Questions
posed to us by attorneys and trustees, with our best
answers, beginning Sept. 1, 2005, are shown
below
Note: the following opinions are
subject to legitimate disagreement, and some of the
issues discussed will inevitably be the subject of
considerable controversy, with wide variances in
interpretation based on local practice and emerging
case law. So, keep that in mind when you read our
answers.
Question 27: (added
10/05/06)
Does the income of a non-filing
spouse have to be computed into the B22 test if she is
part of the household?
Timothy Hawkins
Consumer bankruptcy attorney
St. Albans, Vermont
Answer:
This topic is discussed in
King's Guide at ¶ 8.3(e) and 6.4(a)(4)
In a nutshell, the portion of
the non-filing spouse's income that must be included
in the debtor's income is the portion regularly
contributed to the household expenses." Code §
101(10A), (10B).
This creates lots of room for
argument with the trustee. Even assuming the
non-filing spouse deposits her entire paycheck into a
separate checking account in his/her name only, it may
be difficult convincing the trustee that the money
does not in some way, even if indirectly, contribute
to paying household expenses. The statute includes in
the debtor's income any portion of a non-filing
spouse's income regularly contributed to the debtor's
dependents, as well. Thus one would have to trace the
non-filing spouse's income to identify any portion
being paid, directly indirectly, to cover expenses for
the debtor's dependent children, or any dependent
adults. Thus, the issue has to be addressed on Form
B22 Part II line 8. This would apply whether one is
calculating current monthly income for the means test,
or for chapter 13.
See answer to Question #
23.
Question 26: (added
9/19/06)
I filed a
chapter 7 for an elderly collecting only SSI and a
Pension. The creditors meeting was held last week.
Today, I receive a letter from the US Trustee that
there may be abuse because even though the debtor
passed the means test, he had excess income.
($300.00 per month). What's your opinion on that?
Ira C. Yellin,
Esq.
Yellin & Hyman, PC
Franklin, MA
Answer:
This topic is discussed in
King's Guide at ¶ 10.5(b)
The trustee may move for
dismissal based on "abuse" or "bad faith" under 11
U.S.C. § 707(b)(3) even where the debtor's income
does not raise an automatic presumption of abuse. In
fact, under amendments made by BAPCPA to this section,
it is easier than under pre-reform law to raise the
issue of abuse. This is because under BAPCPA the text
of the statute was amended to delete the word
"substantial" from the phrase "substantial abuse"
found at Code § 707(b)(1), so that now it reads
simply "abuse." This appears to lower the burden to
establish that the filing of chapter 7 is an abuse
based on surplus income, even where the debtor's
income is below the state median.
Two recent cases illustrate
this.
DEBTOR'S
SPENDING HABITS IN YEAR PRECEDING FILING CHAPTER
7 JUSTIFIED DISMISSAL FOR BAD FAITH
The debtor owed some
$24,000 in general unsecured debt. During the
preceding year debtor received substantial sums
of money from various sources and spent it all
on unnecessary indulgences. The court found that
debtor could have used the money to pay down all
or a large portion of the debt, but elected to
squander it by "treating" himself and
"rewarding" himself. Court found that this was
abuse under the bad faith and totality of
circumstances elements prescribed at §
707(b)(3)(A) and (B).
[ed. note: since
BAPCPA deleted the word "substantial" that had
qualified "abuse" under the old code, it is
clear the courts are going to scrutinize
pre-filing spending behavior in a more intensive
way than under pre-BAPCPA law. Hence, even
though in most cases the attention is on the
"means test" part of § 707(b)(2)., counsel
should beware of the need for a more intensive
"inquiry" into the client's past during the
pre-petition stage.
In re James, 345
B.R. 664 (Bkrtcy.N.D.Iowa 2006).
A DEBTOR'S ACTUAL AND
ANTICIPATED FUTURE INCOME MUST BE CONSIDERED IN
DECIDING WHETHER TO GRANT OR DENY MOTION TO
DISMISS AS AN ABUSE
Under the "totality of
circumstances" test for abuse in chapter 7 as
prescribed by 11 U.S.C. § 707(b)(3)(B)
where the debtor's income is below the state
median, the debtor's actual and anticipated
future income may be taken into
consideration.
