Debtor Attorney Information
(Version #47,  Last revised 01/12/16

Outline of Court Procedures,
Trustee's Policies and Procedures, and
Required Forms

For Debtors' Attorneys in Chapter 13 Cases
Administered by Trustee Herbert L. Beskin
in the Western District of Virginia

IMPORTANT NOTE TO ATTORNEYS - August 14, 2014:  We are still in the process of updating the forms that are linked to the Debtor Attorney Information section of the website, but we wanted to go ahead and update the text of the section in the meantime. If you have any questions about the forms referenced in this section, call the Trustee's paralegal, RC Johnson, at (434) 817-9913, ext. 20, or e-mail him at RCJohnson@cvillech13.net.

IMPORTANT NOTE - July 31, 2014:  Since October 1, 2003, Herbert L. Beskin has been the Chapter 13 Bankruptcy Trustee for the Harrisonburg, Staunton, Lynchburg, and Charlottesville divisions of the Western District of Virginia. From 1981 until June, 2013, Judge William Anderson heard all cases in the Charlottesville and Lynchburg Divisions of the Western District of Virginia. From 1985 until August, 2012, Judge Krumm heard all cases in the Staunton and Harrisonburg Divisions. Judge Krumm retired in August, 2012, and Judge Anderson died suddenly in June, 2013. Since June, 2013, Judge Rebecca Connelly has been hearing all Chapter 13 cases in Charlottesville, Lynchburg, and Harrisonburg (Court is no longer held in Staunton; all Staunton cases are heard in Harrisonburg). Judge William Stone heard cases in Roanoke and Abingdon from 2001 until December, 2013, and while he did not hear cases administered by this office, this outline will cite a number of opinions rendered by him.

Judge Connelly has made, and continues to make, significant changes to the process, policies, and rulings which govern Chapter 13 practice in these Divisions. Wherever she has announced new procedures, policies, or rulings, those have been noted in the outline. These are current through July 31, 2014, but are of course subject to change as time goes on. In areas where she has not announced changes, the outline sets forth the policies and rulings of the former Judges.]

In an effort to assist debtors' attorneys and other interested parties, this section will set out the Court's procedures, the Trustee's policies and procedures, and the forms to be used in Chapter 13 cases administered by Trustee Herbert L. Beskin. The outline will follow the path of a Chapter 13 case chronologically from beginning to end: filing of the case; creditors' meeting; confirmation; post-confirmation; completion of plan payments, discharge, and closing of case; and miscellaneous matters.

Each section of the outline will consist of two parts. The first part will explain what the procedures and policies are, and where applicable, provide the forms that are to be used. The second part, "Practice Pointers," will provide the Trustee's suggestions and recommendations as to how best to comply with the procedures and policies.

At the end of the outline is a list of all the Trustee's forms referred to in the outline, organized chronologically from the beginning of the case until the end. These forms can be accessed either by double-clicking on the form within the outline itself, or on the form in the chronological list.

In addition to this outline and the list of the Trustee's forms, there will be two other parts of the Debtor Attorney Information section of the website: (1) a Recent Developments section, and (2) a Links to Other Resources section.

In order to help attorneys new to the Western District acclimate to the procedures required in Chapter 13 cases in this District, the Trustee is available to answer questions and encourages attorneys and their staff to set up a time to visit his office and meet the Trustee's staff. Our phone number is (434) 817-9915.


Two ways to search this document:

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2.  The second method is to click on the hyperlinked page numbers in the right-hand column of the Table of Contents.


SUMMARY TABLE OF CONTENTS

How to use this Summary Table of Contents:
To find the corresponding Section Number in the Detailed Table of Contents
click on the Section Number in the right-hand column.

SECTION NAMES    §   
I.      FILING OF THE CASE I
II.    CREDITOR'S (SECTION 341) MEETING II
III.  PERIOD BETWEEN CREDITORS MEETING AND CONFIRMATION III
IV.   CONFIRMATION IV
V.     POST-CONFIRMATION V
VI.   COMPLETION OF PLAN PAYMENTS, DISCHARGE, AND CLOSING OF CASE VI
VII.  MISCELLANEOUS VII



DETAILED TABLE OF CONTENTS

How to use this Detailed Table of Contents:
To find the corresponding Page number in the Detailed Table of Contents
click on Page number in the right-hand column.

