Some random observations to make life easier for all of us:

 

  1. My office doesn’t have information about the balances owed to creditors who are being paid directly. If the plan provides that the debtor or a third party is paying a particular creditor directly, other than the proof of claim and/or any other filing by that creditor, which is of record on Pacer, my office has no information.  That doesn’t change no matter how many times someone calls my office.  Contrary to what some think, I do not have a crystal ball or a boiling cauldron.

 

  1. “Everything you own/everything you owe” should be the mantra of debtors’ attorneys. Having represented debtors when I was in private practice, I know they operate on the “legal advice” they have received from family, friends and neighbors who have received their legal education from tv, books and other family, friends and neighbors.  An attorney who seemed to not be surprised often at hearings with information that his client hadn’t told him told me that he asked his clients “Is there anything your ex/neighbor/creditor would tell the judge/trustee that you haven’t told me?”  He said that usually elicited something.  Blithely telling me that a certain asset is free and clear is NOT an explanation for not listing it.  And since it wasn’t listed, it wasn’t exempted.  Failure to disclose means the debtor may lose the right to exempt the property once the trustee discovers its existence.  Failure to exempt or lost ability to exempt means that the full value of the asset comes into the calculations for best interest of creditors.

 

  1. Property that the debtor acquires after the petition is filed MUST be disclosed. Bankruptcy Rule 1007(h) requires the newly acquired asset to be disclosed within 14 days unless otherwise extended by the Court.  Inheritances are property of the estate.  Carroll v. Logan, 735 F3d 147 (4th 2013).  Failure to disclose may lead to a criminal referral by the Chapter 13 trustee.

 

  1. The debtor cannot buy or sell major assets without authorization from the Court. We provide this information to the debtors in the “understand letter” we ask each debtor to sign.  A copy is provided to debtors’ counsel.  Disregarding the procedure may open the debtor to criminal referral and maybe action against debtor’s counsel in appropriate circumstances.

 

  1. If the debtor changes his/her mind about how certain debts are to be handled, an amended plan or a modification of a confirmed plan MUST be filed. Unilateral action is a disaster.  Two recent examples include a debtor who decided that despite the Agreed Order which now required his vehicle to be paid through the plan, he would resume his direct payments to the creditor—never mind that he had skipped them for three months.  I filed a motion to dismiss and requested the funds paid to the creditor be sent to me in compliance with the agreed order.  The monthly plan payments had to be increased again since the debtor had paid the creditor and made no plan payment. Another debtor decided that he would simply surrender certain real estate to the secured creditor, never mind that the plan called for the trustee to pay this debt and in fact that the creditor was getting paid through the trustee.

 

  1. There is a trend of cases against nunc pro tunc orders, which would include waiting until a personal injury case is settled to employ counsel and have the fees approved. It is a mistake for debtor’s counsel to think that I won’t object to the failure of the special counsel to obtain authorization to represent the debtor in a personal injury case.  The unsecured creditors have been the beneficiaries of the disallowed attorney fees in a recent Northern District case.

 

  1. In most categories of the required plan in both Northern and Southern Districts, the proof of claim controls. So, if debtor’s counsel provides for less than the amount of the claim or an interest rate that is not contract rate, the creditor does NOT have to object to the plan to have the claim allowed per the proof of claim rather than what is in the plan.  If a claim is being valued, filing that motion with the plan is helpful and serves to keep the case on track for confirmation.  Remember, attorney fees are not paid until after confirmation.  So, getting a plan confirmed as soon as possible gets the attorney paid sooner.  Debtor’s counsel needs to be sure to include any changes in the interest rate in both the motion AND order.  Otherwise, the value may be set but the interest rate is still the contract rate.  It also behooves debtor’s counsel to review the claims as they come in and file appropriate pleadings to resolve the issues the proof of claim may pose.

 

  1. We pay pursuant to the proof of claim. If a creditor, who is listed as secured on the schedules and is provided for in the plan as secured, files a proof of claim as unsecured, we will pay the claim as unsecured.  If a creditor fails to file a proof of claim, the creditor does not get paid—either by my office nor the debtor directly.  THE CLAIM IS NOT ALLOWED.  If it is a secured claim, the lien may survive the case; the personal liability of the debtor may be discharged.