In re Pak, 343 B.R.
239 (Bkrtcy.N.D.Cal. 2006).
Although the statute is not
clear on this point, an argument can be made that in
looking at the debtor's ostensible surplus income the
court must begin with the debtor's "current monthly
income" as is mentioned at § 707(b)(2)(A).
Current monthly income ("CMI") is defined at Code
§ 101(10A)(A). This provision defines CMI as
income "from all sources," but § (10A)(B)
specifically excludes benefits received under the
Social Security Act. See In re Fuller, 346 B.R.
472, 476 (Bkrtcy.S.D.Ill. 2006) (an opinion dealing
with the calculation of surplus income for purposes of
Chapter 13 but states " ... current monthly income
does not include benefits received under the Social
Security Act, payments to victims of war crimes, or
payments to victims of terrorism").
Question 25: (added
01/27/06)
I need some clarification
regarding §7.5 of King's Guide To Practice: Will
a chapter 13 debtor receive a discharge on interest
that accrues on income taxes that are less than 3
years old (assuming they were filed on time and no
fraud)
Allen Mealey
Consumer bankruptcy attorney
Swansea IL
Answer:
This topic is discussed in
King's Guide - Release # 4, ¶ 7.5
Since priority income taxes are
not excepted from discharge in chapter 13, pursuant to
§ 1328(a) [because that section does not
include taxes under § 507(a)(8)(A) in the list of
exceptions from discharge], it follows that
priority income taxes are discharged in the Chapter
13; hence, the postpetition interest accruing on such
a claim is discharged; the general rule is that the
dischargeability of interest on a tax claim follows
the tax, i.e., if the tax is dischargeable, so is the
interest.
Question 24: (added
01/02/06)
We are in the 7th Circuit.
Pursuant to the Bethea ruling, we need to collect all
of our attorney's fees before filing the case, as they
become dischargeable when the case is filed. How do we
reconcile this with the Trustee's presumption that
post-filing fees paid before filing are property of
the estate? Under the old law we had the client sign
one contract for pre-petition fees, and another after
filing for post-petition fees, but our understanding
is that we cannot have two separate fee contracts
under the new law. How do we get paid for
post-petition work under the new law in our
Circuit?
William Mueller
Consumer bankruptcy attorney
Belleville, IL
Answer:
This topic will be discussed in
Release # 4B of King's Guide to Practice
This problem is not limited to
the 7th Circuit, but in fact creates problems in every
federal circuit.
BAPCPA imposes a number of
additional postpetition tasks for the attorney to
perform.
In view of these added
time-consuming tasks there may be a temptation in
chapter 7 cases to ask the debtor to pay a prepetition
retainer large enough to cover substantial anticipated
postpetition tasks. The problem with this is that any
portion of the prepetition retainer fee that is
allocated to cover postpetition services, and hence is
unused as of the date the petition is filed, is
property of the estate, and the trustee is directed by
the Chapter 7 Trustee's Handbook to go after and
recover those funds for the estate (i.e., demand that
you disgorge the unused fees). The trustee would
ordinarily be entitled to recover those unused fees
because the U.S. Supreme Court has held that, unless
court-appointed to represent the estate, the debtor's
attorney may not be paid out of estate funds. Lamie v.
United States, 124 S.Ct. 1023 (2004).
The Trustee's Handbook, at page
6-10, section "D" under Chapter 6, states:
"The
trustee should be alert for retainers held by
debtors' attorneys. While courts generally hold
that an unearned retainer on hand at the
commencement of a case constitutes estate
property, the trustee may have to initiate
action to obtain the balance of the
retainer."
This issue is alive in some
parts of the country, apparently dormant in others.
But even where the local trustees are not currently
going after unused retainer fees the issue is a
ticking time bomb for unwary attorneys.
Finding a creative solution to
this dilemma is not easy. But the bottom line is, be
careful in taking a large prepetition retainer that is
more than enough to pay for your prepetition
services.
Here are several possible
solutions.
1. I
estimate the amount of the fee that will be
unused when the petition is filed, then claim it
as exempt. This should work in California (my
state) where one of our exemption schemes
includes a misc. exemption of about $18,000. Of
course, the client must consent. If the client's
miscellaneous assets already use up the entire
exemption, then it's a problem.
