- AFTER THE 341 MEETING OF CREDITORS IS COMPLETED, THE CHAPTER 13 TRUSTEE WILL ISSUE EITHER A FAVORABLE OR UNFAVORABLE RECOMMENDATION IN THE DEBTOR(S) CASE.
- IF THE DEBTOR RECEIVES A FAVORABLE RECOMMENDATION THEN THERE IS NO ACTION REQUIRED AS RELATES TO THE CHAPTER 13 TRUSTEE. IF THE DEBTOR RECEIVES AN UNFAVORABLE RECOMMENDATION THEN REVIEW SUCH RECOMMENDATION AND CONTACT THE CLIENT VIA TEXT MESSAGE INFORMING THEM OF WHAT ACTIONS THE DEBTOR NEEDS TO TAKE TO REMEDY THE UNFAVORABLE RECOMMENDATION. ALL CORRESPONDENCE WITH THE DEBTOR SHOULD BE BY TEXT MESSAGE. [MAKE CERTAIN THAT THE DEBTOR IS ABLE TO RECEIVE TEXT MESSAGES, THAT YOU WILL BE CONVERSING WITH THE DEBTOR IN SUCH MANNER, AND TEXT MESSAGING IS THE MOST EFFICIENT MANNER TO ADDRESS ANY CONCERNS THE DEBTOR MAY HAVE].
THE DEBTOR MAY NEED TO HAVE CERTAIN ASSETS APPRAISED, OR PROVIDE CERTAIN DOCUMENTS OR EVIDENCE, INCLUDING EVIDENCE OF INCOME. THE TIME LIMIT FOR THE DEBTOR TO COMPLY WITH TRUSTEE REQUESTS PURSUANT TO THE UNFAVORABLE RECOMMENDATION IS TWO WEEKS.
- THE CLAIMS BAR DATE FOR MOST CREDITORS IS 70 DAYS FROM THE DATE OF THE ORDER FOR RELIEF. THIS IS GENERALLY DEFINED AS 70 DAYS FROM THE DATE OF THE FILING OF THE PETITION. FOR GOVERNMENTAL UNITS, THE CLAIMS BAR DATE IS 180 DAYS FROM THE DATE OF FILING. DESPITE THE 70 DAY BAR DATE OR DEADLINE FOR NON GOVERNMENTAL CREDITORS TO FILE A PROOF OF CLAIM, THE BANKRUPTCY COURT WILL SCHEDULE THE FIRST CONFIRMATION HEARING APPROXIMATELY 30 DAYS AFTER THE FIRST SCHEDULED 341 MEETING. FOR THIS REASON, IT IS IMPOSSIBLE TO CONFIRM THE CHAPTER 13 PLAN AT THE FIRST SCHEDULED CONFIRMATION HEARING. THE FIRST SCHEDULED CONFIRMATION HEARING IS ALWAYS CONTINUED TO A LATER DATE AND TIME.
- 80 DAYS FROM THE DATE OF THE FILING OF THE PETITION (OR 10 DAYS AFTER THE CLAIMS BAR DATE), PULL THE PROOF OF CLAIMS IN THE DEBTOR(S) CASE. ONE ONLY NEEDS TO KNOW THE TOTAL OF THE GENERAL UNSECURED CLAIMS FILED IN THE DEBTOR(S) CASE AND THE SECURED CLAIMS FILED IN THE DEBTOR(S) CASE.
- AFTER A REVIEW OF THE PROOF OF CLAIMS FILE IN THE CASE, IF THERE ARE ANY UNUSUAL CLAIMS OR OBJECTIONABLE CLAIMS, THEN FILE THE APPROPRIATE OBJECTIONS. FOR EXAMPLE, THE CREDITOR ATTORNEY MAY BE REQUESTING ATTORNEY FEES EXCEEDING THOSE CONSIDERED REASONABLE BY THE BANKRUPTCY JUDGE.
