Consumer Bankruptcy Law and Practice (8th ed.

2006)

Contents

Volume 1
CD-Rom Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxv

Chapter 1 About This Manual

1.1 Bankruptcy As a Remedy for Consumer Debtors. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.2 The Bankruptcy Reform Act and Subsequent Amendments. . . . . . . . . . . . . 1
1.1.2.1 Passage of the Bankruptcy Reform Act. . . . . . . . . . . . . . . . . . . . . 1
1.1.2.2 Consumer Bankruptcy Amendments of 1984 . . . . . . . . . . . . . . . . . 2
1.1.2.3 Bankruptcy Judges, United States Trustees, and Family Farmer
Bankruptcy Act of 1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1.2.4 The Bankruptcy Reform Act of 1994 . . . . . . . . . . . . . . . . . . . . . . 2
1.1.2.5 The 2005 Bankruptcy Amendments . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.2.6 Other Amendments to the Code. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1.3 Bankruptcy’s Past As Neglected Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1.4 Making Bankruptcy Available to Consumer Clients . . . . . . . . . . . . . . . . . . 5
1.2 The Focus of This Manual—Bankruptcy Practice for Consumer Debtors and
Family Farmers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 How to Use This Manual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3.1 Purpose of the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3.2 Organization of the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3.3 Using This Manual As a Research Tool. . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3.3.1 This Manual Does Not Contain Citations to Every Relevant Case. . . 8
1.3.3.2 NCLC Case Consulting and Other NCLC Manuals. . . . . . . . . . . . . 8
1.4 The Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.1 Statutory Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.1.1 The Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.1.2 Other Relevant Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4.2 The Federal Rules of Bankruptcy Procedure and Interim Bankruptcy
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4.3 The Official Bankruptcy Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4.4 Other Issues Concerning Sources of Law . . . . . . . . . . . . . . . . . . . . . . . . 11
1.4.4.1 Pending Legislation and Amendments to the Rules . . . . . . . . . . . . 11
1.4.4.2 Local Bankruptcy Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.4.4.3 Case Law Under the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Other Resources for Practicing Under the Bankruptcy Code . . . . . . . . . . . . . . . 12
1.5.1 Legislative History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.5.1.1 The Bankruptcy Reform Act of 1978 . . . . . . . . . . . . . . . . . . . . . 12
1.5.1.2 The 1984 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.5.1.3 The 1986 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.5.1.4 The Bankruptcy Reform Act of 1994 . . . . . . . . . . . . . . . . . . . . . 13
1.5.1.5 The 2005 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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1.5.2 Rules Advisory Committee Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5.3 Treatises and Texts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5.4 Reporting Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.5.5 Periodicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.5.6 Citator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.5.7 Computer Assisted Legal Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Chapter 2 What Is Bankruptcy? Some General Concepts

2.1 A Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Relief Available in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 Purposes of Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.4 The Bankruptcy Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.4.1 Status Under the Bankruptcy Reform Act As Amended in 1984. . . . . . . . . 20
2.4.2 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.4.3 Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.5 The Bankruptcy Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5.1 Contents of the Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5.2 Pensions and Spendthrift Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.5.3 Education Savings Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.5.4 Pawned Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5.5 Tax Refunds and the Earned Income Tax Credit . . . . . . . . . . . . . . . . . . . 29
2.6 The Bankruptcy Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.7 The United States Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Chapter 3 Chapter 7 Bankruptcy (Straight Bankruptcy): The Basic Steps

3.1 General Explanation of Chapter 7 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Commencement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2.1 Who May File? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2.1.1 General Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2.1.2 Effect of Prior Bankruptcy Cases on Eligibility to File . . . . . . . . . 36
3.2.1.3 Eligibility to File a Case Does Not Assure Discharge of Debts . . . . 37
3.2.2 The Initial Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.3 Proper Venue for Bankruptcy Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3 First Steps After Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.4 The Section 341(a) Meeting (Meeting of Creditors) . . . . . . . . . . . . . . . . . . . . . 40
3.5 After the Meeting of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.5.1 Exempt and Encumbered Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.5.2 Liquidation of Nonexempt Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.5.3 Filing and Allowance of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.5.4 Distribution of Property to Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.6 The Discharge and Discharge Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Chapter 4 Chapter 13 Bankruptcy: The Basic Steps

4.1 General Explanation of Chapter 13 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 47
4.2 Commencement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.2.1 Who May File? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.2.2 The Initial Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.2.3 Conversion from Chapter 7 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 49
4.3 First Steps After Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.4 The Meeting of Creditors and Other Pre-Confirmation Activities . . . . . . . . . . . . 51
4.5 The Confirmation Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.6 Modification of the Plan and Postpetition Transactions . . . . . . . . . . . . . . . . . . . 53

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4.7 Options in the Event of Failure to Complete the Plan . . . . . . . . . . . . . . . . . . . . 54
4.7.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.7.2 Hardship Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.7.3 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.7.4 Conversion to Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.7.5 Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4.8 Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Chapter 5 Getting All the Necessary Facts

5.1 Introduction to the Manual’s Second Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.1 Purpose of These Four Chapters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.2 Roles for Non-Attorneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.1.3 Use of the Materials in the Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.2 The Importance of Getting All the Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.3 Methods of Gathering Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.3.1 The Initial Interview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.3.2 Filling in the Complete Picture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.3.3 Frequently Missed Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.3.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.3.3.2 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.3.3.3 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.3.3.4 Other Aspects of Financial Affairs . . . . . . . . . . . . . . . . . . . . . . . 63
5.3.4 Other Sources of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5.4 Impressing upon Clients the Need for Full and Accurate Information . . . . . . . . . 64

Chapter 6 Counseling the Consumer Debtor: Does Bankruptcy Provide the Best
Solution and, If So, How and When?
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.1.1 Explaining the Options to Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.1.2 Methods of Explaining Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.2 Advantages and Disadvantages of Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.2.1 Advantages: The Uses of Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.2.1.1 Discharge of Most Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.2.1.2 Protection of Property and Income from Unsecured Creditors. . . . . 66
6.2.1.3 Tools for Eliminating or Modifying Secured Debts . . . . . . . . . . . . 67
6.2.1.4 Automatic Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.2.1.5 Other Protections Available Through Bankruptcy . . . . . . . . . . . . . 67
6.2.1.6 Litigation Advantages of the Bankruptcy Forum . . . . . . . . . . . . . . 67
6.2.2 Disadvantages: Reasons for Not Filing a Bankruptcy Case . . . . . . . . . . . . 68
6.2.2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2.2.2 Loss of Property in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2.2.3 Effect on Credit and Reputation . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2.2.4 Possible Discrimination After Bankruptcy . . . . . . . . . . . . . . . . . . 69
6.2.2.4.1 The available protections. . . . . . . . . . . . . . . . . . . . . . . 69
6.2.2.4.2 Medical debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.2.2.5 Clients’ Feelings of Moral Obligation . . . . . . . . . . . . . . . . . . . . . 70
6.2.2.6 Cost of Filing a Bankruptcy Petition. . . . . . . . . . . . . . . . . . . . . . 70
6.2.2.7 Is Bankruptcy Necessary? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.2.2.8 When Bankruptcy Offers No Help or Is Unavailable . . . . . . . . . . . 71
6.2.2.8.1 When bankruptcy will not help . . . . . . . . . . . . . . . . . . 71
6.2.2.8.2 Clients who have filed prior bankruptcy cases . . . . . . . . 71
6.3 Choosing the Type of Bankruptcy Case to File . . . . . . . . . . . . . . . . . . . . . . . . 72

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6.3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3.2 Considerations Favoring Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3.3 Considerations Favoring Chapter 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.3.4 Use of Chapter 11 by Consumer Debtors . . . . . . . . . . . . . . . . . . . . . . . . 74
6.4 Should Both Spouses File? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.5 Considerations of Timing and Events Prior to Filing . . . . . . . . . . . . . . . . . . . . 75
6.5.1 Reasons to File Quickly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.5.2 The Effects of Prebankruptcy Transfers or Other Actions . . . . . . . . . . . . . 76
6.5.2.1 Fraudulent Acts, Conveyances, and Preferences . . . . . . . . . . . . . . 76
6.5.2.2 Exemption Time Periods and Exemption Planning . . . . . . . . . . . . 77
6.5.3 Other Reasons for Delaying a Petition . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.5.3.1 Anticipation of Further Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.5.3.2 Paying Favored Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.5.3.3 Delay of a Petition As a Strategy to Forestall Harm to Clients . . . . 79
6.5.3.4 Tax Reach Back Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.5.3.5 Delay to Obtain More Favorable Treatment of Certain Secured
Debts in Chapter 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6.5.3.6 Timing the Petition to Avoid a Presumption of Abuse in Chapter
7 or to Lower Disposable Income in Chapter 13 . . . . . . . . . . . . . 80
6.5.3.7 Timing the Petition to Avoid Automatic Stay Limitations. . . . . . . . 80
6.5.3.8 Less Common Reasons for Delaying a Petition . . . . . . . . . . . . . . 80

Chapter 7 Preparing and Filing the Papers

7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.1 Some General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.2 Obtaining the Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.3 Computer Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.1.4 Electronic Filing of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.2 The Papers Necessary to Start a Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.2.1 Forms Usually Filed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.2.2 The Emergency Bankruptcy, or How to Prepare a Bankruptcy Case in
Under One Hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2.3 Timing the Filing of Multiple Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.3 Forms at the Outset of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.3.1 Official and Unofficial Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.3.2 The Bankruptcy Petition (Official Form 1) . . . . . . . . . . . . . . . . . . . . . . . 86
7.3.3 Statement of Social Security Number (Official Form 21) . . . . . . . . . . . . . 87
7.3.4 List of Creditors, Codebtors, and Parties to Executory Contracts . . . . . . . . 87
7.3.5 Credit Counseling Statement, Certificate from Counseling Agency, and
Debt Management Plan (If Any) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.3.6 Notice of Chapters Under Which Relief Is Available and Other
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.3.7 The Bankruptcy Schedules (Official Form 6) . . . . . . . . . . . . . . . . . . . . . 88
7.3.7.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.3.7.2 Schedules A, B, and C: The Debtor’s Property. . . . . . . . . . . . . . . 88
7.3.7.2.1 Schedule A—real property. . . . . . . . . . . . . . . . . . . . . . 88
7.3.7.2.2 Schedule B—personal property . . . . . . . . . . . . . . . . . . 89
7.3.7.2.3 Schedule C—property claimed as exempt . . . . . . . . . . . 91
7.3.7.3 Schedules D, E, and F: Information About Creditors . . . . . . . . . . . 93
7.3.7.3.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.3.7.3.2 Schedule D—secured debts . . . . . . . . . . . . . . . . . . . . . 94
7.3.7.3.3 Schedule E—priority debts . . . . . . . . . . . . . . . . . . . . . 94
7.3.7.3.4 Schedule F—general unsecured debts . . . . . . . . . . . . . . 95
7.3.7.4 Schedule G: Unexpired Leases and Executory Contracts . . . . . . . . 95