2. There is bankruptcy
case law that says, if the fee agreement
specifies that the retainer fee is "advance
payment for future services," that the money
becomes immediately the property of the attorney
and the debtor (and hence the estate) surrenders
any interest in the funds.
3. There is bankruptcy
case law that provides that if state law
provides for an automatic lien on cash deposited
with someone, then the asset (i.e. the cash) is
fully encumbered in favor of the person holding
the cash (e.g., an attorney), and hence must be
surrendered by the estate at some point prior to
closing the case.
4. Take only enough
prepetition to cover services up to point of
filing, then have a second fee agreement to be
signed after the case is filed, and require a
second retainer fee, to cover postpetition
services. I know of no part of BAPCPA that
prohibits this. The only word of caution I would
give is make sure any money you take
postpetition is money the debtor earned or
borrowed after the petition is filed; if he/she
pays you with funds in his or her possession
when the petition is filed, it is property of
the estate and must be turned over to the
trustee (unless one of the other three
strategies work to protect the
funds).
Question 23:
(added 12/05/05)
I have a client who is
unemployed and is supported by his male domestic
partner, who makes $135,000 per year. Arguably their
financial affairs are not separate because they share
a household and one supports the other and even has
the monthly allowance direct deposited from his
paycheck into my client's account. They are a
"household" under the Act, but gay couples still
cannot file a joint bankruptcy. Will the income of the
domestic partner need to be disclosed and taken into
account for median income purposes?
Shaye Larkin
San Francisco, CA
Answer:
This topic is discussed at
¶ 6.4 of King's Guide To Practice.
In our opinion, such a situation
creates no community property rights in the earning
partner's income, nor does it make either partner a
dependent of the other. In calculating the median
income test to determine whether a presumption of
abuse arises, one uses the debtor's "current monthly
income" (see Code § 707(b)(6)). Code section
101(10A), which defines current monthly income,
provides that the contributions to the household
budget regularly made by other inhabitants of the
household are included in the income calculation.
Specifically, section 101(10A) states that the income
" . . . includes any amount paid by any entity other
than the debtor ... on a regular basis for the
household expenses of the debtor or the debtor's
dependents . . . " Code § 101(10A)(B).
If read literally, then, you
would not include the earning partner's whole income,
but only that portion that is routinely contributed to
the household expenses.
Question 22: (added 12/05/05)
What do we file with the
petition as far as the average income over the prior 6
months? I correctly completed the Form 22A Means Test.
But I received a deficiency notice. Do I have to file
6 months of paystubs?
Richard Bash
Anderson, Indiana
Answer:
This topic is discussed at
¶ 8.11 and Checklist # 4 of King's Guide to
Practice
At the time of filing the
petition and the usual schedules, the debtor must also
file:
1. A statement of "current monthly income" over the
last 6 months per § 521(a)(1)(B)(ii).
2. As part of the current monthly income statement
above, a statement of current monthly income with a
calculation showing whether a presumption of abuse
arises (i.e., show the arithmetic for a means test
calculation). § 707(b)(2)(C)
3. A statement of the amount of monthly net income,
itemized to show how the amount is calculated. This is
the current monthly income less allowable expenses
under the IRS standards and the other permissible
expenses described at § 707(b)(2). §
521(a)(1)(B)(v)
4. A statement of any anticipated increase in income
following filing the petition. §
521(a)(1)(B)(vi).
5. Copies of pay stubs per §
521(a)(1)(B)(iv).
Question 21:
(added 11/20/05)
The good-faith components in
1325(a)(3) and (7) apply to above median income cases.
If so, does that mean that such a debtor can be forced
to commit more money (in the plan) than the means test
computes, if schedules "I" and "J" (or other
disclosures such as past and future tax refunds) show
that such funds are available?
David W. Ruskin
Detroit, MI
Answer:
This topic is discussed at
¶ 8.3(f) of King's Guide to Practice
If read literally, the plan
payment must be only the payment calculated under the
Code without regard to actual income and expenses in
the schedules "I" and "J." That in fact is NACBA's
interpretation, and they intend to support litigation
to establish that as the correct policy.
