DETAILED OUTLINE
THE
FUNDAMENTALS OF CONSUMER BANKRUPTCY
PRACTICE
Under The Bankruptcy
Reform Act of 2005
Morgan D. King
Of the California Bar
Chief
Presenter
BankruptcyPractice.com | LearnBankruptcy.com | BankruptcyAcademy.com | BankruptcyBooks.com | BankruptcyLLM.com
PART 1:
OVERVIEW OF CONSUMER BANKRUPTCY LAW
What is bankruptcy?
History of bankruptcy
Sources of bankruptcy law
The bankruptcy system‚ courts‚
trustees, automatic stay, the estate
Bankruptcy Reform (BAPCPA)
Debt relief agencies
Credit counseling
The means test & presumption of abuse
The process in a nutshell
Financial education
Key terms and phrases
Common issues and problems
Ethical issues and compensation
PART 2:
DEBT RELIEF AGENCIES
Debt relief
agency defined
Assisted person
defined
Attorney's
duties if a debt relief agency
Where debtor is
not an assisted person
PART 3:
THE LAW OF CHAPTER 7 BANKRUPTCY
Generally
Venue
The debtor
Duties of the
debtor
Pre-bankruptcy
requirements
Commencing the
case
The estate
Exemptions
Objections to
exemptions
The trustee's
powers and duties
Meeting of
creditors
Additional
examination of the debtor
The automatic
stay
Violation of the
stay
Responding to
violation of the stay
Claims
Proof of claim
Filing claim on
behalf of creditor
Priority claims
General unsecured claims
Secured / undersecured claims / liens
Attacking lien
validity
Objecting to
claims
Executory
contracts and leases
Preference
avoidance
Fraudulent
transfers
Appointment of
attorney for special purpose
Settlement of
debtor-trustee disputes
Death or
incompetence of debtor
Conversion to
chapter 23
Dismissal of
case
Final discharge
Exceptions to
discharge
Litigating
dischargeability
Denial of
discharge
Distribution
from the estate
Closing the case
The "Chapter 20"
Reopening a
closed case
Revocation of
discharge
The permanent
discharge
Withdrawing from
the case
Relief from
judgment
PART 4:
THE LAW OF CHAPTER 13 BANKRUPTCY
In general
Time between
bankruptcies extended
8 years between
chapter 7 cases
4 years between
chapter 7 and chapter 13
2 years between
chapter 13 cases
Chapter "20"
restricted
Mandatory
chapter 13
Where filing
chapter 7 would be an abuse
Is the debtor
eligible for chapter 13?
Must mandatory
chapter 13 plan be for 5 years?
Plan may not
exceed 36 months
Median
income test determines permissible expenses
Calculating
the plan payment in mandatory chapter 13
Using
the new official forms
Optional chapter
13
Debtor may opt
for chapter 13
Length of plan
in optional chapter 13
Calculating the
plan payment for optional chapter 13
Treatment of
claims in chapter 13
Strip-down
Super-discharge
is narrowed
Nondischargeable,
nonpriority unsecured debts
Secured claims
Interest on
non-dischargeable or priority debts in chapter 13
Domestic support
claims
Post-petition
filing requirements for chapter 13
4 years of tax
returns must be filed
Annual financial
report
Copy of tax
return
Filing tax
returns coming due postpetition
Proof of
insurance on secured debts
Proof of claim
for nondischargeable taxes
Evidence of
adequate protection payments
Motion for a
pre-discharge hearing
Other chapter 13
plan provisions
Attorney's fees
No impairment of
withholding to repay pension loans
The confirmation
hearing
Plan payments
Additional
hearing required for chapter 13 discharge
Preparation of
documents to file
New privacy provisions
Petition and schedules
Certificate of credit briefing
Statement of income and calculation of income
Attorney must file notice per Code § 527(a)(1)
Paycheck stubs
Disclosure of future income
Copy of tax return
Interest in educational IRA
Annual statement of income and expenses
PART 5:
PREPARING THE OFFICE
A working knowledge of bankruptcy law is required
Be aware of enhanced accountability for lawyers
Debt Relief Agency requirements may not apply
Preparation for handling cases
Using checklists
The written fee agreement
Obtaining state income data
Obtaining IRS data
Securing creditors' addresses
Making advertising conform to BAPCPA
Preparing written disclosure statements
Preparing forms and documents for filing
Selecting a credit counseling agency
Selecting a financial education agency
Selecting form-filing software
Learning e-filing
The written fee agreement
Obtaining state income data
Obtaining the IRS expense standards
A budget that satisfies the abuse test
A budget for the chapter 13 plan
Securing the creditors' filed addresses for notice
Preparing language required in advertising
Who must comply
Required text in advertising
Preparing written disclosures to client
The Act imposes new requirements of written information
Prepare notice of alternatives
Prepare an admonition of honesty and accuracy
Prepare general information about bankruptcy
Prepare disclosures for reaffirmation agreements
Debt relief agencies must preserve copies for 2 years
Preparing forms or documents to file with petition
Statement of income calculation and anticipated increases
Prepare certification of credit briefing
Prepare a pro-forma annual financial statement
Revising your in-office forms and checklists
Prepare new checklists
Secure copies of IRS forms
Prepare to conduct probing inquiry
Consider new software applications to calculate the budget, etc.