- IF THE DEBTOR OWES MONIES TO THE INTERNAL REVENUE SERVICE AND THE IRS HAS NOT FILED A PROOF OF CLAIM, THEN PROMPTLY CONTACT THE IRS IN ORDER THAT SUCH CLAIMS ARE FILED. ALL CLAIMS BY GOVERNMENTAL UNITS MUST BE FILED, EITHER BY THE GOVERNMENTAL UNIT OR BY THE DEBTOR(S) ATTORNEY ON BEHALF OF THE GOVERNMENTAL UNIT. THE DEBTOR MAY FILE A CLAIM ON BEHALF OF THE INTERNAL REVENUE SERVICE, BUT NOT IN THE TAX YEAR APPLICABLE TO WHEN THE CHAPTER 13 WAS FILED. HOWEVER, IT IS BETTER TO CONTACT THE INTERNAL REVENUE SERVICE TO FILE THE TAX CLAIMS, EVEN THOUGH THIS MAY BE A CUMBERSOME PROCESS.
- WHEN REVIEWING THE CLAIMS FILED BY THE INTERNAL REVENUE SERVICE, SOME CLAIMS WILL STATE THAT THE DEBTOR HAS UNFILED TAX RETURNS. MAKE CERTAIN THAT ALL TAX RETURNS ARE FILED. REQUEST ANY REQUIRED TAX RETURNS FROM THE DEBTOR. UPON RECEIPT OF REQUIRED TAX RETURNS, SIGNED BY THE DEBTOR, FORWARD SUCH TAX RETURNS TO THE BANKRUPTCY DEPARTMENT OF THE INTERNAL REVENUE SERVICE (AS LISTED ON THE PROOF OF CLAIM BY THE INTERNAL REVENUE SERVICE).
- TAX DEBT OWED TO THE INTERNAL REVENUE SERVICE MAY BE CLASSIFIED AS EITHER SECURED OR UNSECURED. UNSECURED DEBT OWED TO THE INTERNAL REVENUE SERVICE MAY EITHER BE DISCHARGEABLE OR NOT DISCHARGEABLE IN BANKRUPTCY, DEPENDING UPON A NUMBER OF FACTORS.
IF THE TAX DEBT IS DISCHARGEABLE, IT WILL BE TREATED AS ANY OTHER UNSECURED, NONPRIORITY CREDITOR. TAX DEBT OWED TO THE INTERNAL REVENUE SERVICE IS GENERALLY DISCHARGEABLE IF THE DEBT REPRESENTS TAX ON THE INCOME OF THE DEBTOR, SUCH TAX WHICH IS MORE THAN THREE YEARS DUE BEFORE THE FILING OF THE CHAPTER 13 PETITION, THE TAX RETURN RELATING TO SUCH DEBT MUST HAVE BEEN FILED MORE THAN TWO YEARS BEFORE THE FILING OF THE PETITION, AND FOR WHICH THERE HAS NOT BEEN A TAX ASSESSMENT WITHIN 240 DAYS OF THE FILING OF THE PETITION. AN ASSESSMENT MEANS THAT THE IRS HAS DETERMINED SUCH DEBT AS DUE AND OWING AND MAY OCCUR THROUGH A NUMBER OF WAYS, INCLUDING AN AUDIT BY THE IRS, THE FILING OF A TAX RETURN BY THE DEBTOR, OR OTHER MEANS.
IF THE DEBTOR WAS INVOLVED IN PRIOR BANKRUPTCY PROCEEDINGS, THEN SUCH PROCEEDINGS MAY OPERATE AS A STAY UPON THE RUNNING OF THE STATUTE RELATING TO DISCHARGEABILITY AND MAY REQUIRE ADDITIONAL TIME BEFORE SUCH DEBT WOULD BE DEEMED DISCHARGEABLE IN BANKRUPTCY [WHICH REPRESENTS NOT ONLY THE DURATION OF THE PRIOR BANKRUPTCY PROCEEDINGS BUT AN ADDITIONAL PUNITIVE PERIOD].
IF THE TAX DEBT IS NOT DISCHARGEABLE IT WILL BE GENERALLY TREATED AS A PRIORITY CREDITOR, WHICH MUST BE PAID IN FULL THROUGH THE CHAPTER 13 PLAN.