However, some chapter 13
trustees have indicated they intend to argue that to
be a good faith plan it must propose to pay the higher
of the calculated payment or the actual surplus
income. Otherwise, they will argue, the plan is not
proposed in "good faith" pursuant to §§
1325(a)(3) and 1325(a)(7).
The answer will doubtless vary
with local practice until the higher courts begin
publishing opinions interpreting the Code in
connection with the issue.
Question 20:
(added 11/16/05)
I am confused about the trustee
multiplier used in Form 22. The fee in my district has
been 6% for quite some time, but the new multiplier is
4.6%. Which % fee is used when figuring the actual
plan?
S. Sherman,
Paralegal
Tavares, FL
Answer:
This topic is discussed at
¶ 8.6.5(d) of King's Guide to Practice
The purpose of the multiplier
list on the U.S. Trustee's web site appears to be the
percent that may be used in determining the chapter 13
trustee's fee portion of administrative expenses in
doing the means test, pursuant to 11 U.S.C. §
707(b)(2)(A)(ii)(III). Whether that per centum is
binding on each respective chapter 13 trustee is not
clear.
One problem that may arise is
that while § 707(b)(2)(A)(ii)(III) permits
counsel to add the hypothetical administrative cost of
a chapter 13 (as shown on the U.S. Trustee's web site)
as a deduction from income for the means test, that
code section, taken literally, puts a cap of 10% as
the maximum that may be calculated in for
administrative expenses.
Most lawyers assume that the
unpaid balance of the attorney's fee may be paid
through the plan as an administrative expense.
However, some of the per centages listed on the web
site do not appear to leave much room for attorney's
fees. For example, the trustee's fee for the Northern
District of California is fixed at 9.9%. Does this
mean the plan can only pay .1% of the debt for
attorney's fees?
Like a lot of other stuff in the
new Code, it remains to be seen how this section will
be applied in the various jurisdictions.
Question
19:
Client filed a pre-reform
chapter 7 and now needs to convert to Chapter 13.
Which version of the code applies to the
conversion?
George Murphy
Benicia, CA
General practice attorney
Answer:
Our interpretation is that a
case filed pre-reform and converted post-reform will
continue to be subject to pre-reform law.
The reason is that both
pre-reform and post-reform law provide that upon
conversion the case reverts back to the original date
of filing as though it were filed as converted from
the beginning. The Reform Act contains no language
that changes that rule.
Question
18:
I purchased your manual and in
Section 6.2(b) (related to non-consumer debt cases) it
mentions dismissal for bad faith. The only location I
can find dismissal based upon bad faith is in
707(b)(3) which is available only in a consumer debt
case. As a result, if my client has a good amount of
disposable income but the debts are not primarily
consumer debts, it would appear that bad faith does
not come into play and the client is free to file a
chapter 7. My questions are: 1) Do you agree; and 2)
Is there another section that provides for dismissal
in a non-consumer debt case for bad faith?
Steve Brechner
Phoenix, Arizona
Consumer bankruptcy attorney
Answer:
This topic is discussed at
¶ 6.2 of King's Guide to Practice, "Is The Median
Income Test Required?"
The reference to "bad faith" in
section 6.2 of the Guide was not meant to reference
the grounds of "bad faith" listed in Code §
707(b)(3), but rather the general notion of an
attorney's accountability under Rule 9011(b)(1)
(attorney's signature represents case was not filed
for an "improper purpose").
Reading Code § 707(b)(3)
literally, you are right; dismissal on the ground of
bad faith pursuant to that section is only available
in cases in which the debts are primarily consumer
debts. This conclusion is reached as follows: Section
707(b)(3) (dismissal for generic "bad faith") refers
to cases falling under section 707(b)(1) by commencing
with the words ""In considering under paragraph 1
...)." Paragraph 1, in turn, provides that in cases in
which the debts are "primarily consumer debts" a
motion may be made to dismiss or convert based on bad
faith (using the means test as the basis for the
motion).
Paragraph 2 provides that one of
the grounds for bad faith is a case in which the
debtor's surplus income fails under the means
test.
Paragraph 3 provides another,
separate ground under the term "bad faith" used in the
more generic sense, not based on the means
test.