SECTIONS       Page
I.      FILING OF THE CASE 5
A.  Court website 5
B.  Trustee's office structure and whom to contact 5
1.  Pre-341 meeting 5
2.  Between 341 meeting and confirmation of case and before Court hearings 5
3.  Post-confirmation, claims issues and case closing issues 5
4.  Orders 5
C.  Chapter 13 Plan format and initial notices 6
1.  Standard Chapter 13 Plan format 6
2.  Special Notice 6
3.  Adequate Protection Payments 6
4.  Automatic Stay—Extension of [Code § 362(c)] 6
7.  Noticing Requirements 7
D.  Payments, Pay Direct Orders, and Wage Deduction Orders 7
1.  Plan payments 7
2.  Automatic Monthly Mortgage payments 7
E.  Case checklist 8
F.  Trustee's introductory letter 8
1.  Documents to be sent to the Trustee 8
2.  Trustee's Questionnaire to Debtors 10
G.  Written and DVD instructions to Debtors 11
H.  Debtors' personal financial management course (Code §111[d]) 11
I.  Other matters 12
1.  Attorney's Fees 12
2.  13Network Website 12
3.  Credit Counseling Certificate 12
4.  Debtor audits by the United States Trustee 12
5.  DSO Letters 13
6.  Extension of time to file schedules or plan 13
7.  Orders needing the Trustee's endorsement 13
8.  Eligibility for Chapter 13 13
J.  Practice Pointers 13
1.  Retainer agreement 13
2.  Lien search 13
3.  Credit report 13
4.  Recent creditor addresses 13
5.  National PACER search for debtors' prior cases 14
6.  Materials explaining the Chapter 13 process 14
7.  Homestead exemptions 14
8.  Discussion of non-dischargeable debts 14
9.  Discussion of fraudulent or preferential transfers 14
14.  Plan payments 14
11.  Preparation of schedules 15
12.  Preparation of plan 21
13.  Opting out of unsolicited offers of credit 31
14.  Service of process on corporations and financial institutions: helpful hints 31
II.    CREDITOR'S (SECTION 341) MEETING 31
A.  English-deficient or deaf debtors 31
B.  Debtors' ID 31
C.  Trustee's Informational Pamphlet 31
D.  Conduct of the creditors' meeting 32
E.  Trustee's Report and Objections Following Meeting of Creditors (the "Trustee's Report") 32
III.  PERIOD BETWEEN CREDITORS MEETING AND CONFIRMATION 32
A.  Trustee's Goals 32
B.  Debtors' Pre-Confirmation Affidavit 33
C.  Preparing cases for Court: communication between the debtors' attorney and the Trustee's office 33
D.  Continuation of the confirmation hearing 35
E.  Filing and noticing amended and modified plans 35
F.  Dismissal of case pre-confirmation; attorney's fees 36
G.  Preferential transfers by the debtors 36
H.  Viewing debtors' payment history on Bankruptcy Link to make sure debtors are current in plan payments 36
IV.   CONFIRMATION 37
A.  The confirmation hearing 37
1.  The Judge's process 37
1.  Attorney's presence 37
1.  Debtors' presence 37
B.  Confirmation Order 37
C.  Continuation of the Trustee's motion to dismiss case 38
1.  Debtor's affidavit regarding disposable income issues 38
D.  Espinosa decision 38
V.     POST-CONFIRMATION 38
A.  Review of claims within 30-day window after claims bar date 38
1.  Objections to claims 38
B.  Trustee's objections to claims 39
C.  Change in debtors' work or home address 39
D.  Semi-annual Trustee's case reports 39
E.  Resolution of debtors' default in payments prior to the Trustee filing a motion to dismiss case 39
F.  Resolution of a Trustee's motions to dismiss case 39
1.  Motion to dismiss documents 39
2.  Continuation of the motion to dismiss 40
3.  Filing of a modified plan 40
4.  The "Motion to Amend Plan to Extend Plan Payments/Amend Plan to Alter Plan Payments/ Clarify Plan Terms/Resolve Trustee's Motion to Dismiss" and "Order" of the same title
[the "Order Resolving"]
40
5.  "Drop dead" order" 40
6.  Importance of checking 13Network the day before the hearing 40
7.  Conversion of case to Chapter 7 40
G.  Motions to lift stay 41
H.  Attorney's fees for post-confirmation work 41
I.  Sale or refinancing of debtors' property, loan modification, and early payoff of case 42
1.  Court permission required 42
2.  Additional language. 42
3.  Transfers of personal property. 42
4.  Loan modifications 43
5.  Obtaining payoff information from the Trustee's office 43
6.  Impact of 4th Circuit Murphy decision on debtor motions to sell real estate 43
J.  Motion to incur debt 43
K.  Debtor requests for refunds 43
1.  Wrecked cars 44
L.  Modification of a confirmed plan under Code §1329 to reduce or increase plan payments 44
1.  Murphy standard 44
2.  Documents needed when seeking a reduction in plan payments 44
3.  Trustee seeking increase in plan payments 44
4.  Subsequent modified plan 44
5.  When modified plans need to be noticed 44
M.  Immediate reduction or suspension of plan payments due to unexpected change in the debtors' financial situation 44
N.  Notice required for modified plans that do not prejudice creditors 44
O.  Practice pointers 45
1.  Notice required for various motions 45
2.  Wording of motions 45
3.  Sale or refinancing of real estate: problem regarding who pays arrears 45
P.  Conversion and dismissal generally 45
Q.  Distribution of funds at dismissal or conversion of case 45
1.  Conversion 45
2.  Dismissal 45
R.  Reopening a dismissed case 45
S.  Reconverting a case back to Chapter 13 from Chapter 7 45
T.  Miscellaneous post-confirmation issues 45
VI.   COMPLETION OF PLAN PAYMENTS, DISCHARGE, AND CLOSING OF CASE 46
A.  Completion of plan payments, stopping of wage deduction order, and debtor refunds 46
1.  Seeking additional time where debtors are struggling to complete plan payments 46
2.  Stopping the wage deduction 46
3.  Trustee's case closing procedure 46
B.  Early completion of plan payments 46
C.  Discharge procedure 46
D.  Failure to file the required certification 46
E.  Discharge procedure where debtors are not eligible for a discharge 46
F.  Hardship discharge under Code §1328(b) 46
G.  DSO Letters 47
H.  Rule 3002.1 notices 47
I.  Debtor refunds where debtors' whereabouts unknown 47
J.  Revocation of discharge 47
K.  Practice Pointers 47
1.  Notify credit reporting agencies of discharge 47
2.  Closing letter to debtors 47
3.  Retention of bankruptcy papers 47
VII.  MISCELLANEOUS 48
A.  Debtors' complaints about their attorney 48
B.  Withdrawal of counsel 48
C.  Complaints about Trustee staff or communications 48
D.  Internet Resources for Bankruptcy Lawyers 48
E.  Bankruptcy petition preparers 48
F.  Creditor request for documents pursuant to Code §521 48
FORMS:  TRUSTEE'S FORMS REFERRED TO IN THE OUTLINE OF COURT'S AND TRUSTEE'S POLICIES AND PROCEDURES 49


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OUTLINE

I. FILING OF THE CASE:

A.  Court website:  The Bankruptcy Court for the Western District of Virginia has a website which contains important information about procedures, court docket calendars, Local Rules, personnel, forms, deadlines, etc. For further information see the home page of the U.S. Bankruptcy Court, Western District of Virginia. This entry point also contains a link to the Court's CM/ECF case look-up system, which requires a user name and password in order to access specific case information. A training session is available for attorneys who will be filing pleadings on CM/ECF. Attorneys who are new to the Western District should familiarize themselves with this site and the Court's requirements.

B.  Trustee's office structure and whom to contact:  The staff contact person for a case will depend upon the stage of the case and the nature of the issue.

1. Pre-341 meeting:

a.  For matters relating to creditors' meeting documents ("341 docs"):
Judy Vermilye    ch13docs@cvillech13.net   ext. 11

b.  For action items concerning a case at any time during the case:
Cassandra Carey    CCarey@cvillech13.net   ext. 16

2.  Between 341 meeting and confirmation of case and before Court hearings:

a.  For issues or questions relating to matters in Staunton or Harrisonburg cases which have been set for a Court hearing in Harrisonburg (including Trustee's Report issues or documents), or matters which may have to be set for hearing, contact:

Angela Scolforo, AScolforo@cvillech13.net, at ext. 10, and Jennifer Schindler, JSchindler@cvillech13.net at ext. 25.

b.  For similar issues or questions relating to matters in Lynchburg or Charlottesville cases contact:

Case#  Case Admin.  E-mail address  Telephone
-00 to -49 Alexis Pennington APennington@cvillech13.net ext. 17
-50 to -99 Jennifer Wagoner JWagoner@cvillech13.net ext. 24

c.  For action items concerning a case and for post-confirmation Motions To Dismiss in all courts:
Cassandra Carey    CCarey@cvillech13.net   ext. 16

3.  Post-confirmation, claims issues and case closing issues:

a.  For issues or questions relating Court hearing matters, see above.

b.  For any claims related issues;

Joe Klodzinski JKlodzinski@cvillech13.net ext. 12
Jennifer Hersh JHersh@cvillech13.net ext. 15

c.  For issues or questions relating to the closing of a case, including wage release orders for completed plans:
Ryan Bryant    RBryant@cvillech13.net   ext. 13

4.  Orders: 
All orders which require the Trustee's signature should be sent via e-mail to the paralegal:
R.C. Johnson    beskinorders@cvillech13.net   ext. 20

Please identify the order in the subject line of the e-mail by case number, debtors' names, type of hearing, and date of hearing. For example, please state "07-60579 T&E Johnson MTLS 1/20/08," where 1/20/08 is the date of the hearing that was held on the Motion to Lift Stay; or "07-60579 T&E Johnson TMTD 1/20/08," where 1/20/08 is the date of the hearing that was held on the Trustee's Motion to Dismiss.

