors to file
periodic financial and other reports containing information, including
the information listed in paragraphs (1) through (4) of § 308(b).
- Other provisions pertaining to small business cases:
- § 1121(e): establishes time periods for plan filing – including the
exclusive period during which only the debtor may file a plan – and for
extending the time in which to file a plan or to have a plan confirmed.
- § 1125(f), Interim Rules 3016(b) & 3017.1: permit the court to
determine that the plan itself furnishes adequate information and that
a separate disclosure statement is unnecessary. [Interim Rule 2002(b):
25 days notice must be provided.]
- 28 U.S.C. §586(a)(3)(H) and (7): gives additional duties to the US
Trustee in small business cases (conduct an initial debtor interview,
visit the debtor’s business premises, ascertain the state of the
debtor’s books and records, verify the filing of the debtor’s tax
returns, and review and monitor diligently the debtor’s activities).
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- District Court Is Bypassed: Under a new provision, an appeal of a
judgment, order or decree may bypass the district court (or bankruptcy
appellate panel*) and, instead, go directly to the court of appeals. [28
U.S.C. § 158(d)(2)]
- The new provision establishes who must certify the direct appeal, what
is the basis for certifying the direct appeal, and who must authorize
the direct appeal.
- Who must certify? For a direct appeal, the appeal must be certified by:
- 1) the bankruptcy court or district court (or bankruptcy appellate
panel), acting on the court’s (or panel’s) own motion or on the request
of a party to the judgment, order or decree being appealed, or
- 2) all the appellants and appellees (if any) acting jointly. [28
U.S.C. § 158(d)(2)(A)]
- *NOTE: The SDNY does not have a bankruptcy appellate panel. In some districts, an appeal of a
bankruptcy judge’s decision is made to a bankruptcy appellate panel in
lieu of appealing to the district court.
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- What is the basis for certifying the direct appeal? Whoever is
certifying the direct appeal – either the court or all appellants/appellees
– must certify that:
- A question of law is involved as to which no controlling decision of
the court of appeals or Supreme Court exists, or a matter of public
importance is involved;
- A question of law is involved requiring resolution of conflicting
decisions; or
- An immediate, direct appeal may materially advance the progress of the
case or proceeding in which the appeal is taken. [28 U.S.C. §
158(d)(2)(A)]
- Who must authorize the direct appeal? After certification is made, the
court of appeals must authorize the direct appeal. [28 U.S.C. §
158(d)(2)(A)]
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- When is a court (or appellate panel) required to make the certification?
The bankruptcy court or district court (or appellate panel) must make
the certification [under subparagraph (A), as described in the last 2
slides] if:
- the court (or panel) determines – on its own motion or at the request
of a party – that one of the three grounds [specified in clause (i),
(ii) or (iii), as described in the last slide] exists; or
- the court (or panel) receives a request made by a majority of the
appellants and a majority of the appellees (if any) to make the
certification. [28 U.S.C. § 158(d)(2)(B)]
- Any request for certification [made under subparagraph (B), as
described above in this slide] must be made not later than 60 days
after entry of the judgment, order or decree. [28 U.S.C. §
158(d)(2)(E)]
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- Petition Requesting Permission to Appeal: Pursuant to § 1233(b)(4) of
the 2005 Act, a petition requesting permission to appeal – based on a
certification [made under 28 U.S.C. § 158(d)(2)(A) or (B)] – must be
filed with the circuit clerk not later than 10 days after the
certification is entered on the docket of the court or panel from which
the appeal is taken.
- Timely Appeal Required: A certification to a court of appeals is not treated
as a certification entered on the docket within the meaning of § 1233(b)(4)(A) of the 2005 Act until
a timely appeal has been taken and the notice of appeal has become
effective. [Interim Rule 8001(f)(1)]
- See the Advisory Committee Note (to Interim Rule 8001), which states in
part:
- “ . . . [S]ubdivision (f)(1) provides that entry of a certification on
the docket does not occur until an effective appeal is taken . . . .”
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- File Where Pending: The certification should be filed in the court in
which the matter is pending.