So, it appears that in cases for
which the debts are primarily other than consumer
debts, there is no statutory basis for a motion based
on "bad faith." The phrase "bad faith" does not show
up anywhere else on a word search of the text of the
code. It does appear in the text of the Reform Act,
under section 302 of the Act, entitled "Discouraging
bad faith repeat filings." That section of the Act
amends Code § 362 to limit the effect of the
automatic stay in some cases in which the debtor had
filed prior cases.
Question 15:
I have a website offering
information about bankruptcy. Some of the people
visiting my web site will be using my services, others
won't. What disclosures am I required to put on the
website on and after October 17, 2005?
Ronald Bernbaum
Tulsa, Oklahoma
Consumer bankruptcy attorney
Answer:
This
topic is discussed at ¶ 3.6 of King's Guide to
Practice
Advertising
for consumer bankruptcy cases must contain to key
buzzwords; "debt relief agency," and
"bankruptcy."
Section
229 of the Act adds Code §528(a)(3) to provide
that a debt relief agency (i.e. a consumer bankruptcy
attorney) must, in all advertisement of bankruptcy
services directed to the general public (whether in
general media, seminars or specific mailings,
telephonic or electronic messages, or
otherwise), clearly and
conspicuously communicate that the services or
benefits are with respect to bankruptcy relief under
this title; and clearly and conspicuously use the
following statement in such advertisement:
"We
are a debt relief agency. We help people file for
bankruptcy relief under the Bankruptcy Code," or a
substantially similar statement.
In
those situations where the requirement applies, a
simple statement such as the following would appear to
satisfy the rule: "We are a Designated Debt Relief
Agency under Federal Law and We Provide Legal
Assistance to Consumers Seeking Relief Under the
Bankruptcy Code."
Code
§528(b)(2) provides that any advertising that
includes references to such things as credit defaults,
mortgage foreclosures, eviction proceedings, excessive
debt, debt collection pressure, or inability to pay
any consumer debt, shall disclose clearly and
conspicuously in such advertising that the assistance
may involve bankruptcy relief. That provision appears
to be directed at those firms that advertise heavily
for foreclosure or eviction relief but use essentially
bait-and-switch methods, luring potential clients
without tipping them off that what is really being
advertised is bankruptcy or chapter 13.
These
requirements only apply to advertising, not media that
merely identify the firm, such as letterhead or cards
(unless mass-mailed to prospective clients). The
consensus of opinion is that a web site will probably
be deemed a form of advertising. Although one could
argue that it is merely an educational or
informational resource, to be on the prudent side we
suggest it be deemed advertising and make sure the
required phrases appear somewhere on the home
page.
Question
14:
How will the impending
bankruptcy reform laws affect those facing real
property foreclosure in obtaining an automatic
stay?
LaTonia Jackson
Florence, SC
Answer:
The Bankruptcy Reform Act does
not appear to restrict the ability of a debtor to halt
a pending foreclosure on, say, a residence or other
real property, by filing chapter 13, and provide for
payment to catch up on the delinquent mortgage
payments through the plan (in chapter 13 or
11).
There are traps for the unwary,
however, in connection with the automatic stay. If the
debtor has had recent, previous bankruptcy cases, then
depending on whether they were filed in bad faith, or
dismissed, or certain other circumstances, the
automatic stay might not arise at all upon filing the
current bankruptcy. Code § 362(c) et
seq.
This topic is discussed at
¶
10.3 of King's Guide to Practice.
If the automatic stay does not
arise, it would, of course, mean the foreclosure can
proceed without hindrance from the bankruptcy. Also,
in some cases the automatic stay may arise, but
terminate in 30 days, which would permit the
foreclosure to resume. The debtor, or any other
creditor in interest, may within 30 days after filing
the current case move the court for an order that the
stay take effect, which would halt a foreclosure in
progress. Code § 362(c)(4)(A). Accordingly, it is
critical that the lawyer explore the client's previous
bankruptcy filing history to identify any reason the
automatic stay may not stop the foreclosure
proceedings.
Question
13:
I have been through the guide
several times and think that the disclosure on pages
311-338 can be incorporated into my practice. May I
reprint them and use them in my practice?
D.J. Rausa
San Diego, CA
Consumer bankruptcy attorney
Answer:
Yes. Anything in the Appendix
may be used in your practice. The only restriction is,
they may not be duplicated for purposes of
resale.