If you are using one of the form orders that are set forth at the end of this Outline, but you have made changes to the standard language in the body of the order, you need to alert the Trustee in your cover e-mail to the changes you have made. Failure to do so may affect your credibility with our office and will delay the processing of the order.

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C.  Chapter 13 Plan format and initial notices:

1.  Standard Chapter 13 Plan format:  In the Western District, debtors are required to use a standard Chapter 13 Plan format which has been approved by the Judges. This form can be found on the Court's website (Local Forms, Form 3015-1B).

2.  Special Notice:  The Court requires that if a secured creditor's lien is being avoided or modified (a "strip off" or "cram down," etc.) pursuant to paragraph 3.A. or 7. of the plan, a "Special Notice" must be filed with the plan and served upon the creditor. This form can be found on the Court's website (Local Forms, Form 3015C). Lien avoidance under Code §506 will also require an adversary proceeding, and under §522 will require a separate motion. Service on the lien holder's registered agent is required pursuant to Rule 7004. It is not clear whether serving this notice at least 30 days prior to the confirmation hearing is an absolute requirement for confirmation; where the creditor didn't file a proof of claim and there had been no objections to confirmation filed, the Judge has held that 20 days notice was sufficient. In re James McKinney, #10 62496, 8/29/13 bench ruling

3.  Adequate Protection Payments:  Section 1326 of the Code requires that a Plan provide that adequate protection ("AP") payments be made to any creditor that is being paid through the plan and that is secured by a purchase money security interest in personal property. These payments must commence within 30 days from the date the case is filed, and a case cannot be confirmed until the Court is satisfied that the plan has properly provided for such payments. A plan may propose that such payments be made directly by the debtors to the creditor, or they can be made to the Trustee as part of the debtors' plan payment and disbursed by the Trustee.

If such payments are made to and disbursed by the Trustee, there will be no need for the debtors to provide proof of payment or proof of receipt by the creditor. If the payments are made directly by the debtors to the creditor, the Trustee will have to obtain proof of payment by the debtors and proof of receipt by the creditor prior to confirmation. Because of the difficulties inherent in proving that the debtors have made these payments, virtually all of the plans filed in this area have proposed that AP payments be made by the Trustee rather than directly by the debtors, and the Trustee will object to any plan that proposes that the debtors make these payments directly.

The BAP&CPA Code changes do not specify the required minimum amount of the AP payments. As a matter of practice, almost all of the plans filed in this District provide a monthly AP payment equal to 1% of the value of the collateral; this amount approximates the collateral's depreciation in value each month.

If the plan proposes not to pay a creditor anything for AP payments, the creditor still needs to be noticed of this in the same fashion, and the Trustee may object to this lack of payment pursuant to Code §1326. Over-secured creditors are still entitled to AP payments.

Local Rule 4001-2 (which incorporated the Court's 12/5/06 Standing Order #9) was amended effective October 5, 2014, to delete the former requirement that debtors' counsel send to affected creditors a separate notice of the Adequate Protection payments contained in the proposed plan. It would appear now that the language in the plan regarding the Adequate Protection payments being proposed will be all the notice required to be given to affected creditors.

4.  Automatic Stay—Extension of [Code §362(c)]:  A hearing to extend the automatic stay beyond the initial 30 days [§362(c)(3)] or to establish a stay [§362(c)(4)] must be held by the Court within 30 days of the date on which the case is filed, and the date and time of any hearing must be arranged beforehand with the Clerk's Office. Debtors' counsel must notice all creditors of any such hearing.

a.  Judge Connelly has approved the use of a "negative notice" pleading that notices all parties that the stay may be extended if no parties object within 21 days and the Court has no objections to the motion. The pleading, which is both a motion and an order, sets a court date in the event that any objections are filed, and extends the stay until the potential court date. [Form#1A: PDF / RTF] The Judge wants the pleading to state the reason why the former case was dismissed, and why the current case has a better chance of succeeding. It must be endorsed by the Trustee.

b.  The termination of the automatic stay does not apply to property of the estate. In re Mark and Wendy Murphy, #11-62465, 12/16/11 opinion (Anderson).

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5.  Noticing Requirements:  For noticing requirements for initial and amended plans, see the first page of the Form Plan and Local Rules 3015-1 and 3015-2. As stated above, for Special Notices see Bankruptcy Rule 7004.

D.  Payments, Pay Direct Orders, and Wage Deduction Orders:

1.  Plan payments are to be sent to a SunTrust Bank lockbox maintained by the Trustee in Memphis, Tennessee. DO NOT SEND PAYMENTS TO THE TRUSTEE'S OFFICE IN CHARLOTTESVILLE. THE CHARLOTTESVILE ADDRESS IS FOR CORRESPONDENCE ONLY.

The address for payments is:

Herbert L. Beskin, Trustee
Chapter 13 Trustee's Office
P.O. Box 1961
Memphis TN 38101-1961

All payments must include the debtors' full names and their full case number (for example: "Thomas William Jones and Edna Joyce Jones, #07-60115."). Payments should be made payable to "Herbert L. Beskin, Trustee." Please advise your clients that the Trustee will not accept "walk-in" payments. If debtors bring payments to Court or to the Trustee's office they will be given an addressed envelope for mailing the payment to the SunTrust Bank lock-box in Memphis.