Revised forms-filing systems
PART 6:
CONDUCTING THE CLIENT INTERVIEW
& DUE DILIGENCE
In general
Who should conduct the interview?
The initial interview
CONTENTS.doc
A probing inquiry
Using paralegals
Using forms and checklists
Key steps in handling a new case
Are you a "debt relief agency"?
a. Assisted person defined
b. Debt relief agency defined
c. Attorney's duties and tasks if client is an assisted person
d. Where debtor is not an assisted person
Conduct a probing interview
a. Determine client’s status as an assisted person
b. Explain and educate
c. Conduct probing inquiry
d. Identify problems with exemptions or discharge of debt
Provide written disclosures and instructions
Identify needed documentation
Explain the debtor's postpetition duties in bankruptcy
Explain possible problems with the automatic stay
a.
Deductions from paycheck for ERISA and similar plans
b.
Termination of stay where prior case was dismissed
c.
Proceedings in family court
d.
Tax court proceedings
e.
Residential eviction proceedings
f.
Securities investigations
g.
As to real property where case is in bad faith
h. Where debtor fails to file or perform intentions
After the interview
a. Calendar follow-up date to get requested documents from client
b. Request documents from 3rd parties
c. Calendar critical postpetition deadlines
Do the math on the median income and means tests
Conduct due diligence to verify the information provided
a. Using online resources
b. Do online check for prior bankruptcies
c. Do online check for home value
d. Do online check for vehicle value
e. Income
f. Budget
g. Leases
h. Mortgage and vehicle balance pay-off figures
i. Delinquent taxes
j. Values of other personal property
k. Judgments, tax liens, UCC-1 security interests
PART 7: CREDIT
COUNSELING
Credit briefing required before filing
The purpose of the credit briefing
Nature of the credit briefing
a. What is a 'briefing"?
b. Services an agency must be able to provide
Debtor may be exempt from briefing
a. Where no approved counseling is available
b. Exigent circumstances
c. Where debtor is incapacitated, disabled or in the military
Court clerk will maintain list of approved agencies
Consequences of failure to do credit counseling
Filing the certificate and payment plan
a. Certificate of compliance with credit briefing requirement
b. Payment plan
Content of certificate of exigent circumstances
Cannot require fee
Cannot report to a credit reporting agency
Creditor sanctioned for refusal to cooperate
Payments not avoidable as preference
Qualifications for credit counseling agencies
PART 8:
THE MEDIAN INCOME AND MEANS TESTS
In a nutshell
a.
Manual versus automated calculation?
b.
The purposes of the median income test
c.
Schedules I and J not used in calculations
d. A
three-step arithmetic exercise
Is
the median income or means test required?
a.
A threshold question
b.
Non-consumer debt cases are not subject to the means test
c.
Disabled veterans
d.
Debtor ineligible for chapter 13
Conducting
the median income test
a.
Median family income for the state
b.
Median income test determines need for the means test
c.
The median income test is based on current monthly income
d.
Whose statistics do you use?
e.
The problem of variable income
Calculating
current monthly income
a.
Establishing average or gross monthly income
b.
Deduct exclusions from income
c.
Compare with state median income
The
means test
a.
What is net monthly income?
b.
Permissible expenses
c.
IRS Collection Financial standards
d.
The Code § 707(b)(2) actual expenses
e.
Doing the arithmetic
f.
Figure gross monthly income
g.
Deduct income exclusions
h.
Begin with current monthly income
i.
Deduct IRS standards
j.
Deduct the § 707(b)(2) permissible expenses
k.
Net monthly income
l.
Net monthly income is used for the means test
m. Flow-chart
aides
n.
Doing the means test
a.
The § 707(b)(2) formula
b.
In a nutshell
c.
The formula
d.
The trigger points
e.
The presumption of abuse
f.
The presumption may be rebutted by special circumstances
g.
Possible sanctions if trustee brings motion
h.
Abuse based on other grounds
i.