Question
12:
Is there a model
Chapter 13 Plan which practitioners will be required
to use under the new law?
Jennifer Kingsley
Wyomissing, PA
Consumer bankruptcy attorney
Answer:
The subject of
drafting the chapter 13 plan is discussed a STEP 8 of
King's Guide to Practice.
Question 1:
Does the term
"household" for means test purposes include roommates
that live in the same house and share the
rent/utilities?
Steve Brechner
Consumer bankruptcy attorney
Phoenix, Arizona
Answer:
This is discussed at
¶ 6.4 of King's
Guide To Practice
The current opinion is
yes, a household for purposes of the means test
includes all persons living with the debtor, whether
related by blood or marriage, or not. The Bankruptcy
Code as amended,§ 707(b)(6) uses terms
"household" and "median family income." Section
101(39A) provides that "median family income" is based
on U.S. Census Bureau statistics. The web site of the
U.S. Census bureau defines a "household" - "A
household consists of all people who occupy a housing
unit regardless of relationship."
So, if read literally,
it includes unrelated roommates.
Question 1
follow-up:
Okay so the current
opinion is that roommates are included in the
household under the act. If the roommate's income and
financial life altogether is separate from the debtor,
is the current opinion that the debtor must obtain 6
months of income and other related financial
information from the roommate in order to file and
sustain a bankruptcy case?
Answer:
This is discussed at
¶ 6.4(a)(3) of King's Guide to
Practice.
Bankruptcy Code §
101(10A) provides that in calculating current monthly
income (which is also used as the starting point for
calculating net monthly income under means test) one
includes the debtor's and debtor's spouse's income (if
joint filing), plus "any amount paid by any entity...
on a regular basis for the household expenses of the
debtor ..." Read literally, this means that only that
portion of a roommate's income that is contributed to
the household budget is counted, and even that is
counted only if it is "regularly" contributed.
Accordingly, there is no need to obtain any other
information about the roommate's income or
expenses.
Question
2:
Can an attorney seek
approval as a credit counselor to meet the requirement
of credit counseling provided there are no conflicts
of interest to clients who remain eligible to file
Chapter 7 bankruptcies because their income is under
the state median?
John W. Gibson
Pittsburgh, Pennsylvania
Answer:
The issue of what is
required of a credit counselor is discussed at ¶
5.12 of King's
Guide to Practice
The question has been
put directly to the Office of the U.S. Trustee, and
answered as follows
"Can an attorney apply
to be a credit counselor and/or debtor
educator?"
"A: Attorneys are
eligible to be approved as credit counselors and/or
debtor educators, provided they meet the requirements
set forth in Section 111 of the Bankruptcy Code.
However, there may be state bar ethical considerations
or other factors that limit an attorney's ability to
provide these services or restrict how the services
are rendered."
Code section 111 does
not explicitly rule out an attorney as a credit
counselor. It does, however, provide that the credit
counselor may not "will not directly or indirectly
benefit financially from the outcome of the counseling
services provided by such agency."
You can view more
questions and answers about credit counseling agencies
put to the U.S. Trustee by clicking on this
link:
U.S.
Trustee's answers to questions about credit counseling
agencies
That's about the best
answer we have at present.
Question
3:
Concerning the
extraterritorial effect of homestead exemption. How
will we determine if a States law will allow
extraterritorial jurisdiction over the property in
another State?
I am interested in how
I will determine if the real property exemption of
another State will apply to realty here in Tennessee
if the debtor has not been a Tennessee resident for 2
years and has purchased real estate here in last 2
years. T.C.A. title 26 indicates that the exemptions
listed are for Tennessee residents so I assume they
would have no extraterritorial effect for filers in
another state who moved from Tennessee in last 2
years. Without having access to codes for all 50
states how will we determine if we can use the other
states homestead in cases filed here if the facts so
warrant?
David Phillips
Nashville, TN.
Consumer bankruptcy attorney
Answer:
This issue is
discussed at ¶ 7.2 of King's Guide to
Practice.
The question of which
state's homestead exemption may be used is based on
domicile. Domicile is that location the debtor
considers his or her "home," and is a separate issue
from residence. Residence can be a temporary
abode, with the actual domicile located
elsewhere.