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7.3.7.5
Schedule H: Codebtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.3.7.6
Schedules I and J: Income and Expenses. . . . . . . . . . . . . . . . . . . 96
7.3.7.7
Declaration Concerning Debtor’s Schedules . . . . . . . . . . . . . . . . . 97
7.3.7.8
The Summary of Schedules and Statistical Summary of Certain
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.3.8 The Statement of Financial Affairs (Official Form 7) . . . . . . . . . . . . . . . . 98
7.3.9 Statement of Current Monthly Income, Means Test, and Chapter 13
Calculations (Official Forms 22A and 22C) . . . . . . . . . . . . . . . . . . . . . 100
7.3.10 Filing Debtor Payment Advices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
7.3.11 The Statement of Intention with Regard to Property Securing Consumer
Debts (Official Form 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
7.3.12 The Chapter 13 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.3.12.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.3.12.2 Form of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.3.12.3 Required Provisions and Confirmation Standards. . . . . . . . . . . . 104
7.3.12.4 Other Plan Provisions Permitted . . . . . . . . . . . . . . . . . . . . . . . 105
7.3.12.5 Formulating the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
7.3.13 Other Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.3.13.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.3.13.2 Disclosure of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.3.13.3 Application to Pay Filing Fee in Installments . . . . . . . . . . . . . . 107
7.3.13.4 Application for Waiver of Filing Fees in Whole or in Part . . . . . 107
7.3.13.5 Motion for Extension of Time to File Required Documents . . . . 107
7.3.13.6 Forms Required by Local Rules or Practice . . . . . . . . . . . . . . . 108
7.4 Signing, Verification, and Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Chapter 8 After the Papers Are Filed

8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
8.2 Advice to Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
8.3 Events Which May Occur Prior to or After the Section 341 Meeting of
Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
8.3.1 Notice of the Automatic Stay and Turnover Requirement . . . . . . . . . . . . 110
8.3.2 Amendments to Statements or Schedules . . . . . . . . . . . . . . . . . . . . . . . 111
8.3.3 Personal Financial Management Course . . . . . . . . . . . . . . . . . . . . . . . . 111
8.3.4 Production of Tax Returns or Transcripts . . . . . . . . . . . . . . . . . . . . . . . 112
8.3.4.1 Providing Tax Return or Transcript to Trustee and Creditors. . . . . 112
8.3.4.2 Filing Tax Returns or Transcripts with the Court. . . . . . . . . . . . . 113
8.3.4.3 Privacy Concerns and Safeguards . . . . . . . . . . . . . . . . . . . . . . . 113
8.3.5 Annual Statements of Income and Expenditures in Chapter 13 Cases . . . . 114
8.3.6 Avoiding Transfers of Exempt Property . . . . . . . . . . . . . . . . . . . . . . . . 114
8.3.7 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
8.3.8 Complaints on Dischargeability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
8.3.9 Objections to Claims of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
8.3.10 Other Disputes That May Arise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
8.3.11 Retaining Nonexempt Property in Chapter 7 Cases . . . . . . . . . . . . . . . . 116
8.3.12 Commencement of Payments in Chapter 13 Cases . . . . . . . . . . . . . . . . 117
8.3.12.1 Plan Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
8.3.12.2 Adequate Protection Payments and Payments to Personal
Property Lessors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
8.3.12.3 Graduated Plan Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
8.3.13 Proof of Insurance in Chapter 13 Cases . . . . . . . . . . . . . . . . . . . . . . . 118
8.3.14 Filing of Tax Returns with Taxing Authorities in Chapter 13 Cases . . . . 118
8.3.15 Audits and Rule 2004 Examinations . . . . . . . . . . . . . . . . . . . . . . . . . 119
8.3.15.1 Debtor Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

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8.3.15.2 Rule 2004 Examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
8.4 The Meeting of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
8.4.1 Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
8.4.2 Document Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
8.4.3 Procedure at the Meeting of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . 120
8.4.4 Attendance of Creditors Seeking Reaffirmation Agreements. . . . . . . . . . . 122
8.4.5 Examination of Chapter 7 Debtors’ Awareness of Bankruptcy
Information—Bankruptcy Information Sheet . . . . . . . . . . . . . . . . . . . . . 122
8.4.6 Checking Claims That Have Been Filed . . . . . . . . . . . . . . . . . . . . . . . . 123
8.5 Chapter 7 Cases—After the Meeting of Creditors. . . . . . . . . . . . . . . . . . . . . . 123
8.6 Chapter 13 Confirmation Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
8.7 Administration of the Chapter 13 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
8.7.1 Trustee Payments to Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
8.7.2 Postpetition Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
8.7.3 Modification of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
8.7.4 Debtor’s Inability to Complete the Plan . . . . . . . . . . . . . . . . . . . . . . . . 127
8.7.4.1 Failure to Make Plan Payments . . . . . . . . . . . . . . . . . . . . . . . . 127
8.7.4.2 Plan Modifications That Enable the Debtor to Complete the Plan . . 128
8.7.4.3 Obtaining a Hardship Discharge . . . . . . . . . . . . . . . . . . . . . . . . 128
8.7.4.4 Conversion to Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
8.7.4.5 Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
8.8 The Discharge and the Discharge Hearing. . . . . . . . . . . . . . . . . . . . . . . . . . . 131
8.8.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
8.8.2 Reaffirmation of Debts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
8.8.3 Procedure When There Is a Discharge Hearing . . . . . . . . . . . . . . . . . . . 133
8.9 After Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Chapter 9 Automatic Stays and Turnover of Property

9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
9.2 Purpose of the Automatic Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
9.3 Duration of the Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
9.3.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
9.3.2 Duration If No Prior Case Was Dismissed in Year Before Petition . . . . . . 136
9.3.3 Duration If a Prior Case Was Dismissed in Year Before Petition . . . . . . . 137
9.3.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.3.3.2 One Prior Case Dismissed Within Previous Year. . . . . . . . . . . . . 137
9.3.3.2.1 General application. . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.3.3.2.2 Demonstrating good faith for extension of stay past
thirty days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.3.3.2.3 Overcoming the presumption that case was not filed in
good faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
9.3.3.3 Two or More Cases Dismissed Within Previous Year . . . . . . . . . 138
9.3.3.4 Order Confirming Stay Termination . . . . . . . . . . . . . . . . . . . . . 139
9.3.3.5 Codebtor Stay Still Applicable . . . . . . . . . . . . . . . . . . . . . . . . . 139
9.3.3.6 Filings in Violation of Section 109(g) or a Prior Court
Order—Section 362(b)(21) . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
9.4 Scope of the Automatic Stay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
9.4.1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
9.4.2 Acts Directed at the Debtor’s Property . . . . . . . . . . . . . . . . . . . . . . . . . 142
9.4.3 Other Acts Prohibited by the Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
9.4.4 The Automatic Stay Protecting Codebtors in Chapter 13. . . . . . . . . . . . . 148
9.4.5 Exceptions to the Automatic Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
9.4.5.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
9.4.5.2 Criminal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

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9.4.5.3 Family Law Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
9.4.5.4 Continued Withholding of Income for Loans from Retirement
Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.4.5.5 Provisions Based on Prior Bankruptcy Case Filings by Debtor or
Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
9.4.5.5.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
9.4.5.5.2 In Rem orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
9.4.5.6 Exceptions to Stay of Residential Tenant Evictions . . . . . . . . . . . 153
9.4.5.6.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
9.4.5.6.2 Prepetition judgment for possession. . . . . . . . . . . . . . . 153
9.4.5.6.3 Illegal use of controlled substances or endangerment to
the property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
9.4.5.7 Transfers Not Avoidable Under Section 549. . . . . . . . . . . . . . . . 154
9.4.5.8 Setoff of Tax Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
9.4.5.9 Other Exceptions Sometimes Applicable in Consumer Cases . . . . 155
9.4.6 Non-Automatic Stays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
9.5 Notice of the Automatic Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
9.6 Enforcing the Stay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
9.6.1 Actions Taken in Violation of the Stay Are Void . . . . . . . . . . . . . . . . . . 157
9.6.2 Cause of Action for Damages, Punitive Damages, and Attorney Fees . . . . 158
9.6.3 Notice Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
9.6.3.1 Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
9.6.3.2 Effective Notice Under Section 342 . . . . . . . . . . . . . . . . . . . . . 160
9.6.4 Contempt Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
9.6.5 Other Possible Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
9.6.6 Remedies Against State and Federal Government . . . . . . . . . . . . . . . . . 162
9.6.7 Procedural Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
9.7 Proceedings Seeking Relief from the Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
9.7.1 Proceedings Must Be Commenced by Motion . . . . . . . . . . . . . . . . . . . . 163
9.7.2 Time Limits for Court Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
9.7.3 Defending Against Motions for Relief from the Stay . . . . . . . . . . . . . . . 165
9.7.3.1 Procedural Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
9.7.3.1.1 Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
9.7.3.1.2 Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
9.7.3.1.3 Defenses and counterclaims . . . . . . . . . . . . . . . . . . . . 166
9.7.3.1.4 Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
9.7.3.1.5 Effect of prior bankruptcy cases involving the same
debtor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
9.7.3.2 Grounds for Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
9.7.3.2.1 For cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
9.7.3.2.2 Lack of adequate protection . . . . . . . . . . . . . . . . . . . . 171
9.7.3.2.3 Lack of equity or necessity for effective reorganization . . 173
9.7.3.2.4 Leases involving residential property . . . . . . . . . . . . . . 174
9.7.3.3 Tactics in Stay Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
9.7.3.3.1 Valuation problems . . . . . . . . . . . . . . . . . . . . . . . . . . 176
9.7.3.3.2 Other tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
9.7.3.3.3 Stays pending appeal . . . . . . . . . . . . . . . . . . . . . . . . 177
9.8 Utility Services in Bankruptcy Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
9.8.1 No Utility May Deny Service Within Twenty Days After Bankruptcy . . . . 177
9.8.2 A Utility May Be Able to Discontinue Service If the Debtor Does Not
Furnish Adequate Assurance of Future Payment . . . . . . . . . . . . . . . . . . 178
9.8.2.1 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
9.8.2.2 Adequate Assurance of Future Payment . . . . . . . . . . . . . . . . . . 179
9.8.2.2.1 Methods of adequate assurance. . . . . . . . . . . . . . . . . . 179
9.8.2.2.2 Adequate assurance not always required . . . . . . . . . . . 179