In every case, an order must be entered by the Court either ordering the debtors themselves to make the payments proposed in the Plan (a "pay direct order"), or ordering a debtor's employer to make the plan payments (a "wage deduction order"). The debtors' attorney is required to file the appropriate order with the Court. Copies of all of the appropriate pay direct and wage deduction forms are attached. The Trustee does not usually need to endorse this order. However, if you want to submit a wage order that reduces the amount of the plan payment, or suspends plan payments, you must have the Trustee's endorsement. [Form#2: PDF / RTF RTF This "Form #2" is actually a collection of the various types of plan payment orders.] Either a wage deduction order or a pay direct order should be filed as soon as the case is filed so that the debtors will not fall behind right away. Studies show that automatic wage deduction cases are about five times more successful than direct payment cases. However, if you want to submit a wage order that reduces the amount of the payment, or suspends payments, you must have the Trustee's endorsement.

In cases where the debtor is working for an employer (as opposed to being self-employed), Judge Connelly will require wage deduction orders in every case unless (a) there is a compelling reason why one should not be required, and (b) the Trustee endorses an order allowing a pay direct order. If the Trustee does not believe that the debtor has presented a sufficiently compelling reason, he will ask that the debtor appear before the Judge to request an exception to this rule. An example of an order permitting direct payments in special circumstances is attached; it states that if the debtors miss a single direct payment, they agree that their attorney will immediately submit to the Court a wage deduction order. The Trustee must endorse this pay direct order. [Form#3: PDF / RTF]

2.  Automatic Monthly Mortgage payments:  Sometimes extra precautions are advisable to keep debtors who have had trouble making their mortgage payments every month from defaulting on future payments. One possibility is for the plan to provide that the monthly mortgage payment will be made through the plan by the Trustee; in this scenario, the Trustee will take his usual commission on each such payment. Be sure to submit to the Court a motion and order (for example, See [Form#4: PDF / RTF]) as soon as the case is filed which will authorize the Trustee to begin making mortgage payments prior to confirmation; without such an order, the Trustee will not be able to begin making the regular mortgage payments until the case is confirmed, and the debtors may be charged late payments or be subjected to a motion to lift stay in the interim. The motion and order must clearly state the date upon which the Trustee will begin making payments, the exact amount of the payment, and the address for the mortgage company to which the payment shall be mailed. Also, you need to discuss with the mortgagee any issues regarding late payments and late fees for the first month or two of the plan, perhaps including them in the arrears amount to be paid. Generally, the Trustee will not have sufficient funds to begin making post-petition mortgage payments until the second month after the case is filed.

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A second method is to have the Court enter a second, separate, wage deduction order with the employer that will have the employer send a separate check directly to the mortgagee each month to cover the mortgage payment. This method has the advantage of saving the debtors the Trustee's commission each month, and getting the payment to the mortgagee more quickly. An example of such a wage deduction order is attached. [Form#5: PDF / RTF]

A third option is to set up an automatic monthly draft from the debtors' checking account directly to the mortgagee. This can be done by the debtors without any Court order or hearing. Many banks will provide this service (sometimes called "automatic bill pay") to the debtors at no additional charge.

3.  Debtor Refunds: The Trustee cannot refund money to debtors unless and until the Judge has entered an order authorizing such a refund. Judge Connelly requires a motion explaining the circumstances surrounding the request. The only exception is when garnished funds have been sent to the Trustee and the funds have been exempted in full by the debtor on Schedule C; in that instance the Trustee can refund the money without a court order.

E.  Case checklist:  When BAP&CPA was enacted in 2005, the Trustee put together a "master case checklist" for processing BAP&CPA cases. We have found it to be a useful guide in making sure that we did not omit any of the new steps and actions required by the Act. Under the for-whatever-it's-worth doctrine, a copy is attached for your review and use. [Form#6: PDF / RTF]

F.  Trustee's Introductory Letter [Form#7: PDF / RTF]:

In every case the Trustee's office will, within a few days of filing, send to the debtors a letter outlining the debtors' initial responsibilities to make plan payments, provide documents, and attend the creditors' meeting. It is quite common for debtors to fail to follow through on the last two requirements, so they are set out in detail below.

1.  Documents to be sent to the Trustee:

a.  How to send documents to the Trustee:  The Trustee asks that all requested information and documents be sent by the attorney to the Trustee's office [ch13docs@cvillech13.net] as PDF, Microsoft Word, or Rich Text formatted attachments to e-mails, rather than via fax or US mail. The Rich Text format is a fairly universal format that is easily generated in those offices that use WordPerfect rather than Word. Emailing these documents will ensure that you have a record that the documents have been sent, and it will allow Trustee staff to quickly attach the documents to our electronic case management software.

(1)  Information on subject line of e-mail:  For each e-mail sent with or without attachments, please put the following information in the subject line: (i) case number; (ii) debtor's name; (iii) nature of attachment; and (iv) relevant hearing date. Providing this information will allow the document to be processed faster, and will ensure that matters are prioritized based on the date of the hearing. So, for example:

(a)  341 Documents:  For documents that are required in every case and are to be filed prior to the creditors' meeting (the "341 meeting") the subject line would read: "07-60579 T&E Johnson 341 docs 1/20/08," where 1/20/08 is the date of the scheduled creditors' meeting.

(i)  Please put all 341 documents in the same e-mail attachment; do not make separate attachments for each document. In joint cases, please attach all of each debtor's paystubs in order, then the other debtor's. And please make sure that you've included all the pages of a given document and put them in the proper order.

(ii)  If you are sending a supplemental or subsequent batch of 341 docs, please denote that in the subject line by indicating "341 docs supp."

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(b)  Trustee's Report and other Documents:  For documents that have been requested by the Trustee's Report (see section II. E., below) and are needed for confirmation, the subject line would read: "07-60579 T&E Johnson T's Rep docs 2/20/08," where 2/20/08 is the date of the confirmation hearing.

(2)  Where to send 341 documents:  All 341 documents should be sent to a special e-mail address which is used solely to receive such documents: ch13docs@cvillech13.net

b.  Documents required in every case:  In every case the following documents should be provided to the Trustee at least TEN DAYS prior to the initially scheduled creditors' meeting. Please tell your clients not to send documents directly to our office; all documents should be sent to the attorney for review, and then by the attorney to our office. Remember to redact Social Security numbers and children's names from these documents.

(1)  All pay stubs or operating statements (the "payment advices" referred to in Code §521) received by the debtors within the 60 calendar days immediately preceding the filing of the case. Do not send six months of paystubs unless you are documenting a change in income from the first four months. Also, if you are sending an employer print-out instead of actual paystubs, make sure that the print-out shows gross income and all deductions for each paycheck during the 60 day period. Bank statements showing paycheck deposits are not sufficient.

(a)  If a Debtor is self-employed, and the attorney needs a monthly operating statement / profit and loss form to show the Debtor's income and expenses, the Trustee has a simple form that can be used. [Form#8: PDF / RTF]

(b)  If the debtors are retired or disabled, send either a copy of: (i) the retirement, pension, or disability payments for the last two months, (ii) bank statements showing these funds being deposited, or (iii) the statement of benefits.