In a nutshell, Code
§ 522(b)(3)(A) provides that the debtor may elect
the state homestead exemption for the state in which
he or she resides if he or she has been domiciled in
that state for at least 730 days (2 years) preceding
filing the bankruptcy.
If the debtor was not
domiciled in the state for at least 2 years, the
exemption that must be used is the exemption for the
state in which the debtor was domiciled for the
greater part of the 180 days immediately preceding the
730 days prior to filing the bankruptcy.
For a quick reference
to find the exemptions of other states, the web site
BankruptcyAction.com does a fairly reasonable job of
keeping the exemptions current. Click here
-
BankruptcyAction.com
Question
4:
Does the credit
counseling requirement apply in individual involuntary
bankruptcies? Do you think involuntaries will be the
waive of the future to collect from individuals with
equity in their homes if they haven't owned the home
for 1215 days? Any thoughts on how to protect a client
from an involuntary?
David Langley
Plantation, FL
Consumer bankruptcy attorney
Answer:
The credit briefing
requirements are discussed in ¶ 5.1 et seq. in
King's Guide to Practice.
If read literally, the
Code does not permit a person to be a debtor in an
involuntary bankruptcy unless such involuntary debtor
satisfies the credit briefing required by Code §
109(h) within 30 days after the case is filed. Section
109(h) provides that a person may not be a debtor in a
case filed under Title 11 (the Bankruptcy Code) unless
such person has satisfied the credit briefing
requirement. Section 303 provides that an involuntary
bankruptcy may be filed only for chapter 7 or 11 (not
chapter 13), and only against an individual who is
eligible to be a debtor under the chapter in
question.
Accordingly, since a
person who has not completed the credit requirement
prior to the filing of the bankruptcy, or no later
than 30 days after filing, is not eligible to be a
debtor in chapter 7, it would appear that such person
cannot be a debtor in an involuntary
bankruptcy.
This appears to be an
example of many contradictions left, or created in the
Code, by the Reform Act. How the courts will actually
deal with this conundrum is difficult to
predict.
In our opinion, there
is no reason the Reform Act should result in more
involuntary filings.
Question
5:
At least here in SD
OH, a debtor's interest in a former spouse's
retirement under a QDRO is property of the estate the
Trustee can liquidate for the benefit of creditors.
Does BARF change this result?
Stephen E Schafer
Columbus, Ohio
Consumer bankruptcy attorney
Answer:
Exemption of pensions
and retirement funds are discussed at ¶ 7.2 of
King's
Guide to Practice.
The Code at §
522(b)(3)(C) provides that pensions funds that are
tax-exempt under the Tax Code are exempt in
bankruptcy. Whether or not a debtor's interest in an
ex-spouse's retirement fund falls into that category
is more a substantive tax question than bankruptcy,
and we are not qualified to address it.
Question
6:
1.) As to the consumer
credit counseling requirement. I am in the S.D. of GA.
Are you aware of any official policy as to whether
clients will be able to do the credit counseling in my
office via the Internet?
2.) Is it your
interpretation that the requirement of using creditor
addresses provided in the last two written
communications from a creditor in the days prior to
filing is ONLY for notices provided by the debtor in
limited circumstances?
Richard S. Barid
Savannah, GA
Consumer bankruptcy attorney
Answer:
1) The subject of
credit counseling is covered in STEP 5 of King's Guide
to Practice
We are aware of no
policy that would prohibit a client from satisfying
the credit briefing requirement in the attorney's
office, via the Internet. The credit counseling agency
providing the briefing would have to be off-site and
not financially connected in any way to the law firm.
The Act specifically provides for satisfying the
briefing requirement by Internet or telephone. See
Code § 109(h)(1), § 111. Informed sources
tell us the Office of the U.S.Trustee is thinking
about requiring the credit "briefing" to last
approximately 90 minutes.
2) The subject of
notice to creditors is discussed at ¶ 8.15 of
King's Guide to Practice
Question
7:
Please explain the
difference between "current monthly income" vs.
"monthly net income" as it relates to Section
521.
David Phillips
Nashville, Tn.