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9.8.2.2.3 Amount necessary for adequate assurance . . . . . . . . . . 180
9.8.2.2.4 Postpetition termination procedures . . . . . . . . . . . . . . . 181
9.8.2.2.5 Possible special protections for customers of
governmental utilities . . . . . . . . . . . . . . . . . . . . . . . . 181
9.9 Turnover of Property Under Section 542. . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
9.9.1 The General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
9.9.2 Questions of Scope: Secured Parties in Possession . . . . . . . . . . . . . . . . . 182
9.9.3 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
9.9.4 Issues of Possession After Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Chapter 10 Exemptions
10.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
10.1.1 Importance of the Exemption Provisions. . . . . . . . . . . . . . . . . . . . . . . 185
10.1.2 Definition of Exempt Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
10.1.3 Purposes of Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
10.2 What Property Is Exempt? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
10.2.1 The Choice of State or Federal Exemptions . . . . . . . . . . . . . . . . . . . . 186
10.2.1.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
10.2.1.2 Determining the Applicable Exemption Law. . . . . . . . . . . . . . . 188
10.2.2 The Federal Bankruptcy Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . 189
10.2.2.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
10.2.2.2 Homestead—§ 522(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
10.2.2.3 Motor Vehicle—§ 522(d)(2). . . . . . . . . . . . . . . . . . . . . . . . . . 190
10.2.2.4 Household Goods, Household Furnishings, Wearing Apparel,
Appliances, and Similar Items—§ 522(d)(3) . . . . . . . . . . . . . . . 190
10.2.2.5 Jewelry—§ 522(d)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
10.2.2.6 Any Property—§ 522(d)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . 191
10.2.2.7 Tools of the Trade—§ 522(d)(6) . . . . . . . . . . . . . . . . . . . . . . . 192
10.2.2.8 Unmatured Life Insurance—§ 522(d)(7) . . . . . . . . . . . . . . . . . 192
10.2.2.9 Accrued Dividend, Interest, or Loan Value of Life Insurance—
§ 522(d)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
10.2.2.10 Health Aids—§ 522(d)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . 193
10.2.2.11 Disability, Retirement, and Other Benefits Replacing Wages—
§ 522(d)(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
10.2.2.12 Rights to Compensation for Injury or Losses—§ 522(d)(11) . . . 196
10.2.2.13 Pensions and Retirement Accounts— § 522(d)(12) . . . . . . . . . 197
10.2.2.13.1 2005 amendments . . . . . . . . . . . . . . . . . . . . . . . . . 197
10.2.2.13.2 Guidelines for exempt retirement funds . . . . . . . . . . 198
10.2.2.13.3 Cap on certain IRA accounts . . . . . . . . . . . . . . . . . 198
10.2.3 Using the State and Federal Nonbankruptcy Exemptions . . . . . . . . . . . . 198
10.2.3.1 Federal Bankruptcy Modifications of These Exemptions. . . . . . . 198
10.2.3.2 Exemption of Property Not Subject to Process . . . . . . . . . . . . . 200
10.2.3.3 Special Retirement Exemptions Available to Debtors Who
Utilize State and Federal Nonbankruptcy Exemptions . . . . . . . . 203
10.2.3.4 Limitations on State Homestead Exemptions . . . . . . . . . . . . . . 204
10.2.3.4.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
10.2.3.4.2 Scope of the new restrictions . . . . . . . . . . . . . . . . . . 204
10.2.3.4.3 Homestead limitation based on fraudulent conversion
of nonexempt property . . . . . . . . . . . . . . . . . . . . . . 204
10.2.3.4.4 Cap on homestead property acquired during 1215-day
period before filing . . . . . . . . . . . . . . . . . . . . . . . . . 205
10.2.3.4.5 Homestead cap based on certain criminal or wrongful
conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
10.2.3.4.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . 205

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10.2.3.4.5.2 Felony conviction . . . . . . . . . . . . . . . . . . . 205
10.2.3.4.5.3 Debts arising from certain wrongful conduct . . 206
10.2.3.4.5.4 Standing to bring objection to exemption . . . . 206
10.2.3.4.5.5 No cap if homestead reasonably necessary for
support . . . . . . . . . . . . . . . . . . . . . . . . . . 206
10.2.3.4.5.6 Delay of discharge . . . . . . . . . . . . . . . . . . 207
10.2.3.4.5.7 Application of homestead caps in joint cases. . 208
10.3 Procedure for Claiming Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
10.3.1 The Initial Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
10.3.2 Amending the Claim of Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . 209
10.3.3 Objections to Exemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
10.3.4 Absent Successful Objections, the Exemptions Are Allowed . . . . . . . . . 212
10.4 Making the Most of Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
10.4.1 Exemption Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
10.4.2 Avoiding Powers of the Debtor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
10.4.2.1 General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
10.4.2.2 Procedure for Use of Avoiding Powers . . . . . . . . . . . . . . . . . . 215
10.4.2.3 Power to Avoid Judicial Liens— § 522(f)(1)(A) . . . . . . . . . . . . 216
10.4.2.3.1 Extent of the power to avoid judicial liens . . . . . . . . . 216
10.4.2.3.2 Limitations on power to avoid judicial liens . . . . . . . . 219
10.4.2.3.3 Avoidance of liens on property which may be claimed
as exempt under § 522(b)(2)(B) . . . . . . . . . . . . . . . . 220
10.4.2.4 Power to Avoid Nonpossessory, Nonpurchase-Money Security
Interests in Certain Items—§ 522(f)(1)(B) . . . . . . . . . . . . . . . . 221
10.4.2.5 Power to Exempt Property Recovered by Trustee—§ 522(g) . . . . 224
10.4.2.6 Debtor’s Right to Utilize Trustee’s Avoiding Powers—§ 522(h). . 226
10.4.2.6.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
10.4.2.6.2 The ‘‘strong-arm clause’’—§ 544 . . . . . . . . . . . . . . . 226
10.4.2.6.3 Statutory liens—§ 545. . . . . . . . . . . . . . . . . . . . . . . 229
10.4.2.6.4 Preferences—§ 547 . . . . . . . . . . . . . . . . . . . . . . . . . 229
10.4.2.6.4.1 In general . . . . . . . . . . . . . . . . . . . . . . . . 229
10.4.2.6.4.2 Exceptions to preference avoiding power . . . . 231
10.4.2.6.4.3 Debtor’s use of preference avoiding power . . . 234
10.4.2.6.5 Fraudulent transfers—§ 548 . . . . . . . . . . . . . . . . . . . 235
10.4.2.6.6 Postpetition transfers—§ 549 . . . . . . . . . . . . . . . . . . 239
10.4.2.6.7 Setoff—§ 553. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
10.4.2.6.8 Liens securing fines, penalties and forfeitures—
§ 724(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
10.4.2.7 Other Limitations on Debtor’s Use of Trustee Avoiding Powers . 242
10.4.2.8 Recovery of Property After Transfer Is Avoided . . . . . . . . . . . . 243
10.4.2.9 Preservation of Avoided Transfers or Recovered Property. . . . . . 244
10.4.2.10 Limits on Availability of Debtor’s Avoiding Powers As Applied
to Liens Predating the Bankruptcy Reform Act . . . . . . . . . . . . 244
10.5 Protection of Exempt Property After Discharge . . . . . . . . . . . . . . . . . . . . . . 245

Chapter 11 Dealing with Secured Creditors

11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
11.2 Determination of the Allowed Secured Claim . . . . . . . . . . . . . . . . . . . . . . . 247
11.2.1 The Concept of the Allowed Secured Claim . . . . . . . . . . . . . . . . . . . . 247
11.2.1.1 General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
11.2.1.2 Limitations on Claim Bifurcation in Chapter 7 . . . . . . . . . . . . . 248
11.2.1.3 Claim Bifurcation Alive and Well in Other Chapters . . . . . . . . . 248
11.2.2 Procedure for Determining the Allowed Secured Claim. . . . . . . . . . . . . 249
11.2.2.1 Overview of the Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249

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11.2.2.2 Date of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
11.2.2.2.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
11.2.2.2.2 Statutory rules for some personal property . . . . . . . . . 251
11.2.2.3 Method of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
11.2.2.3.1 Valuation standard. . . . . . . . . . . . . . . . . . . . . . . . . . 252
11.2.2.3.2 Valuation of motor vehicles . . . . . . . . . . . . . . . . . . . 253
11.2.2.3.3 Property other than automobiles . . . . . . . . . . . . . . . . 254
11.2.2.3.4 Computation of value . . . . . . . . . . . . . . . . . . . . . . . 254
11.3 Creditors’ Efforts to Obtain Security After Bankruptcy Commenced . . . . . . . . 255
11.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
11.3.2 Reclamation of Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
11.3.3 Abandonment of Property by the Trustee . . . . . . . . . . . . . . . . . . . . . . 256
11.3.4 Disposition by the Trustee Under Section 725 . . . . . . . . . . . . . . . . . . . 257
11.3.5 Holding of Cash Collateral by Creditors . . . . . . . . . . . . . . . . . . . . . . . 257
11.4 Statement of Intention with Respect to Property Securing Consumer Debts and
With Respect to Personal Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . 258
11.4.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258
11.4.2 Effect of 2005 Amendments to Section 521(a)(2) and Related Provisions. 259
11.4.2.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
11.4.2.2 No Material Change to the Statutory Language . . . . . . . . . . . . . 259
11.4.2.3 Section 362(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
11.4.2.4 Section 521(a)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
11.4.2.4.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
11.4.2.4.2 Requirement of allowed claim . . . . . . . . . . . . . . . . . 261
11.4.2.4.3 Requirement of claim for the purchase price . . . . . . . . 261
11.4.2.4.4 Rights of creditors and debtors when section 521(a)(6)
applies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
11.4.2.5 Section 521(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
11.4.2.6 Legislative History of the 2005 Amendments . . . . . . . . . . . . . . 263
11.4.2.7 Bankruptcy Policies Supporting the Retain and Pay Option. . . . . 263
11.5 Right of Redemption in Chapter 7 Cases. . . . . . . . . . . . . . . . . . . . . . . . . . . 263
11.5.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
11.5.2 Limitations on the Right to Redeem. . . . . . . . . . . . . . . . . . . . . . . . . . 264
11.5.3 Redemption by Payment in Installments . . . . . . . . . . . . . . . . . . . . . . . 264
11.5.4 Secured Creditors Who Refuse to Agree to Continued Installment
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
11.5.5 Uses in Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
11.6 Using Chapter 13 to Deal with Secured Creditors: The Chapter 13 Cramdown . . 267
11.6.1 Modification of Secured Creditors’ Rights in Claims Not Secured Only
by Real Estate That Is the Debtor’s Principal Residence . . . . . . . . . . . . 267
11.6.1.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
11.6.1.2 Limitations on Modifying Certain Debts Secured Only by Real
Estate That Is Debtor’s Principal Residence . . . . . . . . . . . . . . . 267
11.6.1.2.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
11.6.1.2.2 Security interests in the debtor’s residence that are not
protected by section 1322(b)(2). . . . . . . . . . . . . . . . . 267
11.6.1.2.3 Right to cure defaults is not impaired by section
1322(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
11.6.1.2.4 Section 1322(b)(2) not applicable to liens that are not
security interests in real estate . . . . . . . . . . . . . . . . . 270
11.6.1.3 Provisions Dealing with Allowed Secured Claims Provided for
by the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
11.6.1.3.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
11.6.1.3.2 Creditor acceptance of plan or debtor’s surrender of
collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271