- Pending in Bankruptcy Court: A matter is pending in a bankruptcy court until
the docketing [in accordance with Rule 8007(b)] of an appeal taken
under 28 U.S.C. § 158(a)(1) or (2), or the grant of leave to appeal
under 28 U.S.C. § 158(a)(3). [Interim Rule 8001(f)(2)]
- Pending in District Court: A matter is pending in a district court [or
bankruptcy appellate panel] after the docketing [in accordance with
Rule 8007(b)] of an appeal taken under 28 U.S.C. § 158(a)(1) or (2), or
the grant of leave to appeal under 28 U.S.C. § 158(a)(3). [Interim Rule
8001(f)(2)]
- Certification by Court:
- While the matter is pending in bankruptcy court, only the bankruptcy
court may make a certification on request (of parties to the appeal) or
on its own initiative.
- While the matter is pending in the district court (or appellate panel),
only the district court (or panel) may make a certification on request
(of parties to the appeal) or on its own initiative. [Interim Rule
8001(f)(2)(A)]
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- Certification by All Appellants and Appellees Acting Jointly: A
certification by all appellants and appellees, if any, acting jointly
may be made by filing Official Form 24 (“Certification to Court of
Appeals”) with the clerk of court in which the matter is pending. [Interim
Rule 8001(f)(2)(B)]
- The certification must be accompanied by a short statement of the basis
of the certification. [Interim Rule 8001(f)(2)(B)]
- Parties Making a Request for Certification: Interim Rule 8001(f)(3) outlines
the procedure to follow when requesting that the court make the
certification. Some of these procedural requirements are:
- The request should be timely filed with the clerk of the court in which
the matter is pending. [Interim Rule 8001(f)(3)(A)]
- Notice of the filing must be served as required for service of a notice
of appeal. [Interim Rule 8001(f)(3)(B)]
- For what must be included in the request, see clauses (i) through (v)
of Interim Rule 8001(f)(3)(C).
- For other provisions, see Interim Rule 8001(f)(3)(D), (E) and (F).
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- Certification on Court’s Own Initiative: When the court is certifying on
its own initiative (and not at the request of parties), the
certification must be made in a separate document served on the parties
and must be accompanied by an opinion or memorandum containing the
information that would be included in a request for certification under clauses
(i) through (iv) of Interim Rule 8001(f)(3)(C) [excluding clause (v)]. [Interim
Rule 8001(f)(4)]
- A party may file a supplementary short statement of the basis for
certification within 10 days after certification. [Interim Rule
8001(f)(4)]
- Satisfaction of Requirement for Leave to Appeal: The authorization of a
direct appeal by a court of appeals shall be deemed to satisfy the
requirement for leave to appeal (where leave to appeal is required but
has not already been granted). [Interim Rule 8003(d)]
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- § 333 & Interim Rule 2007.2: Where the ch. 7, 9 or 11 debtor is a “health
care business” [defined in § 101(27A)], the court shall order the
appointment of a patient care ombudsman [on such order, the United
States Trustee makes the appointment] unless the court – on motion of
the US Trustee or a party in interest filed not later than 20 days after
case commencement or a time fixed by the court – finds that the
appointment of an ombudsman is not necessary for the protection of
patients.
- If appointed, the ombudsman is required to monitor the quality of
patient care and to represent the interests of the patients.
- The ombudsman is to report to the court – 60 days after appointment and
at not less than 60-day intervals thereafter – regarding the quality of
patient care and – on determining that patient care is significantly
declining or is otherwise being materially compromised – file a motion
or written report with the court.
- Interim Rule 2015.1(a) requires the ombudsman to give notice before a
report is made to the court and Interim Rule 2015.1(b) pertains to an
ombudsman’s motion to review confidential patient records.
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- Box for Health Care Business to Check on Official Forms 1 and 5:
- Form 1 (“Voluntary Petition”): See underneath the heading “Nature of
Business” in the middle of the first page.
- Form 5 (“Involuntary Petition”): See underneath the heading “Information
Regarding Debtor” [under the subheading “Type of Debtor” on the
right-hand side] in the middle of the first page.