(2)  Real estate tax bills for the current year showing city/county valuations (in some cases the Trustee may later ask for personal property tax bills as well).

(a)  If there has been a recent private appraisal [within two years of filing], the Trustee will expect that to be provided to him as well.

(3)  The federal personal income tax return for the most recent year (prior to filing) filed by the debtors. Do not send prior years unless specifically requested by the Trustee's Report.

(a)  If the debtors are not required to file tax returns, they should submit an affidavit stating this fact, the reason why, and the years for which no returns were required. A sample of such an affidavit is attached. [Form#9: PDF / RTF]

(4)  Note:  Pursuant to Code §521(i), failure to provide within 45 days of the filing of the case the payment advices or other items required by the Court in Code §521(a)(1) can result in automatic dismissal of the case. The debtors can request an extension of this deadline, but the request must be made before the expiration of the 45-day period. . Pursuant to Code §521(e)(2)(B) the Court "shall dismiss" the case if the Debtor fails to provide their most recent federal tax return to the Trustee at least 7 days prior to the first 341 hearing date, absent extenuating circumstances. (Note: It is unknown at this time whether Judge Connelly would dismiss a case under this section without first holding a hearing.)

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c.  Other documents:

(1)  Deed(s) and proof of joint vs. individual liability:  If the debtor(s) own real estate as tenants by the entireties and there is unprotected equity in the property, the Trustee will want to see a copy of the deed and appropriate third-party documents (copies of bills; credit reports; etc.) to establish whether there are any joint debts.

(a)  Note: Virginia Code §8.01-220.2 makes bills for emergency medical care, and the follow-up to such care, joint debts that must be paid from equity in T by Es property. [Compare Virginia Code §55-37 (the "necessaries doctrine"), which does not pierce the T by Es protection.]

(2)  Unusually high living expenses:  The Trustee may ask for documentation of such expenses, so providing them right away will speed up the process. Examples include medical bills, transportation, child care, utility bills, etc. If you are submitting a large stack of bills or receipts, the Trustee will not review them unless they are accompanied by a summary sheet explaining what the attached documents will show. For medical prescription expenses, the summary statement from the debtors' pharmacy is the best document to use.

(3)  Financial assistance to the debtors from family or friends:  If the debtors will be relying upon significant financial assistance from family or friends to make their plan feasible, the Trustee will usually require those persons to execute an affidavit that makes clear the amount and duration of their assistance. [Form#10: PDF / RTF] The Trustee recommends that this affidavit be executed before the plan is filed so that the attorney will know right away if the debtors can truly rely upon this anticipated financial assistance.

(4)  Prior Homestead Deeds:  If the Chapter 7 test is an issue, and the debtors have previously filed Virginia Homestead Deeds, the Trustee will need to see them to ensure that the debtors are not claiming more Virginia Code §34-4 protection than they are entitled to. If each debtor is claiming $10,000 worth or exemptions under 34-4 because he/she is over the age of 65, please note the debtor's age on Schedule C or I. Also note that beginning in 2010 a Homestead Deed must recite all 34-4 exemptions claimed in prior filed Homestead Deeds. [Note: Be aware of the permanent and potentially expanding protection that Virginia Code §34-18 provides debtors who have previously protected some portion of the equity in their home.]

(5)  Valuation issues:  If the debtors are claiming that their real estate is worth less than the most recent tax assessment, their car is worth less than the current NADA retail value, etc., the Trustee will expect to see appropriate third-party evidence of the lower value.

(6)  Other income sources:  Provide the Trustee with appropriate third-party evidence of any other income or benefits received by the debtors: Food Stamps, Unemployment Insurance, child or spousal support, Veterans' Benefits, etc.

(7)  Charitable contributions:  If the amount of contributions being claimed by the debtors is unusually high (more than $75/mo.), the Trustee will probably request documents showing the history of contributions in the year or two prior to filing.

2.  Trustee's Questionnaire to Debtors:  This three page questionnaire [Form#11: PDF / RTF] has been sent to all debtors' attorneys. It must be filled out by the debtors and returned to the Trustee before the 341 meeting. It will provide the Trustee with information required by BAP&CPA, and will save time at the 341 meeting. Since the debtors will need the attorney's assistance in filling out this questionnaire, it should not be sent to the Trustee by the debtors. The Trustee requires that the attorney or a staff person assist the debtors in filling out this form, or review it before it is sent to the Trustee. It should then be sent to the Trustee with the required documents listed above.

By signing this questionnaire, the debtors are certifying that the information is correct as of the date the questionnaire is signed by them, and that it will also be true as of the date their plan is confirmed, which can be several months in the future. The attorney needs to explain to the debtors the importance of this document being filled out correctly and completely, and the debtors' obligation to advise the Trustee if any of the information subsequently changes or is determined by the debtors to be incorrect.

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G.  Written and DVD instructions to Debtors:  Local Rule 3015-3 was amended effective October 5, 2014. It used to require the debtors and debtors' counsel to certify on the Form 3015-3A affidavit that (i) the debtors have viewed Judge Krumm's DVD of instructions to Chapter 13 debtors, and (ii) the debtors have been provided with the Court's written instructions to debtors, reviewed them, and had a chance to ask the attorney questions about them. While the Rule still requires the attorney to perform the second requirement, the first is now suggested but not mandatory. Neither the debtors nor the attorney are required to certify to either task in the revised Form 3015-3A affidavit.

The DVD is downloadable or viewable on the Debtor Information section of this website. The certifications to be made by the debtors are a part of the pre-confirmation affidavit which they must sign and submit to the Court prior to confirmation (see paragraph III. B., below).

This website maintains a copy of the DVD instructions to Debtors at the following web address: www.cvillech13.net/video/krumm_dvd_320w_240h.mp4. This link takes a while to load the video file, but it will play on whatever default video player is available. [If you are having trouble accessing this MP4-formatted video, we recommend that you install QuickTime.]

The Court's website contains information about how to obtain a copy of the DVD.

H.  Debtors' personal financial management course (Code §111[d]):  BAP&CPA requires that in order for debtors to obtain a Chapter 13 discharge, they must take the Personal Financial Management course no later than the date on which they make their last plan payment as required by their plan [Rule 1007(c)]. However, Local Rule 4008-1 and Local Form 4008-1A give the debtors 60 days from the date on which the Trustee advises the Court that they have completed their plan payments to certify to the Court that they have completed the course.

There are more than a seventy private providers of this course that have been approved by the U.S. Trustee to provide a Personal Financial Management course in this District; information about these providers can be found on the U.S. Trustee Program's website. These providers will charge the debtors a fee to take the course, and will sometimes provide the course by phone or online.