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11.6.1.3.3 Payment of allowed secured claim through plan when
creditor does not accept plan . . . . . . . . . . . . . . . . . . 271
11.6.1.3.3.1 Lien retention and present value of payments . 271
11.6.1.3.3.2 Payments in equal monthly amounts and
provision of adequate protection . . . . . . . . . . 272
11.6.1.3.3.3 Filing of the secured claim . . . . . . . . . . . . . 273
11.6.1.3.3.4 Plan need not provide for all secured claims . . 273
11.6.1.3.3.5 Determination of allowed secured claim . . . . . 274
11.6.1.3.3.6 Trustee’s fee and present value interest . . . . . 275
11.6.1.3.3.7 Plans not complying with section 1325(a)(5)
may be confirmed . . . . . . . . . . . . . . . . . . . 276
11.6.1.4 Different Rules for Secured Claims Described in Paragraph at
End of Section 1325(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
11.6.2 Right to Cure Defaults on Long-Term Debts Including Mortgages on
Debtor’s Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
11.6.2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
11.6.2.2 Cure of Mortgages After Acceleration or Foreclosure Judgment . 278
11.6.2.3 Cure of Mortgages That Mature Before the Bankruptcy Case or
Before the End of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 279
11.6.2.4 Cure Permitted Even If Debtor Has No Personal Liability . . . . . 280
11.6.2.5 Length of Time Permitted for Cure . . . . . . . . . . . . . . . . . . . . . 280
11.6.2.6 Method of Maintaining Current Payments on Debts Being Cured . . . 280
11.6.2.7 Amount Necessary to Effectuate Cure . . . . . . . . . . . . . . . . . . . 281
11.6.2.7.1 Attorney fees and costs . . . . . . . . . . . . . . . . . . . . . . 281
11.6.2.7.2 Interest on arrears . . . . . . . . . . . . . . . . . . . . . . . . . . 282
11.6.2.8 Effect of Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
11.7 Use of Section 506 to Reduce Liens That Are Not Paid Under Section
1325(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
11.8 Rent-to-Own Transactions in Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . 284
11.9 Automobile Title Pawn Transactions in Bankruptcy . . . . . . . . . . . . . . . . . . . 286

Chapter 12 Issues Arising in Chapter 13 Cases

12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
12.2 Eligibility for Chapter 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
12.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
12.2.2 Individuals with Regular Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
12.2.3 Debt Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
12.2.3.1 Determining Whether Debts Are Secured or Unsecured . . . . . . . 289
12.2.3.2 Determining Whether Debts Are Liquidated and Non-Contingent . 290
12.2.3.3 Procedure for Determining Eligibility . . . . . . . . . . . . . . . . . . . 291
12.2.3.4 Strategies for Avoiding Eligibility Problems . . . . . . . . . . . . . . . 291
12.3 What Amount Must Be Paid to Unsecured Creditors? . . . . . . . . . . . . . . . . . . 292
12.3.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292
12.3.2 The Best Interests of Creditors Test . . . . . . . . . . . . . . . . . . . . . . . . . . 292
12.3.3 Use of the Good Faith Test Prior to the 1984 Amendments . . . . . . . . . . 293
12.3.4 The Ability to Pay (Disposable Income) Test . . . . . . . . . . . . . . . . . . . 295
12.3.4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
12.3.4.2 Procedure for Objections Based upon Section 1325(b) . . . . . . . . 296
12.3.4.3 Full Payment Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
12.3.4.4 Disposable Income Test. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
12.3.4.4.1 Use of ‘‘current monthly income’’ . . . . . . . . . . . . . . . 297
12.3.4.4.2 New exclusions from disposable income . . . . . . . . . . 298
12.3.4.4.2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . 298

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12.3.4.4.2.2 Child support, foster care, and similar
payments . . . . . . . . . . . . . . . . . . . . . . . . 298
12.3.4.4.2.3 Payments on domestic support obligations . . . 298
12.3.4.4.2.4 Repayments of pension loans and pension
contributions . . . . . . . . . . . . . . . . . . . . . . 298
12.3.4.4.3 Use of means test expense calculations for debtors
with incomes above median income . . . . . . . . . . . . . 299
12.3.4.4.4 Administrative expenses . . . . . . . . . . . . . . . . . . . . . 299
12.3.4.4.5 Calculation of expenses for debtors below median
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
12.3.4.4.6 Applicable commitment period and plan length . . . . . . 300
12.3.4.5 Post-Confirmation Modification of Plan Based Upon Change
in Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
12.3.5 Use of the Good Faith Test After the 1984 Amendments. . . . . . . . . . . . 304
12.3.6 Payments to Unsecured Priority Creditors . . . . . . . . . . . . . . . . . . . . . . 305
12.3.6.1 Priority Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
12.3.6.2 Required Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 307
12.3.6.3 Postpetition Domestic Support Obligation Payments . . . . . . . . . 307
12.4 Classification of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308
12.4.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308
12.4.2 Claims with Cosigners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308
12.4.3 Other Classifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309
12.4.4 Payments Outside the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
12.4.5 Payments to Former Chapter 7 Trustees . . . . . . . . . . . . . . . . . . . . . . . 312
12.4.6 Practical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
12.5 Feasibility of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
12.6 Other Plan Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
12.6.1 Payment of Debtor’s Income Directly to Trustee . . . . . . . . . . . . . . . . . 313
12.6.2 Payment of Interest and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
12.6.3 Length of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
12.6.4 Adjustments in Trustee’s Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
12.6.5 Liquidation of Property in Chapter 13 . . . . . . . . . . . . . . . . . . . . . . . . 316
12.6.6 Refinancing a Property During a Chapter 13 Case . . . . . . . . . . . . . . . . 316
12.7 Do the Section 1325(a) Standards Set Mandatory Requirements? . . . . . . . . . . 317
12.8 Use and Possession of Property of the Estate and Adequate Protection . . . . . . 318
12.8.1 Continuing Use of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318
12.8.2 Adequate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
12.8.2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
12.8.2.2 Adequate Protection Payments . . . . . . . . . . . . . . . . . . . . . . . . 319
12.8.2.2.1 When payments required . . . . . . . . . . . . . . . . . . . . . 319
12.8.2.2.2 Determining the amount and timing of payments . . . . . 319
12.8.2.2.3 Remedy for failure to make payments . . . . . . . . . . . . 320
12.8.3 Payments to Personal Property Lessors. . . . . . . . . . . . . . . . . . . . . . . . 320
12.8.4 Proof of Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
12.8.5 Vesting of Property Upon Confirmation . . . . . . . . . . . . . . . . . . . . . . . 320
12.9 Unexpired Leases and Executory Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 321
12.9.1 Definition of Executory Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
12.9.2 Assumption of a Lease or Executory Contract in Chapter 13 . . . . . . . . . 322
12.9.3 Rejection of Leases or Executory Contracts . . . . . . . . . . . . . . . . . . . . 325
12.9.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
12.9.3.2 Residential Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
12.9.3.3 Credit Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326
12.9.4 Procedure and Tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326
12.9.5 Assumption or Rejection of Personal Property Leases by Chapter 7
Debtor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

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12.9.5.1 2005 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
12.9.5.2 Effect of Lease Rejection in Chapter 7 . . . . . . . . . . . . . . . . . . 328
12.9.5.3 Lease Assumption by the Debtor in a Chapter 7 Case . . . . . . . . 328
12.10 Chapter 13 Cases After Prior Bankruptcies . . . . . . . . . . . . . . . . . . . . . . . . 328
12.10.1 Availability of a Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328
12.10.2 Determining Whether a Prior Discharge Was Under Chapter 7 or
Chapter 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329
12.10.3 Repeat Filing Still Permissible Even If Discharge Unavailable . . . . . . . 329
12.11 Confirmation of Plan Binds Debtor and All Creditors . . . . . . . . . . . . . . . . . 331