- Interim Rule 1021: In a ch. 7, 9 or 11 case, if a petition states that
the debtor is a health care business, the case shall proceed as a case
in which the debtor is a health care business (unless the court orders
otherwise). [IR 1021(a)]
- The US Trustee or a party in interest may file a motion for a
determination as to whether the debtor is a health care business. [IR
1021(b)]
- § 704(a)(12) & Interim Rule 2015.2: If the debtor is a health care
business, the trustee may not transfer a patient to another health care
business under § 704(a)(12) unless the trustee gives at least 10 days’
notice to the patient care ombudsman (if one has been appointed) and to
the patient and any family member or contact person.
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- Disposal of Patient Records: Interim Rule 6011 provides the procedures
for the disposal of patient records in a health care business case.
- The rule establishes the requirements for notice by publication [see IR
6011(a)] and notice by mail [see IR 6011(b)].
- Proof of Compliance: The trustee shall not file but, instead, shall
maintain the proof of compliance with § 351(1)(B) for a reasonable
time, unless the court orders the trustee to file the proof of
compliance under seal. [Interim Rule 6011(c)]
- Report of Destruction of Records: The trustee shall file – not later
than 30 days after the destruction of patient records – a report certifying
that the unclaimed records have been destroyed (and explaining the
method used to destroy them). The report shall not identify patients by
name or other identifying information. [Interim Rule 6011(d)]
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- § 332: The court shall order the United States Trustee to appoint a
consumer privacy ombudsman where a hearing is required under §
363(b)(1)(B) [the appointment of an ombudsman should be made not later
than 5 days before commencement of the hearing].
- § 363(b)(1): The trustee may not sell or lease “personally identifiable
information” [defined in § 101(41A)] where:
- The debtor, in offering a product or service to individuals, had
disclosed a policy prohibiting the transfer of personally identifiable
information to those not affiliated with the debtor; and
- Such policy is in effect on the date of case commencement;
- UNLESS:
- The sale or lease is consistent with such policy; or
- The court approves such sale or lease after appointment of a consumer
privacy ombudsman [pursuant to § 332] and after notice and a
hearing. To approve such sale or
lease, the court – after giving due to consideration to the facts,
circumstances and conditions of such sale or lease – must find that no
showing was made that such sale or lease would violate applicable
nonbankruptcy law.
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- Interim Rule 2002(c)(1): The notice of a proposed sale or lease of personally
identifiable information [under § 363(b)(1)(A) or (B)] must state
whether the sale is consistent with a policy prohibiting the transfer of
the information.
- Interim Rule 6004(g):
- Motion: A motion for authority to sell or lease personally identifiable
information [under § 363(b)(1)(B)] shall include a request for an order
directing the US Trustee to appoint a consumer privacy ombudsman under
§ 332.
- Appointment: If a consumer privacy ombudsman is appointed under § 332,
the US Trustee shall file a notice of the appointment (including the
name and address of the person appointed), accompanied by a verified
statement of the person appointed.
- Schedule B: On line # 24 of Schedule B, the debtor must now furnish
information pertaining to customer lists or other compilations
containing personally identifiable information.
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- New § 112 – Prohibition on Disclosure of Names of Minor Children: The
debtor may be required to provide information regarding a minor child
but may not be required to disclose the name of such child in public records
in the case.
- The debtor may be required to disclose the name of such minor child in
a nonpublic record that is maintained by the court and made available
for examination by the US Trustee, the trustee and – if serving – the
auditor.
- Where the name is maintained in the nonpublic record, this provision
prohibits the court, US Trustee, trustee or auditor from disclosing
the name.
- The Official Forms have been amended to instruct filers not to disclose
the name of any minor child (e.g., Official Form 4 and 6, as amended).
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- § 101(12A): “Debt relief agency” means any person who provides any
“bankruptcy assistance” [defined in § 101(4A)] to an “assisted person” [defined
in § 101(3)] in return for the payment of money or other valuable
consideration, or who is a bankruptcy petition preparer under § 110.
- See § 101(12A) for a list of those not considered to be a “debt relief
agency” (e.g., tax-exempt, nonprofit organizations are not considered
debt relief agencies).
- § 526 imposes restrictions on debt relief agencies.
- § 526(a) contains a list of prohibitions with respect to certain
conduct.
- Under § 526(c), a written contract that is not in compliance with the
requirements contained in § 526 shall be void and may not be enforced
in any Federal or State court.
- § 527 describes the kind of disclosures that debt relief agencies must
provide to assisted persons.