The Trustee strongly recommends that the debtors take this course as soon as possible, as it will greatly assist the debtors in the management of their personal finances and the successful completion of their case. If the Debtor(s) fail to take this court, the Court may close their case without entering the discharge order.

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I.  Other matters: 

1.  Attorney's Fees:

a.  Effective August 1, 2015, the Judges in the WD of VA put into effect Standing Order 15-1, a copy of which can be found on the Court's website. It is entitled "Order on fees for debtor's counsel in Chapter 13 cases; adoption of guidelines for fee applications in Chapter 13 cases filed on or after August 1, 2015." Every attorney should read this Standing Order fully and carefully. Among other things, it (i) raises the "no look" fee for Chapter 13 cases through confirmation from $2,900 to $4,000; (ii) does away with any requirement to formally apply for approval of such fees; (iii) clarifies that such a fee includes all routine costs (copying, postage, etc.), but does not include filing fees or actual costs paid to outside entities (credit reports, credit counseling, lien searches, etc.); (iv) sets out the range of tasks and responsibilities that an attorney must perform to earn such a fee; (v) sets forth guidelines for how an attorney can apply for fees in excess of this "no look" fee; (vi) sets forth a table of additional "no look" fees for various post-confirmation matters that an attorney may apply for if the attorney chooses initially to seek the $4,000 "no look" fee for services through confirmation; and (vii) provides the forms to be used when an attorney is applying for supplemental compensation.

b.  The Judge has also announced that she will allow an additional $150 fee, plus reasonable costs (excluding costs of a lien search), for avoiding a junior mortgage lien under Code §506 in an uncontested Adversary Proceeding. [In re Yeater, #13-62066, 12/12/13 bench ruling].

c.  The Court has ruled that while attorneys fees may be paid ahead of unsecured claims, executory contracts, secured debt arrears, and priority claims other than DSO [Domestic Support Obligation] arrears, they come behind AP and fixed monthly payments to secured creditors and at best can only be paid pro rata with DSO arrears being paid by the Trustee. For attorney's fees for work performed after confirmation of the case, see the "Post-Confirmation" part of this Outline, section V. I.

d.  Cases: (1) Attorney's requested fees significantly reduced by the Court; Court sets out in detail the standard for evaluating such fees: In re Palmer and Debra Goodbar, #09-52018, and In re Jeffrey Goodbar, #10-51542, Bankr. Dt., W.D. Va, 6/29/11 Krumm opinions, aff'd In re Palmer Goodbar, Dist. Ct., W.D. of Va., #5:12cv063, 3/26/13 opinion (Urbanski), (2) Photocopying expenses must be necessary to a particular case and property documented to be reimbursed: In re Jeffrey Goodbar, #10-51542, 8/10/11 opinion (Krumm); (3) Attorney ordered to disgorge $5,000 in fees: In re Edward Dunn, #11-60847, Bankr. Ct., W.D. Va., 8/18/11 opinion (Anderson); (4) Appropriateness of "no-look" fees in Chapter 13 cases is reaffirmed by the Court; in this case the attorney’s request for hourly fees is denied, but even if hourly fees were allowed, the lodestar analysis would confirm that the no-look fee was appropriate. In re Bruce and Jane Slater, #10-62521, Bankr. Ct., W.D. Va., 9/6/11 opinion (Anderson).

e.  Advancing costs. Judge Connelly has indicated that she will follow Judge Anderson's ruling regarding debtors' counsel advancing filing fees and other costs. As long as the plan is using "extra money" to pay such costs — a below-median case that extends beyond 36 months or an above-median case that is paying to the general unsecured creditors more than the amount required by Line 59 on Form B22C — and the cost advancing is clearly disclosed, the attorney may advance the filing fee and be reimbursed for this cost in paragraph 2.A. 2. of the plan. The attorney may not be reimbursed in this manner for the costs of the credit counseling session or the personal financial management course. In re Jennifer Ballard, #11-62006, 11/8/11 opinion.

2.  13Network Website:  The Trustee's case management software provider, Bankruptcy Software Specialists ("BSS"), maintains a website www.13network.com/) that allows debtors' attorneys and creditors to have 24/7 access to basic information about all the Trustee's pending cases: payments received, claims filed, disbursements to creditors, etc. Access to this website is free, and can be obtained by e-mailing to the Trustee a request for access to the system. Any applicant will be required to sign an access agreement. Please note that there is always a delay of 5 – 10 days between the date a payment is sent by the debtor to the Memphis SunTrust lockbox and the date it appears on the 13Network website . This delay can be especially crucial in plan confirmation and motion to dismiss situations.

3.  Credit Counseling Certificate:  A certificate from a certified credit counseling agency must be filed with the Court; a plan cannot be confirmed without it. The Court's website lists those agencies which have been approved for debtors in the Western District of Virginia. The debtors must have taken the credit counseling session within 180 days of the date on which their case is filed. The credit counseling session can be taken the same day as the case is filed, but it must be taken before the case is actually filed. In re Marvin and Wanda Crewey, #11-71179, Bankr. Ct., W.D. Va., 6/28/11 opinion (Stone); In re Susan Holsinger, W.D. Bankr. Ct., #11-51720, 2/27/12 opinion (Krumm) [pro see debtor's request for an exemption from this requirement is denied and her case is dismissed]; see also In re Michael and Anna Grayson, W.D. Bankr. Ct., # 12-71908 [Chap. 7], 1/25/12 opinion (Stone) [Court can't waive the requirement.]

4.  Debtor audits by the United States Trustee:  Generally, in this District the confirmation process will proceed independently of any case audits being conducted by the Office of the United States Trustee.

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5.  DSO Letters:  At the beginning of the case, the Trustee is required by BAP&CPA to send a notice to any DSO (Domestic Support Order) payee and the state agency in charge of collecting child support to alert them to the case and certain information about the debtor. [Form#12: PDF / RTF] In order to ensure proper noticing of such claims, the Trustee will not recommend confirmation unless all DSO payees and potential payees are listed on Schedule E, and he recommends that the state child support agency be listed there as well.

6.  Extension of time to file schedules or plan:  When an attorney is asking for the Trustee's endorsement on an order requesting an extension of time in which to file schedules or a plan in a new case, the attorney should provide the Trustee with a brief statement of the reason(s) the extension is needed. This explanation must also be in the motion filed to request the extension. This explanation need not be any longer than one sentence and should be included within the e-mail that contains the order for which the Trustee's endorsement is being sought. The motion for an extension must be filed before the deadline for filing the schedules or plan. A motion to extend the time for filing schedules must be heard, if necessary, prior to the scheduled 341 meeting, and the hearing must be noticed to the UST. In re Pamela Brooks, #14,60935, 07/24/14 bench ruling (Connelly).