Chapter 13 Litigating in the Bankruptcy Court

13.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
13.2 Bankruptcy Court Jurisdiction Under the 1984 Amendments . . . . . . . . . . . . . 335
13.2.1 A Brief History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
13.2.2 Initial Referral of Bankruptcy Matters to the Bankruptcy Courts. . . . . . . 337
13.2.3 The Bankruptcy Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337
13.2.4 Types of Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338
13.2.4.1 Adversary Proceedings, Contested Matters, and Applications . . . 338
13.2.4.2 Core and Non-Core Proceedings. . . . . . . . . . . . . . . . . . . . . . . 338
13.2.4.3 Court’s Determination of Jurisdictional Questions . . . . . . . . . . . 339
13.2.4.4 Procedure in Non-Core Proceedings . . . . . . . . . . . . . . . . . . . . 342
13.2.5 Withdrawal to the District Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343
13.2.5.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343
13.2.5.2 Mandatory Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343
13.2.5.3 Discretionary Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . 344
13.2.6 Personal Injury and Wrongful Death Claims . . . . . . . . . . . . . . . . . . . . 344
13.2.7 Jury Trials in the Bankruptcy Court . . . . . . . . . . . . . . . . . . . . . . . . . . 345
13.2.8 Contempt Powers of the Bankruptcy Courts . . . . . . . . . . . . . . . . . . . . 346
13.3 Advantages of the Bankruptcy Court As a Forum. . . . . . . . . . . . . . . . . . . . . 347
13.3.1 Possibilities of a Fairer Result for the Consumer Client . . . . . . . . . . . . 347
13.3.2 Avoidance of Substantive or Procedural Difficulties . . . . . . . . . . . . . . . 348
13.3.2.1 In Personam Jurisdiction, Venue and Service Requirements . . . . 348
13.3.2.2 Sovereign Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349
13.3.2.3 Overcoming Barriers to Federal Court Access . . . . . . . . . . . . . 352
13.3.2.4 Recoupment Claims in Bankruptcy After Expiration of
Limitations Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352
13.3.2.5 Avoiding Mandatory Arbitration Agreements . . . . . . . . . . . . . . 353
13.3.2.6 Avoiding Standing and Judicial Estoppel Problems . . . . . . . . . . 354
13.3.2.6.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354
13.3.2.6.2 Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354
13.3.2.6.3 Judicial estoppel . . . . . . . . . . . . . . . . . . . . . . . . . . . 355
13.4 Bringing a Matter Before the Bankruptcy Forum . . . . . . . . . . . . . . . . . . . . . 356
13.4.1 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356
13.4.1.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356
13.4.1.2 Procedure for Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
13.4.1.3 Procedure After Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 358
13.4.1.4 Remand of Removed Actions. . . . . . . . . . . . . . . . . . . . . . . . . 358
13.4.2 Litigation of Other Claims Commenced by the Debtor . . . . . . . . . . . . . 359
13.4.3 Objections to Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
13.4.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
13.4.3.2 Claims Filed After Bar Date for Claims. . . . . . . . . . . . . . . . . . 360
13.4.3.3 Claims Not Enforceable Against the Debtor . . . . . . . . . . . . . . . 362
13.4.3.4 Objecting to Overcharges on Mortgage Claims . . . . . . . . . . . . . 363
13.4.3.4.1 Overcharges in general . . . . . . . . . . . . . . . . . . . . . . 363

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13.4.3.4.2 Escrow overcharges . . . . . . . . . . . . . . . . . . . . . . . . 364
13.4.3.4.3 Interest overcharges . . . . . . . . . . . . . . . . . . . . . . . . 364
13.4.3.4.4 Late charge abuses and other mistakes in crediting
payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
13.4.3.4.5 Bankruptcy monitoring fees and other bankruptcy fees. . 366
13.4.3.5 Objecting to Claims Filed with Inadequate Documentation . . . . . 368
13.4.3.6 Objecting Based Upon Prepetition Settlement Attempts . . . . . . . 370
13.4.3.7 Reconsideration of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 370
13.4.4 An Example: Truth in Lending Claims of the Debtor . . . . . . . . . . . . . . 370
13.4.5 Habeas Corpus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
13.5 Abstention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373
13.5.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373
13.5.2 Mandatory Abstention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373
13.5.3 Discretionary Abstention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374
13.6 In Forma Pauperis—Filing Fee Waivers in Bankruptcy Cases and
Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
13.6.1 General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
13.6.2 Statutory Authority of Bankruptcy Courts to Waive Fees. . . . . . . . . . . . 376
13.6.2.1 Chapter 7 Filing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376
13.6.2.2 Other Filing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
13.7 Class Actions in Bankruptcy Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
13.8 Involuntary Bankruptcy Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378
13.9 Voluntary Dismissal of Bankruptcy Cases . . . . . . . . . . . . . . . . . . . . . . . . . . 381
13.10 Typical Causes and Effects of Involuntary Dismissal or Conversion to
Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382
13.10.1 Reasons for Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382
13.10.2 ‘‘Automatic’’ Dismissal Under Section 521(i) . . . . . . . . . . . . . . . . . . 383
13.11 Involuntary Dismissal for Abuse of the Provisions of Chapter 7 . . . . . . . . . . 384
13.11.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384
13.11.2 Limits on Section 707(B) Motions for Debtors with Incomes Below
State’s Median Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384
13.11.2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384
13.11.2.2 Determining the Debtor’s Current Monthly Income . . . . . . . . . 385
13.11.2.2.1 A six-month average used to determine safe harbors. . 385
13.11.2.2.2 Payments toward household expenses of debtor or
dependents on a regular basis . . . . . . . . . . . . . . . . . 385
13.11.2.2.3 Treatment of spouse’s income . . . . . . . . . . . . . . . . . 385
13.11.2.2.4 Treatment of business income . . . . . . . . . . . . . . . . . 386
13.11.2.2.5 Treatment of capital gains and losses . . . . . . . . . . . . 386
13.11.2.2.6 Withdrawals from an IRA or pension plan . . . . . . . . 386
13.11.2.2.7 Explicit statutory exemptions from current monthly
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386
13.11.2.3 Determining Whether Current Monthly Income Is Above
State’s Median Family Income . . . . . . . . . . . . . . . . . . . . . . . 387
13.11.3 Safe Harbor for Disabled Veterans . . . . . . . . . . . . . . . . . . . . . . . . . . 388
13.11.4 The Means Test Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388
13.11.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388
13.11.4.2 Deduction of IRS Expense Allowances . . . . . . . . . . . . . . . . . 389
13.11.4.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389
13.11.4.2.2 IRS national standards for food, clothing,
housekeeping supplies, personal care, and
miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . 389
13.11.4.2.3 IRS local standards for transportation expenses . . . . . 389
13.11.4.2.4 IRS local standards for housing and utilities . . . . . . . 391

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13.11.4.2.5 Other necessary expenses allowed under IRS
standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391
13.11.4.3 Other Expenses That May Be Deducted . . . . . . . . . . . . . . . . . 392
13.11.4.3.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392
13.11.4.3.2 Deduction for secured debts . . . . . . . . . . . . . . . . . . 392
13.11.4.3.3 Deduction for priority debts . . . . . . . . . . . . . . . . . . 393
13.11.4.3.4 Deduction for health insurance . . . . . . . . . . . . . . . . 393
13.11.4.3.5 Deduction for expenses to maintain safety from
domestic violence . . . . . . . . . . . . . . . . . . . . . . . . . 393
13.11.4.3.6 Deduction for support of elderly and disabled family
members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393
13.11.4.3.7 Deduction for administrative expenses . . . . . . . . . . . 393
13.11.4.3.8 Deduction for education expenses . . . . . . . . . . . . . . 394
13.11.4.3.9 Deduction for charitable contributions . . . . . . . . . . . 394
13.11.5 Application of the Means Test Formula. . . . . . . . . . . . . . . . . . . . . . . 394
13.11.5.1 Presumption of Abuse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
13.11.5.2 Rebutting the Presumption of Abuse . . . . . . . . . . . . . . . . . . . 394
13.11.6 Other Changes in the Abuse Standard Under Section 707(B) . . . . . . . . 395
13.11.6.1 No Challenges Based on Ability to Pay for Debtors with
Incomes Below Median Income . . . . . . . . . . . . . . . . . . . . . . 395
13.11.6.2 Substantial Abuse Standard Changed to Abuse Standard . . . . . . 395
13.11.6.3 Elimination of Explicit Presumption Favoring the Debtor . . . . . 396
13.11.6.4 Dismissal for Bad Faith or Based on a Totality of
Circumstances Showing Abuse . . . . . . . . . . . . . . . . . . . . . . . 396
13.11.6.5 Dismissal for an Abusive Rejection of an Executory Contract . . 397
13.11.7 Procedures for Means Testing Under Section 707(B). . . . . . . . . . . . . . 397
13.12 Chapter 7 Involuntary Dismissal Based on Certain Crimes . . . . . . . . . . . . . . 398
13.13 Bankruptcy Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398
13.13.1 Appeals from the Bankruptcy Court . . . . . . . . . . . . . . . . . . . . . . . . . 398
13.13.2 Direct Appeal from Bankruptcy Court to Court of Appeals . . . . . . . . . 400
13.13.3 Appeals from the District Court or Appellate Panel . . . . . . . . . . . . . . 400
13.13.4 What Is a Final Order?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401
13.13.5 Procedure on Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404

Chapter 14 The Discharge: Protecting It and Using It

14.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
14.2 Objections to Discharge in Chapter 7 Cases. . . . . . . . . . . . . . . . . . . . . . . . . 407
14.2.1 How They Arise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
14.2.2 Grounds for Objecting to Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . 409
14.2.2.1 Debtor Is Not an Individual—11 U.S.C. § 727(a)(1) . . . . . . . . . 409
14.2.2.2 Intentional Concealment, Transfer or Destruction of
Property—11 U.S.C. § 727(a)(2) . . . . . . . . . . . . . . . . . . . . . . 409
14.2.2.3 Unjustified Failure to Keep Books or Records As to
Finances—11 U.S.C. § 727(a)(3) . . . . . . . . . . . . . . . . . . . . . . 410
14.2.2.4 Dishonesty in Connection with the Bankruptcy Case—11 U.S.C.
§ 727(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411
14.2.2.5 Failure to Explain Loss or Deficiency of Assets—11 U.S.C. §
727(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411
14.2.2.6 Refusal to Obey Court Orders or to Testify—11 U.S.C. §
727(a)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412
14.2.2.7 Commission of Prohibited Acts in Connection with Another
Bankruptcy Case Concerning an Insider—11 U.S.C. § 727(a)(7) . . 412
14.2.2.8 Prior Discharge in Chapter 7, Chapter 11, or Their
Predecessors—11 U.S.C. § 727(a)(8). . . . . . . . . . . . . . . . . . . . 412