Dismiss or convert?
a.
The debtor's options
b.
Standing to file motion
Filing
the Statement of Current Monthly Income & Means Test
Calculation
PART 9:
PREPARING FORMS AND FILING THE PETITION
Generally
Forms-filing
systems
What
to file
The
attorney's signature
Attorney's declaration per Code § 527(a)(1)
New
notice requirements
When
to file? Tax returns required
Filing fees
How to file (electronic filing)
PART 10: THE
MEETING OF CREDITORS
In general
Hearing
on confirmation of chapter 13 plan
Notice
of meeting of creditors
Creditor
representation at meeting
Tax
returns required in chapter 13
a.
Filing prepetition tax returns
b.
Additional time permitted for filing tax returns
c.
Chapter 7 & 13 tax return due 7 days before meeting of
creditors
Return
or transcript provided to trustee
Perform intentions within 30 days
Perform
intentions within 45 days
Complete
the financial management course NLT 45 days after MOC
U.S.
Trustee post-moc review
Advise
the debtor about meeting of creditors
Proof of identity
Current bank statements
Tax return if not provided previously
Other documents
Prepare
client for trustee's cross-examination
Proceed
to next PART
PART 11 POSTPETITION
ISSUES & TASKS
Postpetition
deadline checklist
Calendar
critical deadlines
a.
1 day after petition is filed (motion to extend automatic
stay)
b.
3 days: written retainer agreement
c.
5 days: disclosure statement given to client
d.
7 days - before
meeting of creditors – file tax return
e.
30 days: adequate protection payment & file proof
f.
30 days: last day to hold hearing to extend automatic stay
g.
30-days: last day to do credit counseling if not done
prepetition
h.
30 days: - last day to lodge proof of lease payment with court
clerk
i.
30 days: last day to file defense to eviction judgment
j.
45 days: last day to file missed forms & documents
k.
45 days: last day to complete financial management course (ch
7)
l.
45 days: - after MOC - intentions must be performed
m.
60 days: notice of insurance to secured creditors
n.
60 days: last day for trustee to assume/reject leases
o.
60 days -
p.
90 days: last day to file requested tax returns
q.
120 days: last day for trustee assume/reject non-residential
property
r.
120 days: last day to file first postpetition tax return
s.
180 days: last day to file claim on behalf of creditor
t.
Before final chapter 13 discharge: complete financial course
u.
90 days
v.
Last day before meeting of creditors
w. 180
days
10
days prior to discharge
Potential
problems with the automatic stay
a.
Motion to prevent termination some circumstances
b.
Motion to extend must be completed within 30 days
c.
Stay restricted as to family law proceedings
d.
Stay restricted as to landlords
e.
Stay restricted as to tax setoff actions
f.
Tax court proceedings
g.
Failure to file statement of intentions
h.
Failure to complete the stated intentions
i.
Actions to collect domestic support
j.
No changes made as to co-debtor stay
Perform
intentions - reaffirm or redeem
a.
Stay terminated if intentions not performed
b.
Is payment without reaffirming eliminated?
c.
Redemption in lump sum
d.
Reaffirmation
e.
Interest rates
f.
Debtor's statement of income and expenses
g.
Attorney's certification
h.
Creditor's remedy under nonbankruptcy law?
i.
Agreement filed with court
Motion
to dismiss or convert under § 707(b)
a.
Applies only in cases where debts are consumer debt
b.
Abuse is presumed if income exceeds allowable expense
guidelines
c.
Notice of presumption of abuse
d.
Presumption does not apply to disabled veterans
e.
Who has standing to move for conversion or dismissal?
f.
Presumption of abuse is rebuttable
g.
Court may order debtor's attorney to pay trustee's fees
h.
Other grounds for dismissal or conversion
i.
Calculating the chapter 13 budget uses different math
Provide
copy of most recent federal tax return
File
4 years of prepetition returns in chapter 13
File
all postpetition tax returns
a.
File all required postpetition tax returns
b.
File with court copies of requested postpetition returns
c.
The first tax return due postpetition
Different
definitions of tax returns
a.
Discharge of taxes
b.
Four years of returns filed
c.
Copy of return to trustee
Motion
to extend time to file documents
Assume
or reject lease or executory contract
a.
Some affirmative action required
b.
Cure of nonmonetary default
c.
Lease of personal property
d.
Lease of residential real property
e.
Lease of nonresidential real property
f.
Dismissal for abusive rejection of executory contract
Continuation
of eviction proceedings
a.
Continuation of eviction in certain circumstances
b.
Where debtor deposits rent with court clerk
c.
Endangerment or illegal use of drugs on premises
d.