7.  Orders needing the Trustee's endorsement:  Almost all orders in a Chapter 13 case in this District require the endorsement of the Chapter 13 Trustee. At any time in the case if an order requires the Trustee's endorsement, please send it via e-mail to: beskinorders@cvillech13.net. Using this email address will ensure that the order is sent directly to the Trustee's paralegal, R.C., and that it will be reviewed promptly. As stated previously, the Trustee asks that orders be sent by e-mail instead of by fax or the postal service, and that they include the full case number, the name of the debtor(s), the kind of order, and hearing date in the subject line of the email. (E.g. "07-62161 B Jones MTLS 1/21/08").

8.  Eligibility for Chapter 13. As of 2/12/13, the eligibility requirements for debt limits for a Chapter 13 debtor or debtors is $383,175 in unsecured debt and $1,149,525 in secured debt. This amount is adjusted for inflation every three years. Code §109(e). For a discussion of liquidated, non-contingent, and undisputed debts, see In re Jean Mitchell, W.D. Bankr. Ct., #12-70856, 1/30/13 opinion (Stone).

a.  Even though the 109(e) determination is to be made as of the petition date, Judge Connelly has ruled that this provision is not jurisdictional, and resolution of the issue can be postponed until after the bar date if no party is pushing for an earlier decision by the Court. In re David Capps, #13 61407, 10/10/13 bench ruling.

J.  Practice Pointers:

1.  Retainer Agreement:  Be sure to spell out in your agreement your right to fees if the case is converted or dismissed; the amount of any such fees will have to be approved by the Court. Some judges do not allow any fees in such circumstances unless the agreement allows for them. In this District the initial fee agreement is presumed to cover all ordinarily required attorney services through initial plan confirmation.

a.  For a recent Supreme Court case discussing the application of sections 101(12A), 526, and 526 to attorneys generally, see Milavetz, Gallop et al. v. U.S., 130 S. Ct. 1324, 3/8/10 Opinion.

2.  Lien search:  If the debtors own any interest in real estate, the Trustee strongly recommends that a lien search be conducted by debtors' counsel. It is the only way to ensure that all existing liens are known and dealt with. Do not take the debtors' word regarding what liens exist against real estate. The safest way to conduct such a search is to do it within a few days after the case has been filed; this ensures that the attorney does not miss any last-minute liens filed against the debtor’s property.

3.  Credit report:  Always obtain a copy of a current credit report for each debtor and review it with them. It is the best way to ensure that no debts have been omitted from the schedules, and to determine if the debtors are the victims of identity theft. A new federal law allows each person one free credit report each year. www.AnnualCreditReport.com

4.  Recent creditor addresses:  Under the new requirements of Code §342(c)(2)(A), in order to ensure that creditors are noticed at the correct address(es) the attorney will need to obtain from the debtors copies of all correspondence received from creditors in the 90 days immediately preceding the filing of the case, and to notice each creditor at every listed address.

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5.  National PACER search for debtors' prior cases:  Before a case is filed, it is essential to know about the debtors' prior bankruptcy cases. The debtors' ability to obtain or retain the automatic stay, and their eligibility for discharge, hinge on this information. Do not take the Debtor's word on this, they often get it wrong. The web site is: Pacer Service Center: U.S. Party Case / Index.

a.  Eligibility for discharge:  Judge Anderson has ruled that §1328(f) means that the 2 and 4 year disqualification periods are to be measured from the date the former case was filed to the date the current case was filed. In re Kimberly Campbell, Case #06-60678, 7/13/06 ruling.

b.  109(g) issues: Debtors may be ineligible to file again if there was a causal connection in a prior case within the last 180 days between a motion to lift stay and the debtors' motion to dismiss the case. In re Marilyn Myers, #10-60880, Bankr. Ct., W.D. Va., 6/21/10 opinion (Anderson).

6.  Materials explaining the Chapter 13 process:  The need for such materials from the attorney has been decreased by the Judge's DVD instructions to debtors, the Trustee's introductory letter to debtors, and the Trustee's "Gold Pamphlet" [see Part II. of the outline], but information or checklists clarifying the debtors' initial duties, payment schedules, court hearing dates and locations, etc., are still essential to prevent problems in the first stages of the case.

7.  Homestead exemptions:  In order to determine which state's exemptions the debtors are eligible for, the attorney needs to know the debtors' domicile for the past 2 years. Code §522(a)(3).

8.  Discussion of non-dischargeable debts:  Do the debtors understand their post-case responsibilities for any non-dischargeable debts (student loans, taxes, DSO obligations, etc.) that will not be paid in full during the case? Remember that any such debts will have to be disclosed in the end-of-case DSO letters that the Trustee is required to send to the DSO recipient and the state child-support collection agency. Code §1302.

9.  Discussion of fraudulent or preferential transfers:  The Trustee will always ask about any such transfers in the five years prior to filing. Such transfers may affect how much the debtors will have to pay in their plan, and may directly affect the transferees. Have these issues been discussed with the debtors and the transferees prior to filing?

10.  Plan payments:

a.  By wage deduction:  Make sure that debtors understand their responsibility to begin making plan payments themselves immediately until they see the deduction showing up on their paystubs, and the need to keep all paystubs received during the plan to prove payments if problems arise.

b.  Direct by debtors:  Similarly, make sure that debtors understand the importance of keeping a copy of any check or money order used to make a plan payment.

c.  If the plan payment is required to increase during the plan:  Stress to the debtors that it is their responsibility to ensure that any required "step up" in payments occurs on time, whether payment be by wage deduction or direct payment. Give the debtors written materials that clarify the change(s) and when they are to occur. They may need to remind their payroll department when the time comes.

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11.  Preparation of schedules:

a.  Basic rules:

(1) "Disclose, disclose, disclose":  when in doubt, put something in the schedules. E.g.: equitable/contractual interests in real property or vehicles; all bank accounts or sources of income, no matter how small; personal injury claims; "uncollectible" debts.

(2) DO A SIDE-BY-SIDE COMPARISON OF THE PLAN AND SCHEDULES ONE LAST TIME BEFORE FILING: It is depressing how often the figures on the plan do not match those on the schedules, and how many debts are stated on Schedule D or E but not provided for in the plan (or vice versa). Take the time to cross-check the plan and the schedules before filing them with the Court. You will save yourself significant time and trouble by not having to correct these documents later, and the Trustee will greatly appreciate the decrease in mistakes that need to be fixed. The failure to conduct this final review is the single most common source of plan mistakes.