- The assisted person must be provided with the written notice required
under § 342(b) and, to the extent not covered in the § 342(b) written
notice, a separate written notice containing the debtor’s
responsibilities that are listed in § 527(a)(2).
- The assisted person must be provided with the statement that is quoted
in § 527(b) (this multi-paragraph statement must be furnished to the
assisted person in a separate document).
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- § 528 imposes certain requirements on debt relief agencies.
- A written contract (between the debt relief agency and the assisted
person) must be executed, with a copy furnished to the assisted person.
- The section requires that certain disclosures, descriptions and
statements must be included in any advertisement of services.
- Provisions Applicable to an “Attorney”: While the 2005 Act contains new
provisions applicable to a debt relief agency, the 2005 Act includes
other new provisions referring to an “attorney” (instead of referring to
a “debt relief agency”). The
examples provided below pertain to the signature of an attorney (in a
chapter 7 case):
- The signature of an attorney on a petition shall constitute a certification
that the attorney has no knowledge after an inquiry that the
information in the schedules filed with the petition is incorrect. [§
707(b)(4)(D)]
- The signature of an attorney on a petition, pleading or written motion
shall constitute a certification that an attorney has performed a
reasonable investigation into the circumstances giving rise to the
filing and has determined that the filing is: 1) well grounded in fact
and 2) warranted by existing law – or a good faith argument for the
extension, modification or reversal of existing law – and does not
constitute an abuse under § 707(b)(1). [§ 707(b)(4)(C)]
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- The 2005 Act makes number of amendments pertaining to domestic support
obligations, such as:
- New Definition for “Domestic Support Obligation” [ § 101(14A)]:
Defined, in part, as a debt accruing before, on or after the date of
the order for relief in a title 11 case – including interest accruing
on the debt – that is owed or recoverable by: 1) a spouse, former
spouse or child of the debtor or such child’s parent, legal guardian or
responsible relative, or 2) a governmental unit [see entire definition in §
101(14A)].
- First Priority for Certain Domestic Support Obligations [§ 507(a)(1)]:
With the 2005 Act, the domestic support priority is rewritten and moved
upward to have a first priority as paragraph (1) of § 507(a) [prior to
the 2005 Act, it had a seventh priority – see § 507(a)(7) in the
pre-Act version of the Bankruptcy Code]. Consequently, the first through sixth
priorities in the pre-Act version of the Code are now the second
through seventh priorities respectively in the amended Code [see §
507(a)(2) through (a)(7) of the Bankruptcy Code, as amended by the 2005
Act].
- Schedule E (Official Form 6) and Official Form 10 have been amended to
reflect the amendments made to § 507(a).
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- Exception to the Automatic Stay Pertaining to Domestic Relations
Matters – § 362(b)(2): With the 2005 Act, the exception to the
automatic stay pertaining to domestic relations matters has been
broadened to include such actions as:
- The withholding of income [that is either property of the estate or
property of the debtor] for the payment of a domestic support
obligation [under a judicial or administrative order or by statute].
- The withholding, suspension or restriction – under state law –of a
driver’s license, a professional or occupational license, or a
recreational license [as specified in § 466(a)(16) of the Social
Security Act].
- Interception of a tax refund [under certain provisions of federal law
or analogous state law].
- Enforcement of a medical obligation [under title IV of the Social
Security Act].
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- 28 U.S.C. § 586(f) – The US Trustee must engage the services of auditors
to audit the chapter 7 and 13 cases of individual debtors.
- While debtors will be randomly selected for an audit under procedures
that are established, the 2005 Act requires that not less than 1 of
every 250 debtors be selected for an audit.
- When the report resulting from an audit reveals a material misstatement
of the debtor’s income, expenditures or assets:
- The clerk must give notice of the misstatement to creditors.
- The US Trustee must report the misstatement to the US Attorney and, if
advisable, take appropriate action such as commencing an adversary
proceeding to revoke the debtor’s discharge.
- § 521(a)(3) and (4) – Debtor’s Duties When Audited: The debtor’s duties
set forth in paragraphs (3) and (4) – duties to cooperate with the
trustee and to surrender property of the estate and recorded information
to the trustee – are amended to make these duties applicable to cases in
which an auditor is conducting an audit under 28 U.S.C. § 586(f).