 

  1. My office files objections to claims based on the claim itself and its attachments—or lack thereof—and the requirements of the Code and Rules. So, if a mortgage proof of claim on the debtor’s principal residence is filed without the required attachment, the note, and the deed of trust/mortgage, we will object.  If the claim is filed after the bar date—even by one day—we will object.  If the debtor filed a Chapter 7 case and believes that a claim filed in the Chapter 13 case was included in the previous filing and therefore was discharged, I don’t know that.  It is up to debtor’s counsel to object to that claim. Although the confirmation orders in both Northern and Southern Districts provide that objections to claims can be filed after confirmation, there is case law, including in bankruptcy courts in the Fourth Circuit, that overrule post-confirmation objections on the basis that the objection should have been raised prior to confirmation.

 

  1. Amended plans are not retroactive and do not change what was due under the prior plan. In re Walters, 223 B.R. 710 (Bankr. W.D. Mo. 1998). If plan payments change, we set the new plan payment to begin the following month.  I frequently receive an argument from counsel when the plan payments go down that it should be effective the month of filing.  I am told that even if the amended plan is filed after the plan payment for that month came due.  Surprisingly, I don’t hear that argument when the plan payment increases.  Payments due under the prior plan add to the gross base and the length of the plan.  Changing the payments to start on month 6 for 60 months results in a 66-month plan.

 

  1. If an amended plan is filed AFTER the bar date, please use the claim number of the secured and priority creditors in the amended plan. This is especially important if there are several claims by the same creditor but different treatment in the plan.  For example, if a debtor has 4 real estate secured loans with ABC Bank and each is secured by a different piece of property, simply saying the collateral is “real estate” in the plan may not be sufficient for my office to set up the claim correctly.  We will try to match the plan provision with the dollar amount of the claim, but too many times, it is impossible because debtor’s counsel hasn’t used the claim amount in the plan but is still using the Scheduled amount or the amount from a prior plan.  Using the claim number—and amount in the claim–in the amended plan also helps the plan move closer to confirmation.  If the plan provides that the IRS will be paid $1,000.00 on its priority claim and the claim of the IRS is $5,000.00, this plan probably isn’t going to be confirmed without plan payments going up.  Similarly, if debtor’s counsel has entered into an agreement with an objecting creditor or the trustee regarding treatment of a claim, then that treatment should be included if the plan is amended or modified subsequently.  The agreed order can act as an amendment/modification, but too frequently after such an order is entered, other circumstances call for an amended/modified plan and the agreement is ignored, which then requires objection, a hearing and often another amended plan/modification.

 

  1. Stipulations are accepted by both Courts. If there is no issue, a stipulation can speed up the resolution of the issues which are set forth in the stipulation.  Northern District has a number of stipulations on its website which are easy to use.  Most of these can be modified to be used in Southern District cases.

 

  1. Since the lockdown from the pandemic ended, my office has been cautiously filing motions to dismiss. Generally, we have sent emails to counsel advising debtor’s attorneys of the state of default and offering to hold off on a motion to dismiss for 30 days to allow counsel and the debtors to come up with a solution.  Frequently, we get no response to those emails, and we are filing motions to dismiss with an additional month of default, which may make it harder for the debtor to stay in the Chapter 13—particularly if counsel ignores the motion until the hearing at which time, counsel asks for a 30-day continuance.  By the next hearing, we may have added an additional 3 months of missed payments.  We are willing to work with counsel and debtors to keep cases progressing.  Remember if the debtors have sustained a COVID related issue which affects their ability to make the plan payments, the extension of the plan is still available to those cases which were confirmed prior to March 27, 2021.  The deadline for filing a COVID extension is March 27, 2022.  My understanding is that the order approving the extension must be entered by March 27, 2022.  I am considering dropping the courtesy email to debtor’s counsel who habitually don’t reply and filing the motion to dismiss when the case reaches the two-month delinquency in order that the debtor doesn’t have as large a deficiency by the time we go to hearing.