IF THE INTERNAL REVENUE SERVICE HAS FILED A TAX LIEN AGAINST THE DEBTOR, THE TAX LIEN OPERATES AS A BLANKET LIEN AGAINST ALL OF THE DEBTOR(S) ASSETS. A TAX LIEN BY THE INTERNAL REVENUE SERVICE IS GENERALLY EFFECTIVE FOR ABOUT 10 DAYS. HOWEVER, THE TAX LIEN MAY BE RENEWED FOR AN ADDITIONAL TEN YEARS BY THE INTERNAL REVENUE SERVICE.
THE TAX LIEN IN BANKRUPTCY IS EFFECTIVE IN BANKRUPTCY AGAINST THE ASSETS OF THE DEBTOR, IRRESPECTIVE OF ANY EXEMPTIONS CLAIMED BY THE DEBTOR. FOR EXAMPLE, IF THE DEBTOR HAS ASSETS TOTALLING $5,000.00, SUCH ASSETS OF WHICH ARE FREE OF ANY CREDITOR LIENS, THEN THE TAX LIEN AGAINST THE DEBTOR OPERATES IN THE MAXIMUM AMOUNT OF $5,000.00. THE BANKRUPTCY EXEMPTIONS ARE NOT RELEVANT. ANY AMOUNTS OWED TO THE INTERNAL REVENUE SERVICE THAT EXCEED $5,000.00 WOULD BE EITHER NON DISCHARGEABLE OR DISCHARGEABLE. WHETHER NON DISCHARGEABLE OR DISCHARGEABLE, SUCH DEBT WOULD BE CLASSIFIED AS UNSECURED. THE PORTION OF THE TAX DEBT THAT IS SECURED WOULD BE PAID IN FULL PLUS INTEREST. THE REMAINING DEBT WOULD EITHER BE DISCHARGEABLE AND PAID AS ANY NON PRIORITY UNSECURED CREDITOR, OR NON DISCHARGEABLE AND PAID AS A PRIORITY CREDITOR, IN FULL, THROUGH THE CHAPTER 13 PLAN, BUT GENERALLY PAID WITHOUT INTEREST.
- IF THE CHAPTER 13 PLAN SEEKS TO CRAMDOWN ANY ASSETS (SUCH AS AUTOMOBILE(S), FURNITURE, WATER SOFTENERS, ETC.), THEN ASCERTAIN WHETHER THE RELEVANT CREDITORS FILED A PROOF OF CLAIM IN THE CASE. IF THE CREDITOR DID NOT FILE A PROOF OF CLAIM THEN FILE A CLAIM ON BEHALF OF THE CREDITOR AND SUBSQUENTLY FILE THE MOTION TO DETERMINE SECURED STATUS OF THE RELEVANT ASSET (CRAMDOWN). IF THE CREDITOR FILED AN UNSECURED CLAIM (FOR CRAMDOWNS OTHER THAN AUTOMOBILES) THEN SIMPLY TREAT THE CLAIM AS UNSECURED AND PAY SUCH CLAIM AS THE OTHER UNSECURED CLAIMS IN THE CASE.
- THE CREDITOR HAS 30 DAYS TO RESPOND TO THE DEBTOR(S) MOTION TO DETERMINE SECURED STATUS. IF THE CREDITOR DOES NOT RESPOND BY THE 33RD DAY, THEN FILE THE ORDER GRANTING MOTION TO DETERMINE SECURED STATUS. IF THE CREDITOR RESPONDS TO THE MOTION TO DETERMINE SECURED STATUS WITHIN THE PRESCRIBED PERIOD, THEN CONTACT THE CREDITOR ATTORNEY TO DETERMINE WHETHER A SETTLEMENT CAN BE REACHED AS TO THE VALUE OF THE ASSET.