Consumer bankruptcy attorney
Answer:
This matter is
discussed at ¶ 6.4 of King's
Guide to Practice.
In a nutshell,
current monthly income is defined at Code
§ 101(10A) as gross income minus certain specific
exclusions from income, but does not take into
consideration expenses. Monthly net income is
not defined, but appears to constitute current monthly
income less permissible expenses specified at Code
§ 707(b).
Question
8:
If a debtor has had a
Chapter 7 bankruptcy dismissed within the last year
and the debtor's attorney must file a motion to keep
the automatic stay in effect after 30 days, how much
notice does he need to give? Can it be done on a "no
opposition, no hearing" basis? Thanks
James Beirne
Glendale, CA
Consumer bankruptcy attorney
Answer:
Question
9:
A year ago, I'd never
heard of a debt relief agency, now I am one. I'm not
quite sure how this morphs into the concept of an
attorney client relationship. Other than a large
amount of noticing, is there something additional I
should be doing at my initial meeting with a
client?
Scott McGraw
Newark, OH
Consumer bankruptcy attorney
Answer:
This matter is
discussed at ¶ 4.5 of King's
Guide to Practice.
If your question is,
are there additional things that should be done at the
initial meeting with the client, to reflect
requirements of being a debt relief agency, then the
answer is yes.
Additional duties and
tasks of a debt relief agency (which is any attorney
who provides advice or services to a person, for a
fee, in connection with bankruptcy - Code §
101(12A)) are described at Code §§ 526, 527,
528.
Question
10:
Any ideas on how to
get started on the problem of pre-petition filing
credit counseling for clients after October
17?
Salvador C.
Ramirez
El Paso, Texas
Consumer bankruptcy attorney
Answer:
The subject of credit
counseling is treated in STEP 5 of King's Guide to
Practice.
Pursuant to Code
§ 109(h)(2)(A), debtors will be excused from
doing the credit briefing if there are no credit
counseling agencies in the district that have been
approved by the Office of the U.S. Trustee. So, if
there are no approved agencies in the district as of
Oct. 17, it appears the attorney need not concern
him/herself with this requirement.
If there is an
approved agency in the district, the local court
clerk's office will have that information. We suggest
the attorney contact that the court clerk regularly
leading up to Oct. 17 to determine whether any agency
has been approved. We suggest that if there is an
approved agency, the attorney contact the agency as
soon as possible (even before actual cases come in
that are subject to the Reform Act, if possible), to
determine what will be necessary to handle a credit
briefing; what forms may be used, how the briefing may
be done (i.e., personal consultation, group
consultation, phone, or Internet), and how long the
briefing must be.
The certificate that
the attorney is required to file on behalf of the
debtor pursuant to Code § 521(b), certifying that
the credit briefing has been done and describing the
services provided, is a form to be signed by the
credit counseling agency. No proposed interim official
form for this use has been posted on the Rule
Committee page of the web site for the Judicial
Conference of The United States (See
http://www.uscourts.gov/rules/BK_Memo.pdf) or the
Office of the United States' Trustee. However, we
anticipate that such a form will be prepared for use
by Oct. 17, 2005.
Question
11:
If you file a Chapter
7 prior to 10/16 and after 10/17 while in the 7 elect
to convert to Chapter 13, does the new law apply to
the Chapter 13?
Jeff Rosenblum
Great Neck, NY
Consumer bankruptcy attorney
Answer:
We will add a comment
on this question to King's Guide to
Practice.
The rule that upon
conversion the characterization of the case reverts
back to the date the case was originally filed, has
not been changed by the Reform Act. Consequently, a
case filed as a chapter 7 before the effective date of
the Act, which is then converted to chapter 13 after
the effective date, is treated as though filed as a
chapter 13 from the original filing date preceding the
Act's effective date. In other words, the case would
continue to be governed by pre-reform law.
This interpretation is
supported by the language of the Reform Act, which
states, at § 1501, "... the amendments made by
this Act shall not apply with respect to cases
commenced under Title 11, United States Code, before
the effective date of this Act." (There are a few
exceptions, such as the provisions governing the
homestead exemption, which became effective upon the
date of enactment of the Act).
Attorneys - Do you have questions about the language,
interpretation, implementation of the Reform Act?