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14.2.2.9 Prior Discharge Under Chapter 13—11 U.S.C. § 727(a)(9) . . . . . 413
14.2.2.10 Written Waiver of Discharge—11 U.S.C. § 727(a)(10) . . . . . . . 413
14.2.2.11 Failure to Complete Course in Personal Financial
Management—11 U.S.C. § 727(a)(11).. . . . . . . . . . . . . . . . . . 413
14.2.2.12 Delay of Discharge to Determine Homestead Exemption
Rights—11 U.S.C. § 727(a)(12) . . . . . . . . . . . . . . . . . . . . . . 414
14.3 Revocation of Discharge—11 U.S.C. § 727(12)(e) . . . . . . . . . . . . . . . . . . . . 414
14.4 Exceptions to Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415
14.4.1 Differences Between Chapter 7 and Chapter 13 . . . . . . . . . . . . . . . . . . 415
14.4.2 How Exceptions to Discharge Are Raised . . . . . . . . . . . . . . . . . . . . . . 416
14.4.3 Which Debts Are Excepted from Discharge? . . . . . . . . . . . . . . . . . . . . 419
14.4.3.1 Taxes—11 U.S.C. §§ 523(a)(1), 1328(a)(2) . . . . . . . . . . . . . . . 419
14.4.3.1.1 Taxes that can not be discharged . . . . . . . . . . . . . . . . 419
14.4.3.1.2 Analyzing tax debts to determine dischargeability . . . . 422
14.4.3.2 Debts Incurred Through False Pretenses, Fraud, or False
Financial Statements—11 U.S.C. § 523(a)(2) . . . . . . . . . . . . . . 424
14.4.3.2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424
14.4.3.2.2 Elements which must be proved by the creditor in
cases of alleged false financial statements. . . . . . . . . . 425
14.4.3.2.2.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . 425
14.4.3.2.2.2 The debtor obtained money, property, services,
or an extension, renewal, or refinancing of
credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 425
14.4.3.2.2.3 The statement was materially false and in
writing . . . . . . . . . . . . . . . . . . . . . . . . . . 426
14.4.3.2.2.4 The statement concerned the financial
condition of the debtor or an insider . . . . . . . 427
14.4.3.2.2.5 The creditor reasonably relied upon the false
statement . . . . . . . . . . . . . . . . . . . . . . . . 427
14.4.3.2.2.6 The debtor’s intent to deceive . . . . . . . . . . . 428
14.4.3.2.3 Debts incurred through false pretenses or fraud . . . . . . 429
14.4.3.2.3.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . 429
14.4.3.2.3.2 Credit cards and other credit use with no
intent to pay . . . . . . . . . . . . . . . . . . . . . . 430
14.4.3.2.3.3 Public benefits overpayments . . . . . . . . . . . . 434
14.4.3.2.4 Tactics in cases under 11 U.S.C. § 523(a)(2) and
award of attorney fees under 11 U.S.C. § 523(d) . . . . . 434
14.4.3.3 Creditors Not Listed or Scheduled by the Debtor—11 U.S.C.
§ 523(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437
14.4.3.4 Fraud As a Fiduciary, Embezzlement, or Larceny—11 U.S.C.
§ 523(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
14.4.3.5 Domestic Support Obligations—11 U.S.C. § 523(a)(5) . . . . . . . . 441
14.4.3.5.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441
14.4.3.5.2 Support debts owed to governmental units . . . . . . . . . 442
14.4.3.5.3 Determination of whether debt is a domestic support
obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442
14.4.3.6 Willful and Malicious Injury—11 U.S.C. §§ 523(a)(6),
1328(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
14.4.3.7 Fines and Penalties—11 U.S.C. §§ 523(a)(7), 1328(a)(3) . . . . . . 448
14.4.3.8 Student Loans—11 U.S.C. § 523(a)(8). . . . . . . . . . . . . . . . . . . 449
14.4.3.8.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449
14.4.3.8.2 Student loan dischargeability tests . . . . . . . . . . . . . . . 452
14.4.3.8.2.1 Former seven year test . . . . . . . . . . . . . . . . 452
14.4.3.8.2.2 Undue hardship test . . . . . . . . . . . . . . . . . . 453
14.4.3.8.3 Procedure for dischargeability determination . . . . . . . . 456

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14.4.3.8.4 Raising defenses to student loan debts . . . . . . . . . . . . 457
14.4.3.8.5 Special issues regarding student loans in chapter 13. . . 457
14.4.3.8.6 Health education assistance loans and other special
loan programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
14.4.3.9 Debts Incurred Through Drunk Driving—11 U.S.C. § 523(a)(9) . . 459
14.4.3.10 Debts Which Existed at Time of Denial or Waiver of Discharge
in Prior Bankruptcy Cases—11 U.S.C. § 523(a)(10). . . . . . . . . 461
14.4.3.11 Debts Emerging from Responsibilities to Federal Depository
Institutions—11 U.S.C. § 523(a)(11), (12) . . . . . . . . . . . . . . . 461
14.4.3.12 Federal Criminal Restitution—11 U.S.C. § 523(a)(13) . . . . . . . 461
14.4.3.13 Debts Incurred to Pay Nondischargeable Taxes or to Pay
Federal Election Law Fines or Penalties—11 U.S.C. §
523(a)(14A), (14B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462
14.4.3.14 Marital Property Settlement Debts—11 U.S.C. § 523(a)(15) . . . 462
14.4.3.15 Debts for Condominium, Cooperative, or Home Owner
Association Fees—11 U.S.C. § 523(a)(16) . . . . . . . . . . . . . . . 463
14.4.3.16 Costs and Fees in Prisoner Litigation— 11 U.S.C. § 523(a)(17). . 463
14.4.3.17 Pension Loans—11 U.S.C. § 523(a)(18). . . . . . . . . . . . . . . . . 464
14.4.3.18 Debts Arising from Securities Violations—11 U.S.C. §
523(a)(19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464
14.4.3.19 Debts Made Nondischargeable by Other Statutes . . . . . . . . . . . 464
14.4.3.20 Debts That Were Nondischargeable in a Previous Bankruptcy
Case—11 U.S.C. § 523(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 464
14.4.4 Res Judicata and Collateral Estoppel in Dischargeability Cases . . . . . . . 465
14.5 The Protections of the Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468
14.5.1 Effects on Discharged Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468
14.5.1.1 Definition of Claim for Discharge Purposes . . . . . . . . . . . . . . . 468
14.5.1.2 Elimination of Personal Liability and Protections for Property. . . 469
14.5.1.3 Voiding of Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469
14.5.1.4 The Discharge Injunction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 470
14.5.2 Reaffirmation and Security Interests Which Survive Bankruptcy . . . . . . . 472
14.5.2.1 Reaffirmation by Agreement Only. . . . . . . . . . . . . . . . . . . . . . 472
14.5.2.2 Disclosure Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473
14.5.2.3 Form of the Reaffirmation Agreement . . . . . . . . . . . . . . . . . . . 474
14.5.2.4 Protective Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
14.5.2.5 Abusive Creditor Reaffirmation Practices . . . . . . . . . . . . . . . . . 476
14.5.2.6 The Undue Hardship and Best Interests Tests . . . . . . . . . . . . . . 477
14.5.2.7 Factors to Be Considered by Attorneys Validating Reaffirmation
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
14.5.3 Secured Debts Without Reaffirmation . . . . . . . . . . . . . . . . . . . . . . . . . 478
14.5.4 Protection Against Discrimination Based on Bankruptcy . . . . . . . . . . . . 480
14.5.5 Particular Problems Relating to Discharge Protections . . . . . . . . . . . . . 483
14.5.5.1 Drivers’ Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483
14.5.5.2 Student Loans and College Transcripts . . . . . . . . . . . . . . . . . . 483
14.5.5.3 Public and Private Housing . . . . . . . . . . . . . . . . . . . . . . . . . . 484
14.5.5.4 Social Security, Welfare, and Other Governmental Benefits. . . . . 485
14.5.5.5 Criminal Proceedings, Fines, and Incarceration . . . . . . . . . . . . . 486
14.5.5.6 Tax Consequences of the Discharge . . . . . . . . . . . . . . . . . . . . 487
14.5.5.7 Enforcement of the Discharge Protections . . . . . . . . . . . . . . . . 487

Chapter 15 Attorney Fees for Debtor’s Counsel and Attorney Duties in Consumer
Bankruptcy Cases
15.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491
15.2 Initial Fee Arrangements with Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

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15.2.1 The Basic Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491
15.2.2 Amounts Typically Charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492
15.2.3 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493
15.3 Court Supervision of Bankruptcy Attorney Fees . . . . . . . . . . . . . . . . . . . . . . 495
15.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
15.3.2 Disclosures Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
15.3.3 Bankruptcy Court Review of Fee Disclosures and Requests. . . . . . . . . . 496
15.3.4 Making a Record on Fee Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498
15.4 Payment of Attorney Fees Through the Chapter 13 Plan . . . . . . . . . . . . . . . . 499
15.4.1 Fees Which Can Be Paid Through a Plan . . . . . . . . . . . . . . . . . . . . . . 499
15.4.2 Procedure for Obtaining Payment of Fees Through the Plan . . . . . . . . . 500
15.5 Other Sources of Attorney Fees in Bankruptcy Cases . . . . . . . . . . . . . . . . . . 501
15.5.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501
15.5.2 The Civil Rights Attorney’s Fees Awards Act of 1976 . . . . . . . . . . . . . 501
15.5.3 Consumer Protection Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502
15.5.4 The Equal Access to Justice Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
15.5.5 Other Fee-Shifting Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
15.5.6 Limitations on Fee Awards Against Governmental Units . . . . . . . . . . . . 504
15.6 Services Provided by Non-Attorneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
15.7 Duties of Debtors’ Counsel Under Bankruptcy Rule 9011 and Related
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
15.7.1 Federal Rule of Bankruptcy Procedure 9011 . . . . . . . . . . . . . . . . . . . . 508
15.7.2 Section 707(b)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
15.7.2.1 Costs and Attorney Fees for Successful Section 707(b)
Motions—§ 707(b)(4)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
15.7.2.2 Civil Penalties Under Bankruptcy Rule 9011—§ 707(b)(4)(B). . . 509
15.7.2.3 Attorney Certifications—§ 707(b)(4)(C). . . . . . . . . . . . . . . . . . 509
15.7.2.4 Attorney Certification As to Schedules— § 707(b)(4)(D) . . . . . . 509
15.8 Debt Relief Agency Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510
15.8.1 Applicability of Debt Relief Agency Provisions to Debtor’s Attorney . . . 510
15.8.1.1 Definition of Debt Relief Agency . . . . . . . . . . . . . . . . . . . . . . 510
15.8.1.2 Persons Specifically Excluded from the Definition of Debt
Relief Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511
15.8.2 Restrictions on Debt Relief Agencies . . . . . . . . . . . . . . . . . . . . . . . . . 511
15.8.3 Disclosures Required of Debt Relief Agencies . . . . . . . . . . . . . . . . . . . 511
15.8.3.1 Relationship Between Section 527 and Section 342(b)(1)
Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511
15.8.3.2 Disclosures Concerning the Bankruptcy Process . . . . . . . . . . . . 512
15.8.3.3 Required Statement About Bankruptcy Assistance Services
Statement Required Under Section 527(b) . . . . . . . . . . . . . . . . 512
15.8.3.4 Disclosures Required of Non-Attorney Agencies That Prepare
Bankruptcy Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
15.8.4 Written Contract Under Section 528(a) . . . . . . . . . . . . . . . . . . . . . . . . 513
15.8.5 Advertising Requirements Under Section 528(a) . . . . . . . . . . . . . . . . . 514
15.8.6 Remedies for Failure to Comply with Debt Relief Agency Provisions . . . 514