THE BANKRUPTCY COURT WILL GENERALLY SET A PRELIMINARY HEARING ON THE DEBTORS MOTION TO DETERMINE SECURED STATUS IF THE CREDITOR ATTORNEY RESPONDS TO SUCH MOTION WITHIN THE PRESCRIBED 30 DAY PERIOD. IT IS BEST TO APPROACH THE CREDITOR ATTORNEY AFTER THE PRELIMINARY HEARING IS HELD. AT THE PRELIMINARY HEARING, THE COURT WILL SET A FINAL EVIDENTIARY HEARING IN ORDER TO DETERMINE THE VALUE OR THE FAIR MARKET VALUE OF THE ASSET. THE STANDARD OF VALUATION IN CRAMDOWN SITUATIONS IS WHAT PRICE DOES THAT ASSET COMMAND BASED UPON THE AVAILABLE RETAIL MARKET FOR THAT ASSET. IN THE CASE OF USED FURNITURE, THE AVAILABLE MARKET IS THRIFT STORE, SALVATION ARMY, AND CRAIGSLIST. IN USED FURNITURE, THE MARKET VALUE IS CLOSER TO LIQUIDATION VALUE. HOWEVER, WITH AUTOMOBILES, THERE IS A ROBUST RETAIL MARKET FOR USED AUTOMOBILES. AS SUCH, THIS WILL PROVIDE A VALUATION THAT MORE SERVES CREDITORS INTEREST.
ANYTIME, THE DEBTOR CHOOSES TO CRAMDOWN AN AUTOMOBILE LOAN, THE DEBTOR SHOULD GET A CERTIFIED APPRAISAL BEFORE THE CHAPTER 13 IS FILED. THE DEBTOR SHOULD ALSO OBTAIN A CERTIFIED APPRAISAL IF THERE APPEARS TO SIGNIFICANT EQUITY IN THE DEBTOR(S) AUTOMOBILE, SUCH THAT THE DEBTOR(S) EXCEED THEIR ALLOWABLE EXEMPTIONS.
A DIFFERENT STANDARD OF VALUATION IS EMPLOYED WHEN DETERMINING THE VALUATION OF THE AUTOMOBILE, OR OTHER ASSETS, IN SUCH CASE. THE STANDARD OF VALUATION IS LIQUIDATION VALUE. LIQUIDATION VALUE MEANS WHAT THAT ASSET WOULD COMMAND AT AN AUCTION OR SIMILAR LIQUIDATION SALE. CRAIGSLIST OFTEN OFFERS A GOOD EXAMPLE OF LIQUIDATION VALUE.
- ALSO, AT 80 DAYS AFTER THE FILING OF THE PETITION, THE DETERMINE WHETHER THERE ARE ANY JUDGMENT LIENS. IF THERE ARE JUDGEMENT LIENS, THEN THE DEBTOR(S) SHOULD FILE A MOTION TO AVOID SUCH JUDGEMENT LIENS. IF THE CREDITOR DOES NOT RESPOND WITHIN THE PRESCRIBED RESPONSE PERIOD OF 21 DAYS, THEN FILE THE ORDER TO AVOID THE JUDGMENT LIEN(S). ONE CAN GENERALLY AVOID A JUDGMENT LIEN TO THE EXTENT TO WHICH SUCH AVOIDANCE DOES NOT IMPAIR AN EXISTING EXEMPTION. IF THE DEBTOR(S) OWNS ASSETS THAT ARE NOT EXEMPT, THE AMOUNT THAT IS NOT EXEMPT IS REPRESENTED AS A SECURED CLAIM ON BEHALF OF THE CREDITOR HOLDING THE JUDGMENT LIEN. THE EXEMPT PORTION IS REPRESENTED AS AN UNSECURED CLAIM ON BEHALF OF THAT SAME CREDITOR.
- BETWEEN 90 TO 120 DAYS AFTER THE CHAPTER 13 BANKRUPTCY IS FILED, ALL OF THE ABOVE ISSUES MUST HAVE BEEN ADDRESSED. THERE WILL BE GENERALLY AVAILABLE ONLY THREE CONFIRMATION HEARINGS FOR THE DEBTOR. THE FIRST CONFIRMATION HEARING, STRANGELY, IS SET ONLY 60 DAYS AFTER THE CHAPTER 13 WAS FILED.