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- Court to Seal Record: Pursuant to new subsection (l)* of § 303, the
court, on motion of the debtor, shall seal all the records relating to
an involuntary petition, as well as all references to the petition,
where:
- The debtor is an individual;
- The involuntary petition filed against the individual is false or
contains any materially false, fictitious or fraudulent statement; and
- The court dismisses such petition.
- Prohibition Applicable to Consumer Reporting Agencies: If the debtor is
an individual and the court dismisses a petition under § 303, the court
may enter an order prohibiting all consumer reporting agencies from
making a report containing information pertaining to the petition or the
case commenced by the filing of that petition.
- Court May Expunge Record: The court, on motion of the debtor and for
good cause, may expunge any records relating to an involuntary petition
filed under § 303 (on expiration of the statute of limitations in 18
U.S.C. § 3282, for violation of 18 U.S.C. § 152 or 157).
- * [NOTE: Congress – in deleting subsection “(k)” of § 303 – should
probably have designated this new subsection as “(k)” instead of using
the next letter {i.e., “(l)”}.]
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- Change of “Look Back” from 1 to 2 Years: As amended by the 2005 Act, subsections
(a) and (b) of § 548 permit the trustee to avoid certain transfers made
– or obligations incurred – within 2 years before the date of the filing
of the petition where, under the provisions of § 548, the transfer or
obligation is considered to be fraudulent (prior to the 2005 Act, the
transfer or obligation had to have occurred within 1 year prior to
filing).
- This amendment applies only to bankruptcy cases commenced more than 1
year after the date of enactment (date of enactment was April 20, 2005).
- Transfers to Self-Settled Trusts: Under new § 548(e), the trustee may
avoid certain transfers made by the debtor to self-settled trusts on or
within 10 years before the date of filing of the petition (where the
debtor is the beneficiary of such trust and the transfer was made with
actual intent to hinder, delay or defraud any entity to which the debtor
was or became indebted).
- This amendment applies only to bankruptcy cases commenced on or after
the date of enactment (date of enactment was April 20, 2005).
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- Replacement Value To Be Used in Individual Debtor’s Ch. 7 or 13 Case: In
a ch. 7 or 13 case of an individual debtor, the value of personal
property securing an allowed claim shall be determined based on the replacement
value of such property as of the date of filing of the petition (without
deduction for costs of sale or marketing). [§ 506(a)(2)]
- Replacement value of property acquired for personal, family or
household purposes shall mean “the price a retail merchant would charge
for property of the kind considering the age and condition of the
property” at the time of valuation. [§ 506(a)(2)]
- Due to this amendment, Schedules A, B, C and D no longer refer to
“market value.” See the Advisory
Committee Note to Official Form 6.
- Section 506 Not Applicable to Certain Secured Claims in Ch. 13: Where a
creditor in a ch. 13 case has a purchase money security interest
securing the debt owed to it, section 506 shall not apply – for purposes
of § 1325(a)(5) – to a claim described in § 1325(a)(5) if: 1) the debt
was incurred within the approximately 2.5 years* prior to filing and the
collateral for that debt is a motor vehicle (acquired for personal use),
or 2) the debt was incurred during the 1 year preceding the filing and
the collateral for that debt consists of any other thing of value. [See the
new sentence added at the end of § 1325(a).]
- * [NOTE: Amended statute refers to “910 days”; see § 1325(a), as
amended.]
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- In Cases of Individual Debtors With Primarily Consumer Debts under Under
Chapters 7, 11 and 13: Under a new section added to title 28 (28 U.S.C.
§ 159), the clerk of the district court – or clerk of the bankruptcy
court [if one is certified under 28 U.S.C. § 156(b)] – shall collect
statistics regarding individual debtors with primarily consumer debts
under chs. 7, 11 and 13.
- The Administrative Office will compile the statistics and make them
available to the public.
- The information that the statistics are required to include may be
found in subparagraphs (A) through (H) of 28 U.S.C. § 159(c)(3).
- To collect the required information, a new summary has been added to
the schedules; see the “Statistical Summary of Certain Liabilities”
that has been added to Official Form 6.
- This provision does not become effective until October 2006, i.e., 18
months after the effective date (effective date was April 20, 2005).
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Notes