Section 341 Meetings by Zoom in EDKY – Procedures

COVID-19 pushing us into the next stage of technology.

Chapter 13 Trustee, EDKY: Trustee's Blog

This post was updated 04/06/2020 10:50 a.m. to add a link to the list of  341 questions  the debtor’s attorneys will ask.

In my previous post I discussed some general issues about using Zoom for section 341 meetings.  This post will cover the procedures for scheduling, noticing, and conducting Zoom meetings.

We are in the process of re-noticing the section 341 meetings that will be conducted via Zoom.  The docket text of the notice gives the date and time of the rescheduled meeting and indicates that the meeting will be conducted via video conference.  The PDF document gives a little more information.  The BNC is mailing the notice to the debtor and all creditors.

Note that there is no “location” for the meeting.  This is not like the Court’s video hearings where the parties go to a courtroom and the hearing is conducted through the Court’s video system by…

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The Impact of the CARES Act on Chapter 13 Cases

A great breakdown of some of the debt related provisions of the CARES act.

Chapter 13 Trustee, EDKY: Trustee's Blog

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on Friday, March 27, 2020 and includes provisions that may have an effect on debtors and creditors in chapter 13 cases.

Bankruptcy-Specific Provisions:

Payments the federal government will make to individuals under the CARES Act (the well-publicized $1,200/$2,400+ direct payments) are not counted as income for bankruptcy purposes.  Debtors in chapter 13 cases can keep the money.

Section 1329 of the Bankruptcy Code relating to modification of plans after confirmation has been amended to add a new subsection (d).  I have decided to skip the soundbite and set forth the actual statutory language as follows:

(d)(1) Subject to paragraph (3), for a plan confirmed prior to the date of enactment of this subsection, the plan may be modified upon the request of the debtor if-

(A) the debtor is experiencing or has experienced a material financial…

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“I Can’t Make My Plan Payments Right Now”: These Policy and Procedure Changes Might Help

Tremendous news that can help people complete their chapter 13 bankruptcy in this trying time.

Chapter 13 Trustee, EDKY: Trustee's Blog

Due to the present health and economic crises, we are making changes to the procedures and policies regarding motions to dismiss for nonpayment and probation orders in the EDKY.  These changes will remain effective until further notice.

I will not file motions to dismiss until debtors are at least four (4) months’ delinquent.  The present practice is to file motions to dismiss when the delinquency is at least two (2) months.

After I file a motion to dismiss, debtors can agree to become current within 30, 60, 90, 120, or 150 days.  The new agreed probation orders allowing 120 days or 150 days to become current will be posted on my website by Monday, March 23.

Paragraph (3) of Local Form 3070-1(b), the Probation Order Regarding Chapter 13 Plan Payments, and our agreed probation orders, will be changed to add “Unless the Court orders otherwise . . . .”  This…

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Secured Claims in a Chapter 13 Plan in the EDKY

Chapter 13 Trustee, EDKY: Trustee's Blog

In 2017, the court in this district adopted the so-called “national plan” with a few minor changes.  Part 3 of the chapter 13 plan form discusses treatment of secured claims, but it does not refer to payment of “allowed” claims.  Must I pay a secured creditor listed in the plan if no proof of claim has been filed by or on behalf of the creditor?

It is done in a minority of jurisdictions, but historically the majority rule (followed in this district) has been that a secured creditor must have an allowed claim in order to be paid under the plan.  It makes sense to pay only allowed claims in light of the 2017 amendment to Rule 3002 requiring secured creditors to file a proof of claim.  However, the plain language of the plan seems to follow the minority rule.

Some practitioners approached me a few weeks ago to express…

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New Deadlines for Filing Tax Returns as Required by Section 1308

Makes sense. File your tax returns. I have had a number of people fail to file returns because they knew they could not pay what was due. Unfortunately, the IRS will still assess a tax against you and by NOT filing, you prevent the statute of limitations to begin to run on that tax year. This prevents older tax debts from being dischargeable in the bankruptcy.

Chapter 13 Trustee, EDKY: Trustee's Blog

I have a new policy regarding the deadlines for filing tax returns pursuant to section 1308 of the Bankruptcy Code.

REFRESHER:  Section 1308 requires debtors to file with the tax authorities all tax returns for all tax periods ending during the four (4) years before the date of the petition.  The plan cannot be confirmed until these tax returns have been filed, and a case can be dismissed for not timely filing the returns.

If the required tax returns have not been filed by the day before the first scheduled section 341 meeting of creditors date, the trustee may hold open the meeting for a reasonable period of time to allow the debtor additional time to file the tax returns, subject to a maximum number of days depending on whether the return was past due at the time of the petition or not.