- THE SECOND CONFIRMATION HEARING, DEPENDING UPON THE JUDGE, AND THE COMPLEXITY OF THE CASE, WILL BE SET 30-90 DAYS AFTER THE FIRST SCHEDULED CONFIRMATION HEARING. THAT MEANS THE SECOND CONFIRMATION HEARING WILL BE SCHEDULED FOR 90-120 DAYS AFTER THE CHAPTER 13 PETITION WAS FILED. THE BEST PRACTICE IS FOR THE DEBTOR(S) CASE TO BE CONFIRMED AT THE SECOND CONFIRMATION HEARING.
- IF THE CHAPTER 13 PLAN IS NOT CONFIRMABLE AT THE SECOND CONFIRMATION HEARING, THEN A THIRD CONFIRMATION HEARING WILL BE SCHEDULED, AGAIN DEPENDING UPON THE JUDGE AND THE COMPLEXITY OF UNRESOLVED ISSUES, 30 TO 90 DAYS AFTER THE SECOND CONFIRMATION HEARING. THIS MEANS THE THIRD CONFIRMATION HEARING WILL BE SCHEDULED 120-150 DAYS AFTER THE CHAPTER 13 PETITION WAS FILED.
- IF THE CHAPTER 13 PLAN IS NOT CONFIRMED AT THE THIRD CONFIRMATION HEARING, THE JUDGE MAY DISMISS THE CHAPTER 13 AND THE DEBTOR(S) ATTORNEY AND/OR THE DEBTOR MAY BE SUBJECT TO SANCTIONS BY THE BANKRUPTCY JUDGE.
- IF THE CHAPTER 13 IS NOT CONFIRMED BY THE SECOND CONFIRMATION HEARING, MEANING 90-120 DAYS AFTER THE CHAPTER 13 IS FILED, IT MAY BE ADVISABLE TO FILE AN AMENDED CHAPTER 13 PLAN. AN AMENDED CHAPTER 13 PLAN USUALLY WILL REFLECT AN INCREASE IN THE DEBTOR(S) MONTHLY PLAN PAYMENT. THIS MAY BE DUE TO A NUMBER OF FACTORS, INCLUDING THAT THE SECURED CLAIMS MAY BE SIGNIFICANTLY HIGHER THAN ORIGINALLY ANTICIPATED, OR THE DEBTOR(S) INCOME MAY NECESSITATE A HIGHER PAYMENT.
IF THE CHAPTER 13 CONFIRMATION PROCESS EXTENDS FOR MORE THAN AN OPTIMAL PERIOD OF TIME, MEANING MORE THAN 120 DAYS AFTER THE CHAPTER 13 IS FILED, AND THE DEBTOR IS MAKING A PAYMENT TO THE TRUSTEE SIGNIFICANTLY LOWER THAN THE FINALLY CONFIRMED CHAPTER 13 PLAN WILL DEMAND; UPON CONFIRMATION, THE DEBTOR(S) MONTHLY PAYMENT CAN INCREASE DRAMATICALLY IN ORDER TO MAKE UP FOR THE NUMEROUS MONTHS OF LOWER PAYMENTS. [THE CHAPTER 13 BANKRUPTCY CAN ENDURE FOR A MAXIMUM PERIOD OF 60 MONTHS AFTER THE PETITION IS FILED. IN THE CASE OF A 36 MONTH PLAN, THE DEBTOR(S) MAY EXTEND THE PLAN, IF THE CLAIMS, OR MONTHLY PAYMENT, ARE MORE THAN ORIGINALLY ANTICIPATED]
- IF THE CHAPTER 13 PLAN IS NOT CONFIRMED AT THE THIRD CONFIRMATION HEARING, THE JUDGE MAY DISMISS THE CHAPTER 13 AND THE DEBTOR(S) ATTORNEY AND/OR THE DEBTOR MAY BE SUBJECT TO SANCTIONS BY THE BANKRUPTCY JUDGE.
PROPER ORGANIZATION AND EXECUTION ARE PROBABLY THE MOST IMPORTANT INGREDIENTS TO SUCCESSFUL CONFIRMATION OF CHAPTER 13 BANKRUPTCY PLANS.
Picture Credit: Freepik