Curing lease default
Proof
of adequate protection
a.
Leases and installment contracts
b.
Secured claims
c.
Leased personal property
Annual
income & expense statement
Complete
the required credit briefing
The
pre-discharge hearing in chapter 13
Notice
of insurance coverage to secured creditors
The
financial management course
Notice
of amended schedules
File
proofs of claim for taxes
Hearing
on plan confirmation
Notice
of meeting of creditors
Lookback
period for fraudulent transfers extended
Avoiding
transfers to trusts
Certain
payments not avoidable as preferences
a.
Ordinary course transfers
b.
Aggregate value is less than $5,000
c.
Payment arranged by a credit counseling agency
Conversion
of chapter 13 to chapter 7
a.
Valuations
b.
Secured claims
c.
Defaults revert to pre-bankruptcy status
d.
Bad faith conversion
Certain
documents filed not later than 45 days after case filed
Dismissal of chapter 7 where debtor convicted of certain
crimes
Purchase-money
lien avoidance
a.
Listed as household goods
b.
Listed as not household goods
Dismissal
for failure to pay postpetition domestic support
Motion
to excuse credit briefing requirements
New
filing periods
Conversion
of cases
Motion
to reduce creditor's claim
APPENDIX............................................................................................
Summary
of BAPCPA changes
In general
Changes in exemptions and exclusions
a. State homestead exemption domicile requirement
b. The homestead exemption
c. Personal property exemptions
d. Certain tax-exempt retirement accounts
e. Some assets are excluded from the estate
Exempt property may be seized for support
Changes of discharge of debts
a. Debts incurred for luxuries
b. Cash advances
c. Employee wages
d. Debts to pay non-dischargeable state and local taxes
e. Marital property divisions
f. Exception to discharge for student loans
g. Debts owed to debtor's pension
Chapter 13 super-discharge is restricted
a. Debts no longer dischargeable in chapter 13
b. Super-discharge survives as to certain debts
Changes affecting discharge of taxes
a. The means test might not apply in tax discharge cases
b. Credit briefing might not apply in tax cases
c. Chapter 7 discharge of income tax debts is preserved
d. Discharging the interest
e. Discharging the penalties
f. Additional language added to Code § 523 to define return
g. The definition of “filed” helps debtors
h. Late filed tax claims
i. Changes affecting chapter 13
j. The automatic stay
k. Tolling events expanded
m. Tax return or transcript of return
n. Dismissal for failure to provide recent tax return
o. Amends subordination of tax liens
p. Discharge denied where tax documents not provided
q. Case dismissed or converted if postpetition returns unfiled
r. "Assessment" word deleted for property taxes
s. New notice requirements
t. Automatic stay no longer stays tax court proceedings
u. Are you a Debt relief agency?
v. Miscellaneous provisions
w. Changes affecting chapter 11 tax discharge
Delay of discharge
FLOW CHARTS
Flow-chart #1 - Handling a case
Flow-chart #2 -
Handling a case cont'd
Flow-chart #3 -
Figuring net monthly income
Flow-chart #4 -
Means test
Flow-chart #5 -
Means test alternate chart
Flow-chart #6 -
The credit briefing
Flow-chart #7 -
Figuring the homestead exemption
Flow-chart #8 -
Calculating the Chapter 13 payment
Flow-chart #9 -
When Must Disclosures Be Given?
NEW
OFFICIAL FORMS
[Note:
Official Forms are found on the CD]
CHECKLISTS
Checklist # 1 -
Preparation for practice under the Act
Checklist # 2 - Client interview checklist
Checklist # 3 - Documents to request from
client
Checklist # 4 -
Documents to file
Checklist # 5 -
Deadline checklist 33 items
Checklist # 6 -
Debtor's post-petition duties
Checklist # 7 -
Duties of a debt relief agency
Checklist # 8 -
Look-back periods
Checklist # 9 -
Debtor's motions
Checklist # 10
- Things That Can Cause Dismissal
Checklist # 11
- Checklist of certifications for filing
Checklist # 12
- Traps For The Unwary
DISCLOSURE STATEMENTS
Disclosure
# 1 Per § 527(b)
Disclosure
# 2 Per § 527(a)(1) & 342(b)(1)
Disclosure
# 3 Per § 527(a)(2)
Disclosure
# 4 Per § 527(c)
Disclosure
# 5 Per § 342(b)(2)(A) & (B)
Disclosure
# 6 Per § 524(k)
MISCELLANEOUS DOCUMENTS
Brett
Weis' Motion To Invoke Automatic Stay
Wendell
Sherk's Motion To Continue Automatic Stay
Stephen Otto's certificate re waiver of