FIRST POLICY CHANGE – WHICH YEARS’…

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Late Secured Claim Disallowed Under 12/01/2017 Amended Rules

Yikes! Debtors counsel need to pay close attention to this deadline.

Chapter 13 Trustee, EDKY: Trustee's Blog

A secured claim filed after the bar date is disallowed when objected to in the EDKY, even if it is provided for in a confirmed chapter 13 plan.  A copy of the order is available here.

The debtor’s confirmed plan provided that the creditor’s claim, which is secured by the debtor’s car, would be paid as a “910 claim.”  The creditor filed its proof of claim after the deadline for filing claims (the “bar date”).  I objected to the claim as being untimely filed.

In the Eastern District of Kentucky, the court has a long history of sustaining objections to the allowance of late unsecured claims in chapter 13 cases, strictly interpreting 11 U.S.C. § 502(b)(9) and the Federal Rules of Bankruptcy Procedure.  (In a nutshell, section 502(b)(9) says that if an objection to a claim is filed, the court shall allow the claim “except to the extent that proof…

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Increases in Prime Rate of Interest and in EDKY Trustee’s Fee

Chapter 13 fees and interest rates every practitioner in the Eastern District should know.

Chapter 13 Trustee, EDKY: Trustee's Blog

On September 27, 2018, the prime rate of interest increased to 5.25%.

On October 1, 2018, my percentage fee increased to 7.1%.  If you are calculating how much a debtor must pay in order to adequately fund a plan, you need to add at least 7.7% to the total amount of secured claims, interest, attorney’s fee, priority claims, and whatever amount is needed to satisfy the liquidation test.

These increases apply in cases confirmed after the effective date of the changes.

The interest rate for secured IRS tax claims remains at 5%, at least through the end of 2018.  Secured claims filed by the Kentucky Department of Revenue are paid interest at 6% in calendar year 2018.

You can find other posts about interest rates by using the search feature or by clicking on the “categories” link on the right-hand side of the home page.

 

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Delinquent Property Taxes and the EDKY Chapter 13 Plan

I still do the plan by hand because of these little quirks. Thanks for the information.

Chapter 13 Trustee, EDKY: Trustee's Blog

Where should fully secured delinquent property tax claims be listed in the new chapter 13 plan form?  Debtors’ attorneys and attorneys representing mortgage creditors need to make sure these claims are listed in the plan in such a way as to ensure they are paid in full.

For a refresher on property taxes under Kentucky law, how they should be paid in a chapter 13 case in general, and interest rates on the claims, click here.  For this post, we’re only looking at where in the plan fully secured delinquent property tax claims held by third-party purchasers should be listed.

The logical place to list the claims is under Section 3.2 of the plan: “Request for valuation of security, payment of fully secured claims, and modification of undersecured claims.”  It’s interesting that the heading includes “payment of fully secured claims,” but that’s easier said than done.

Start by reading…

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Chapter 7 and Student Loans

Student loans are not automatically discharged in a bankruptcy. It requires an adversary proceeding, which is a lawsuit within a lawsuit, in order to determine if student loans are discharged. The factors that have to be met make discharge of student loans relatively rare. However, that is not the purpose of this post. Rather, I wanted to explain what does happen to the student loans.

Once the holder of the student loan is notified of the Chapter 7, the loan is recharacterized in their computer system and no action will be taken until the bankruptcy ends. Sometimes the characterization of the student loan as in bankruptcy never gets changes back, which can cause problems later on. However, the debtor can still make payments on the student loan during the Chapter 7, but they will be provided a different address to send the payments. Unfortunately, this notice may take months to be sent out.

If possible, I recommend that the debtor continue to make payments voluntarily during the bankruptcy. This avoids the interest piling up and increasingly the total amount due. It also helps satisfy one of the factors if the debtor later attempts to discharge these loans, even if the payments are less than the full payment due.

Bitcoin and Bankruptcy

There is probably already a post out there regarding bitcoin and bankruptcy because it seems all the rage these days. However, I have not seen one, so I will claim the first. Perhaps though, it is because there is really only one thing to say about bitcoin and bankruptcy. As opposed to the complexity of every other aspect of bitcoin, this is really quite simple: bitcoin is an asset in a bankruptcy so it must be disclosed.

I hope that is sufficient explanation. Now that I think of it, though, there could be one rather challenging aspect of bitcoin and bankrupty: what is its value? There have been cases where a chapter 7 has been held open so long that the trustee went after the increase in value of exempted real property as part of the estate – with how volatile bitcoin is, one would need to calculate its value right when the petition is filed (be sure to preserve documentation of that value at that moment). Then, one would just hope the trustee does not seek after the gains towards the end of the bankruptcy.

However, I cannot imagine anyone who owns bitcoin is going to be filing bankruptcy anytime soon, so we have time to figure this one out.