Chapter 16 Chapter 12 Bankruptcy: Family Farmer and Family Fisherman

Reorganization
16.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517
16.1.1 Evolution and Historical Background of Chapter 12 . . . . . . . . . . . . . . . 517
16.1.1.1 Current Status of Chapter 12 . . . . . . . . . . . . . . . . . . . . . . . . . 517
16.1.1.2 Purpose of Chapter 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517
16.1.2 Special Bankruptcy Code Protections Outside of Chapter 12 . . . . . . . . . 518
16.1.3 Farmer Reorganizations Under Chapters Other Than Chapter 12 . . . . . . 519

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16.1.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519
16.1.3.2 Problems Under Chapter 13 for Farmers . . . . . . . . . . . . . . . . . 519
16.1.3.3 Problems Under Chapter 11 for Farmers . . . . . . . . . . . . . . . . . 520
16.1.4 The Unique Nature of Farm Finance . . . . . . . . . . . . . . . . . . . . . . . . . 520
16.1.4.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520
16.1.4.2 The Farm Credit System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521
16.1.4.3 The Farm Service Agency Loan Programs . . . . . . . . . . . . . . . . 521
16.1.4.4 The Federal Farm Programs. . . . . . . . . . . . . . . . . . . . . . . . . . 522
16.1.4.4.1 Treatment in bankruptcy . . . . . . . . . . . . . . . . . . . . . 522
16.1.4.4.2 Basic attributes of federal farm programs . . . . . . . . . . 522
16.1.5 Timing a Chapter 12 Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524
16.2 Commencement of a Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524
16.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524
16.2.2 Eligibility for Chapter 12 Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524
16.2.2.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524
16.2.2.2 The Regular Annual Income Requirement . . . . . . . . . . . . . . . . 525
16.2.2.3 The ‘‘Engaged in a Farming Operation’’ Requirement . . . . . . . . 525
16.2.2.4 Definition of ‘‘Family Farmer’’ and ‘‘Family Fisherman’’. . . . . . 527
16.2.2.4.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527
16.2.2.4.2 Debt ceiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527
16.2.2.4.3 Debt arising from the farm operation or commercial
fishing operation. . . . . . . . . . . . . . . . . . . . . . . . . . . 527
16.2.2.4.4 Income arising from the farming operation or the
commercial fishing operation . . . . . . . . . . . . . . . . . . 528
16.2.2.4.5 Eligibility requirements for partnerships and corporate
farmers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530
16.2.2.5 Joint Chapter 12 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530
16.2.3 Initial Schedules, Forms, and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 531
16.2.3.1 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531
16.2.3.2 Appointment of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531
16.2.3.3 Costs and Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531
16.2.3.4 Other Reports and Documentation . . . . . . . . . . . . . . . . . . . . . 532
16.2.4 Voluntary Conversion from Other Chapters to Chapter 12 . . . . . . . . . . . 532
16.2.5 What to Expect at the Meeting of Creditors . . . . . . . . . . . . . . . . . . . . 532
16.3 The Family Farmer As Debtor-in-Possession . . . . . . . . . . . . . . . . . . . . . . . . 533
16.3.1 What Is a Debtor-in-Possession? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533
16.3.2 Removal of the Farmer As a Debtor-in-Possession . . . . . . . . . . . . . . . . 533
16.4 General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534
16.4.1 The Chapter 12 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534
16.4.1.1 Role and Standing of the Trustee . . . . . . . . . . . . . . . . . . . . . . 534
16.4.1.2 Payments Made Through the Chapter 12 Trustee and Trustee
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534
16.4.1.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534
16.4.1.2.2 Challenges to variations in trustee costs paid by
different debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . 535
16.4.1.2.3 Avoiding the trustee commission for certain payments . . 535
16.4.1.2.4 Does the trustee receive a fee on its fee? . . . . . . . . . . 536
16.4.1.3 Role of the Chapter 12 Trustee upon Removal of the Family
Farmer As a Debtor-in-Possession . . . . . . . . . . . . . . . . . . . . . 536
16.4.2 What Constitutes Property of the Estate . . . . . . . . . . . . . . . . . . . . . . . 536
16.4.3 Exemptions, Lien Avoidance, and Recapture Powers . . . . . . . . . . . . . . 537
16.4.3.1 Exemptions Available to Family Farmers Under Chapter 12 . . . . 537
16.4.3.2 Exemptions for ‘‘Tools of Trade’’ and ‘‘Livestock’’ . . . . . . . . . . 537
16.4.3.3 Lien Avoidance Under Section 522(f) . . . . . . . . . . . . . . . . . . . 538
16.4.3.4 Section 552 Lien Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . 539

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16.4.3.5 Other Avoidance and Recapture Powers of the Family Farmer
Debtor-in-Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540
16.4.3.5.1 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540
16.4.3.5.2 Recovery of property as a fraudulent transfer . . . . . . . 540
16.4.3.5.3 Preferential transfers . . . . . . . . . . . . . . . . . . . . . . . 540
16.4.3.5.4 Avoidance of improperly perfected security interests . . 541
16.4.3.5.5 Redemption and cure . . . . . . . . . . . . . . . . . . . . . . . 541
16.4.4 The Automatic Stay and Codebtor Stay in Chapter 12 Cases . . . . . . . . . 541
16.4.4.1 The Automatic Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
16.4.4.2 The Codebtor Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542
16.4.4.3 Grounds for Relief from the Automatic Stay . . . . . . . . . . . . . . 542
16.4.5 Objections to Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543
16.4.6 Dismissal and Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543
16.4.6.1 Voluntary Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543
16.4.6.2 Involuntary Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544
16.4.6.3 Voluntary Conversion from Chapter 12 to Other Chapters . . . . . 545
16.4.6.4 Involuntary Conversion from Chapter 12 to Chapter 7 . . . . . . . . 545
16.4.7 Executory Contracts and Unexpired Leases . . . . . . . . . . . . . . . . . . . . . 545
16.4.7.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545
16.4.7.2 Federal Farm Program Contracts As Executory Contracts . . . . . . 545
16.4.7.3 Installment Land Contracts As Executory Contracts. . . . . . . . . . 546
16.4.7.4 Unexpired Equipment Leases . . . . . . . . . . . . . . . . . . . . . . . . . 546
16.4.7.5 Unexpired Farmland Rental Agreements . . . . . . . . . . . . . . . . . 546
16.4.8 Use of Cash Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546
16.4.9 New Financing and Its Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547
16.4.10 Sale of Property Free and Clear of Liens . . . . . . . . . . . . . . . . . . . . . 548
16.4.11 Adequate Protection Under Chapter 12 . . . . . . . . . . . . . . . . . . . . . . . 548
16.4.12 Creditors’ Right to Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549
16.5 The Chapter 12 Reorganization Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 550
16.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550
16.5.2 Procedure and Timing in Chapter 12 Cases . . . . . . . . . . . . . . . . . . . . . 551
16.5.3 Determining the Value of the Creditor’s Claims: The Allowed Secured
Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551
16.5.4 Chapter 12 Plan Requirements: Secured Claims . . . . . . . . . . . . . . . . . . 553
16.5.4.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553
16.5.4.2 Amortization and Extending Plan Payments Beyond the Plan’s
Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553
16.5.4.3 Interest Rates for Secured Creditors . . . . . . . . . . . . . . . . . . . . 555
16.5.4.4 Return or Surrender of Property to Secured Creditors . . . . . . . . 556
16.5.4.5 Sale of Property Free and Clear of Liens . . . . . . . . . . . . . . . . . 557
16.5.4.6 Replacement Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
16.5.5 Chapter 12 Plan Requirements: Unsecured Creditors . . . . . . . . . . . . . . 557
16.5.5.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
16.5.5.2 The Liquidation Test. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
16.5.5.3 The Disposable Income Requirement. . . . . . . . . . . . . . . . . . . . 558
16.5.5.4 Treatment of Priority Unsecured Creditors . . . . . . . . . . . . . . . . 560
16.5.6 Classification of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561
16.5.6.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561
16.5.6.2 Classification of Codebtor Claims . . . . . . . . . . . . . . . . . . . . . . 561
16.5.6.3 Classification of the Claims of Unsecured Creditors. . . . . . . . . . 561
16.5.6.4 Classification of Secured Creditors . . . . . . . . . . . . . . . . . . . . . 562
16.5.7 Other Chapter 12 Plan Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 563
16.5.7.1 Good Faith Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563
16.5.7.2 The Feasibility Requirement . . . . . . . . . . . . . . . . . . . . . . . . . 563
16.5.7.2.1 General observations . . . . . . . . . . . . . . . . . . . . . . . . 563

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16.5.7.2.2 Determination of feasibility . . . . . . . . . . . . . . . . . . . 564
16.5.7.3 Trustee Fees and the Direct Payment Issue. . . . . . . . . . . . . . . . 566
16.5.8 Additional Protections for Domestic Support Obligations . . . . . . . . . . . 567
16.5.9 Other Plan Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568
16.6 Denial of Confirmation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570
16.7 The Chapter 12 Discharge and Its Operation . . . . . . . . . . . . . . . . . . . . . . . . 570
16.7.1 Scope of the Chapter 12 Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . 570
16.7.2 The Hardship Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570
16.7.3 Revocation of Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571
16.8 Post-Confirmation Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571
16.8.1 Post-Confirmation Modification of the Chapter 12 Plan. . . . . . . . . . . . . 571
16.8.2 Post-Confirmation Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573
16.8.3 Revocation of Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574

Chapter 17 Consumers As Creditors in Bankruptcy: Selected Topics

17.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575
17.2 Prebankruptcy Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575
17.2.1 Preparing for the Debtor’s Voluntary Bankruptcy . . . . . . . . . . . . . . . . . 575
17.2.2 Putting the Debtor into Involuntary Bankruptcy . . . . . . . . . . . . . . . . . . 576
17.3 The Automatic Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577
17.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577
17.3.2 Relief from the Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578
17.3.3 Practical Considerations Applicable to Stay Relief Issues . . . . . . . . . . . 580
17.3.4 Tenants’ Counterclaims Against a Bankrupt Landlord . . . . . . . . . . . . . . 580
17.4 Filing a Proof of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581
17.4.1 For Individual Consumer Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . 581
17.4.2 Class Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582
17.5 Strategies to Increase the Chance of Recovery . . . . . . . . . . . . . . . . . . . . . . . 584
17.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584
17.5.2 Property Which Is Not Part of the Bankruptcy Estate—Trust Funds . . . . 584
17.5.2.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584
17.5.2.2 Determining the Existence of a Trust . . . . . . . . . . . . . . . . . . . 585
17.5.2.3 Tracing Trust Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588
17.5.3 Postpetition Claims As Administrative Expenses . . . . . . . . . . . . . . . . . 589
17.5.4 Challenging Dischargeability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590
17.5.4.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590
17.5.4.2 Individual Debtors in Chapters 7, 11, and 12 . . . . . . . . . . . . . . 590
17.5.4.2.1 Grounds for a finding of nondischargeability. . . . . . . . 590
17.5.4.2.2 Procedures for obtaining a determination of
nondischargeability . . . . . . . . . . . . . . . . . . . . . . . . . 592
17.5.4.3 Chapter 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594
17.5.4.4 Corporate or Partnership Debtors . . . . . . . . . . . . . . . . . . . . . . 595
17.5.5 The Consumer Priority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595
17.5.6 Equitable Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597
17.5.7 Seeking Defendants Not in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . 598
17.5.8 Rule 2004 Examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 598
17.6 In Forma Pauperis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599
17.6.1 Need for Consumers As Creditors to Proceed In Forma Pauperis. . . . . . 599
17.6.2 Seeking In Forma Pauperis Relief . . . . . . . . . . . . . . . . . . . . . . . . . . 599
17.7 Chapter 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
17.7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
17.7.2 General Role of Creditors and the U.S. Trustee . . . . . . . . . . . . . . . . . . 601
17.7.2.1 Creditors’ Right to Participate in the Case and Vote on the
Debtor’s Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601

