Trustee’s Perspective2021-02-24T19:54:33+00:00

TRUSTEE’S PERSPECTIVE

A SNARKY VOICE OF REASON

Dealing with delinquencies

On February 3, 2021, Ryan Johnson, Clerk, Northern District Bankruptcy Court, sent out the following email to the bar:

The Office of the Chapter 13 Trustee and the Clerk’s Office for the Northern District of West Virginia collaborated on a missing plan payment notification system that utilizes CM/ECF to send a notification to the Chapter 13 debtor’s attorney that a plan payment is delinquent. As originally envisioned, this early notification would provide the debtor’s attorney with an opportunity to contact the Chapter 13 debtor before having to respond to an eventual motion to dismiss and/or to potentially obviate the need for a court appearance.

The notice of electronic filing (NEF) generated by the CM/ECF system has no paper image attached and there is no need to file any response with the Clerk’s Office. The NEF generated from the docket entry is only an information item. The first such notice was filed today.

There may be instances when this NEF of a delinquent plan payment is docketed when there is a pending motion to dismiss. Nothing has changed with regards to WVNB’s procedures on motions to dismiss and the need to file a response. If you have any questions, please call the WVNB Clerk’s Office or Helen’s Office.

Subsequently, Leslie Gallian, Chief Deputy Clerk, Southern District Bankruptcy Court, notified the bar that the Southern District was adopting the practice.

The first filings by the Chapter 13 office went out the first of February in the Northern District with the efilings in Southern District in mid-February.

These cases are cases which were one-month delinquent as of the date we ran the report.

Obviously, payments in transit are not showing.  The due date for a payment is based on the Code which states that the due date is 30 days from the date of the petition.  We understand that frequently, debtors aren’t in a position to make the payment by the due date based on their income stream, so it is possible that there are cases on the list for which the attorney will be notified that will be brought current before the end of the month by the monthly payment.

Attorneys can check the payment history at NDC.org, which is free to both debtors and their attorneys. (See Resources for more information.)

We hope that this feature will help the attorneys and their clients deal with any income changes or other circumstances which affect plan payments in a timely fashion to avoid a motion to dismiss.  Meagan and I are willing to work with attorneys and debtors to help the debtors complete their plans.  Please contact us (Meagan at mapreece@WVTRUSTEE.ORG and me at hmmorris@WVTRUSTEE.ORG) to work out a cure or modification.  Remember both courts will accept a joint stipulation for cures and modifications.  However, if we can’t come to an agreement, counsel can file a motion to modify, which will be set for hearing.

It is my opinion that the sooner payment issues are caught, the more options are available.  I am aware, having represented debtors in a prior life, that many debtors don’t advise counsel of changes in circumstances that affect their ability to pay until the motion to dismiss is filed.  (In one of my debtor cases, my client told me immediately after the confirmation hearing that he had lost his job and didn’t know how he was going to make the plan payments.  When I asked why he hadn’t told me before the hearing, he replied quite earnestly that he didn’t think his plan would have been confirmed.)

We know that the larger the delinquency, the more funds it will take to cure the default.  While we try to file motions to dismiss when the debtors are 2 months delinquent, there are times in which the motion is not filed until 3 or 4 months have passed.  So, I hope that the one-month notices will decrease those situations.  In recent months, we have tried to email counsel of delinquencies in advance of filing the motion to dismiss so the motion can be avoided.  The success rate on responses to these emails is so low that we have had serious discussions to stop the practice and simply file the motions.

Please keep in mind that when a motion to dismiss is filed, the delinquency is the amount as of that filing.  It is not a static number.  If the hearing on the motion is set the following month, another payment is due.  And if that hearing gets continued, and before the second hearing the debtor pays the amount set forth in the motion to dismiss but has not paid any of the payments for the subsequent months, the debtor IS NOT CURRENT.  I have attended countless hearings in which counsel announces that the debtor paid the delinquency amount so they’re current.  They are only current as of the date set out in the motion.  So if the debtors were 2 months delinquent at the time of the motion and 2 months later they pay the amount in the motion but have not paid the plan payments in the intervening months, they are still 2 months delinquent.  The motion is NOT resolved.

Remember that a plan payment is on hold for 10 business days, so making the payment the day before the hearing doesn’t mean that I have received good funds.  This includes cashier’s checks, certified checks and money orders.  Stop payments have been received by my office on cashier’s checks and certified checks, and money orders have also been rejected for a variety of issues.  Bringing a payment to my office doesn’t negate the 10-day-rule.  The payment has to clear my bank before it counts as a payment in the case.

My office supports the use of TFS (see Resources for more information).  Funds we receive from TFS are not subject to the 10 business day hold. BUT TFS holds the funds until they’re good.  As a general rule, we receive TFS funds about a week after the payment IF the funds are good.

Judge Bissett has requested that we start updating the motions to dismiss if the motion is more than 30 days old before the hearing, so that will be another new filing in the world of delinquencies.

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