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17.7.2.2 The United States Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
17.7.3 Appointment of a Creditors’ Committee . . . . . . . . . . . . . . . . . . . . . . . 603
17.7.4 Appointment of a Trustee or an Examiner. . . . . . . . . . . . . . . . . . . . . . 604
17.7.4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604
17.7.4.2 General Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604
17.7.4.3 Grounds for Appointment of a Trustee Under Section 1104(a)(1). . 604
17.7.4.4 Grounds for Appointment of a Trustee Under Section 1104(a)(2). . 605
17.7.4.5 Other Grounds for Appointment of a Trustee Under the 2005
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606
17.7.4.6 Appointment of an Examiner . . . . . . . . . . . . . . . . . . . . . . . . . 606
17.7.4.7 Practice and Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607
17.7.5 Objection to Compensation Being Paid to Debtor’s Principal . . . . . . . . . 608
17.7.6 Transfer Avoidance Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
17.7.7 Objections to the Debtor’s Disclosure Statement . . . . . . . . . . . . . . . . . 609
17.7.8 Objections to the Debtor’s Plan of Reorganization . . . . . . . . . . . . . . . . 610
17.7.9 Creditor’s Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . 611
17.7.10 Special Provisions Applicable to Small Business Bankruptcies . . . . . . . 611
17.7.11 Seeking Dismissal or Conversion of a Chapter 11 Case . . . . . . . . . . . . 612
17.7.12 Representing Employees and Other Industrial Stakeholders in Chapter
11 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
17.7.12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
17.7.12.2 Employee Priority Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 614
17.7.12.3 Job Retention Strategies in Chapter 11 Proceedings . . . . . . . . . 615
17.7.12.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615
17.7.12.3.2 Right to intervene . . . . . . . . . . . . . . . . . . . . . . . . . 615
17.7.12.3.3 Opposing a chapter 11 liquidation . . . . . . . . . . . . . . 615
17.7.12.3.4 Placing conditions upon approval of a sale of the
debtor’s business. . . . . . . . . . . . . . . . . . . . . . . . . . 616
17.7.12.3.5 Other job retention strategies . . . . . . . . . . . . . . . . . 616
17.8 Special Problems of Tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617
17.8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617
17.8.2 Maintaining Services When Private Landlords File Chapter 7
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617
17.8.2.1 Abandonment by a Chapter 7 Trustee . . . . . . . . . . . . . . . . . . . 617
17.8.2.2 Legal Theories to Prevent Abandonment . . . . . . . . . . . . . . . . . 618
17.8.2.3 Loss of Services Without Abandonment. . . . . . . . . . . . . . . . . . 618
17.8.2.4 Steps to Take. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619
17.8.2.5 Forcing Abandonment to the Lender . . . . . . . . . . . . . . . . . . . . 621
17.8.2.6 Maintaining Services in the Event the Property Has Been
Abandoned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621
17.8.3 Pursuing Opportunities for Tenant Ownership in a Chapter 7 Bankruptcy. . 622
17.8.4 Preventing Evictions in Chapter 11 and 13 Proceedings . . . . . . . . . . . . 622
17.8.5 Security Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624
17.9 Representing Consumers When Lenders File Bankruptcy. . . . . . . . . . . . . . . . 626
17.9.1 Lender Bankruptcies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626
17.9.2 Automatic Stay Issues for Consumer Borrowers. . . . . . . . . . . . . . . . . . 627
17.9.3 Loan Company Sales of Assets Under 11 U.S.C. § 363 . . . . . . . . . . . . 628
17.9.4 Filing a Proof of Claim for a Consumer Borrower . . . . . . . . . . . . . . . . 629
17.9.5 Third-Party and Successor Releases and Injunctions . . . . . . . . . . . . . . . 630
17.10 Other Mechanisms to Protect Consumers in Business Bankruptcies . . . . . . . . 631

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633

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Volume 2
Appendix A Bankruptcy Statutes
A.1 Selected Provisions of the Bankruptcy Code, 11 U.S.C. §§ 101–1532. . . . . . . . 647
A.2 Selected Provisions of Title 28 of the United States Code. . . . . . . . . . . . . . . . 749
A.3 Selected Provisions of Other Titles of the United States Code . . . . . . . . . . . . . 760
A.4 Selected Uncodified Provisions of Bankruptcy Acts . . . . . . . . . . . . . . . . . . . . 785
A.4.1 Selected Provisions of Title IV [Transition] of Bankruptcy Act of 1978
(as amended by the Bankruptcy Amendments and Federal Judgeship Act
of 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785
A.4.2 Selected Provisions of the Bankruptcy Amendments and Federal
Judgeship Act of 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786
A.4.3 Selected Provisions of Title III [Transition and Administrative
Provisions] of Bankruptcy Judges, United States Trustees, and Family
Farmer Bankruptcy Act of 1986 (as amended by the Judicial
Improvements Act of 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787
A.4.4 Provisions Related to Effective Date of 1990 and 1991 Student Loan
Dischargeability Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790
A.4.5 Selected Provisions of the Judicial Improvements Act of 1990 . . . . . . . . 791
A.4.6 Selected Provisions of the Bankruptcy Reform Act of 1994 . . . . . . . . . . 791
A.4.7 Selected Provision of the Federal Courts Improvements Act of 2000 . . . . 791
A.4.8 Selected Provisions of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792

Appendix B Federal Rules of Bankruptcy Procedure

B.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797
B.2 Judicial Conference Memoranda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797
B.3 Rules and Interim Rules of Bankruptcy Procedure . . . . . . . . . . . . . . . . . . . . . 804

Appendix C Bankruptcy Fees

C.1 Initial Filing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 869
C.2 Miscellaneous Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870

Appendix D Official Bankruptcy Forms with Annotated Samples

D.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873
D.2 Permitted Alterations to the Official Forms . . . . . . . . . . . . . . . . . . . . . . . . . . 875
D.3 Bankruptcy Forms Software on the Companion CD-Rom . . . . . . . . . . . . . . . . 876
D.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 876
D.3.2 Microsoft Word 97, 2000, 2002 (XP), and 2003 . . . . . . . . . . . . . . . . . . 876
D.3.3 Corel WordPerfect 8, 9, 10, 11, 12 and X3 . . . . . . . . . . . . . . . . . . . . . 877
D.3.4 Chapter 13 Plan; Local Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877
D.3.5 Other Forms Included in Bankruptcy Forms. . . . . . . . . . . . . . . . . . . . . 877
D.4 Electronic Case Filing (ECF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877
D.4.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877
D.4.2 Converting Documents to PDF Format . . . . . . . . . . . . . . . . . . . . . . . . 878
D.5 Annotated and Completed Bankruptcy Forms to Institute Case . . . . . . . . . . . . 879
D.6 Annotations to Other Official Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958
D.7 Blank Versions of Other Official Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 961

Appendix E Selected Forms Promulgated by the Administrative Office of the

U.S. Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989

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Appendix F Bankruptcy Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1041

Appendix G Sample Bankruptcy Pleadings and Other Forms

G.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1065
G.2 Pre-Filing Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1070
G.3 Initial Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1074
G.4 Automatic Stay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1095
G.5 Turnover of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1107
G.6 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1108
G.7 Steps After Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1111
G.8 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1118
G.9 Exemptions and Lien Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1133
G.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1138
G.11 Discharge and Reaffirmation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1152
G.12 Conversion, Dismissal, and Modification of Plan After Confirmation. . . . . . . 1169
G.13 Consumers As Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1174

Appendix H Practice Aids

H.1 Date Calculator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1181
H.2 Obtaining Tax Returns or Transcripts from the Internal Revenue Service . . . . . 1182
H.3 Interim Guidance Regarding Tax Information . . . . . . . . . . . . . . . . . . . . . . . 1194
H.4 Helpful Resources from the United States Trustee Program . . . . . . . . . . . . . . 1195

Appendix I Means Test Data

I.1 Median Income by State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1197
I.2 Internal Revenue Service Standards As to Allowable Expenses . . . . . . . . . . . . 1199
I.2.1 Internal Revenue Manual (IRM) Provisions Regarding Allowable
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1199
I.2.2 National Standards for Allowable Living Expenses . . . . . . . . . . . . . . . . 1211
I.2.3 Standards for Allowable Living Expenses—Alaska . . . . . . . . . . . . . . . . 1214
I.2.4 Standards for Allowable Living Expenses—Hawaii. . . . . . . . . . . . . . . . 1217
I.2.5 Local Housing and Utilities Expense Standards . . . . . . . . . . . . . . . . . . 1220
I.2.6 Local Transportation Expense Standards . . . . . . . . . . . . . . . . . . . . . . . 1221
I.2.7 Administrative Expenses Multipliers. . . . . . . . . . . . . . . . . . . . . . . . . . 1226

Appendix J Summaries of State Exemption Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 1227

Appendix K Bankruptcy Client Handouts

K.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . . 1259
K.2 Answers to Common Bankruptcy Questions . . . . . . . . . . . . .......... . . 1260
K.3 Your Legal Rights During and After Bankruptcy: Making the Most of Your
Bankruptcy Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... . . 1265
K.4 Using Credit Wisely After Bankruptcy . . . . . . . . . . . . . . . . .......... . . 1268

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1273

Quick Reference to Consumer Credit and Sales Legal Practice Series . . 1311

About the Companion CD-Rom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1324

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