(3) If you need additional time to file the schedules, you need to get an order allowing additional time entered before the initial 15-day deadline has expired. The Judge will expect the motion to explain the reasons why additional time is needed, and the order will need the Trustee’s endorsement.

b.  Valuing assets:  On Schedules A and B, please disclose the source of your valuation of real estate, vehicles, and other assets of significant value (e.g.: tax assessment, NADA retail value, private appraisal). Do not deduct liquidation costs, and if property is jointly owned, please specify if you are providing the total value or the value of the debtor's proportional interest in the property.

c.  Schedule A:

(1)  Disclose all forms of ownership: condos, burial plots, mineral rights, life estates, property owned in other states, rent-to-own interests, property jointly owned, etc.

(2)  Always disclose the results of any recent appraisal and send the Trustee a copy.

d.  Schedule B: 

(1)  Use retail fair market values.

(2)  Commonly omitted items: bank accounts; jewelry; debts owed to the debtors; earned-but-not-received commissions or bonuses; "junk" vehicles; property in which the debtor owns a partial or equitable interest.

(3)  Disclose all potential claims: personal injury, child/spousal support, commissions, etc.

(4)  A debt or promissory note owed to the debtors by a third party should be listed as an asset on Schedule B. If regular payments are being received by the debtors on this debt, those payments should also be listed as income on Schedule I.

e.  Schedule C:

(1)  Remember to review Code §522(b)(3)(A) and determine eligibility for Virginia exemptions.

(2)  Remember that if an asset is owned by one spouse, the other spouse's Va. Code §34-4 exemptions cannot be used to protect it.

(3) You will need to review any previously filed Homestead Deeds.

(4) All debtors' attorneys should review the 6/17/10 decision of the U.S. Supreme Court in the case of Schwab v. Reilly, 130 S. Ct. 2652, #08-538. In a Chapter 7 case, the Court held that an exemption claim does not cover the excess value of the asset over the value disclosed on Schedule B. In re Stoney, 21 CBN 562, Bankr. Ct., E.D.Va. 2011 [Court sustained the Trustee's objection to the debtor's claiming "100% of FMV" on Schedule C because it supersedes state exemption statutes]

(5) Other cases: In re James Perkins, #10-63148, Bankr. Ct., W.D. Va., 3/31/11 opinion (Anderson) [Va. Code sec 34-29 applies only to earnings subject to garnishment and does not cover paycheck earnings once deposited into the debtor's checking account]; In re Carl and Rita Lyall, W.D. Bankr. Ct., # 11-70535, 8/9/12 opinion (Stone) [Debtors allowed to amend their Schedule C exemptions post-confirmation because no bad faith present]; Clark v. Rameker, U.S. Sup. Ct., #13 299, 6/12/14 opinion [funds held in an inherited IRA are not "retirement funds" and may not be exempted under Code 522(b)(3)(C).

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f.  Schedule D:

(1)  State the date (day, month and year) each claim was incurred (for "910 claim" issues, etc.).

(2)  Clearly identify the collateral for each claim.

g.  Schedule E:

(1)  State the year(s) and kind of tax for each tax owed. Several experienced debtor attorneys list the Va. Dept. of Taxation and the IRS on Schedule E in every case. This ensures that if there is a tax problem that the debtor is unaware of, it is flushed into the open and can be dealt with in the case. The Trustee recommends this approach.

(2)  The Trustee strongly prefers that any non-priority taxes be listed separately and solely on Schedule F, but if you do list both on Schedule E, be sure to specify which amounts are priority and which are non-priority.

(3)  The Trustee will not object if the plan proposes to pay in full a child support delinquency by an ongoing wage deduction from the debtor's wages to the DSO [Domestic Support Obligation] recipient or the state agency IF it will be paid in full during the term of the plan; they do not need to be paid through the plan by the Trustee. Show this treatment of the claim in paragraph 2 of the Court's required form plan. You will have to confirm with your client that the garnishment continues to withdraw the payments at the higher amount post-petition. If the delinquency will not be paid in full during the term of the plan, the DSO recipient or state agency will have to agree to such treatment unless Code §1322(a)(4) applies.

(4)  List any DSO recipient and the appropriate state support collection agency, even if the debtor says there is no delinquency on the support obligation. Also list a custodial parent even when no support order has been entered, since Code §101 14A)(C) includes orders entered even after a Chapter 13 case has been filed. The Virginia Division of Child Support Enforcement has designated a Senior Assistant Attorney General, Suzanne Wade, in Richmond [telephone: 804-367-8270; suzanne.wade@dss,virginia.gov], as the point person for all delinquent child support debts in Chapter 13 cases. She may take an active role in objecting to plans that do not properly provide for such claims, objecting to confirmation where the debtor is not current post-petition on such an obligation, and bringing post-confirmation defaults to the attention of the Trustee. Attorneys are urged to call Ms. Wade early on if there are any questions about delinquent child support in a case.

(5)  For Virginia personal property taxes, state law gives the locality a lien on the vehicle for all taxes owed. Virginia Code §58.1-3942. So if the debtor still owns the vehicle, the claim is really a secured claim and should be listed on Schedule D, not Schedule E. If listed on Schedule D, the Trustee will not object to the payment of interest on such a claim at the rate set forth in the Virginia Code. However, the Trustee will also not object if the debt is listed on Schedule E as long as it is no more than one year old, since that is the way most localities file their claims.

h.  Schedule F:

(1)  List account number, reason for the debt, and date claim incurred for each debt. Be as precise in your description of the debt as your software will allow; "credit card" is better than "open account."

(2)  Redacting all but the last four digits of account numbers [Bank. Rule 9037(a)] will cause problems for creditors trying to match Trustee plan payments with debtors' accounts. Debtors may choose to submit full account numbers and waive this requirement [Rule 9037(g)], and the Trustee encourages debtors to do so to ensure payments are properly applied by creditors to their accounts. Surprisingly, creditors often return Trustee checks if they cannot match the account number.

i.  Schedule G:  If a lease or executory contract is being cured in the plan, be sure the creditor is listed on the matrix so it can file a proof of claim and be paid.

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j.  Schedule I [make sure to use the new, more detailed Form effective 12/1/13]:

(1)  If in a joint case one spouse is not working, disclose at the top of the form whether the non-filing spouse is retired, disabled, homemaker, or looking for employment; it will save time at the 341 meeting.

(2)  At the bottom of the form, disclose any expected changes, temporary nature, or seasonality of income, children with special needs, any unusual situation regarding family structure or dependents, any health problems affecting income, etc. If you are concerned with the debtor’s privacy, send an e-mail to my office with this information when the case is filed; it's helpful if we know about special circumstances before the 341 meeting.

(3)  At the top of the form, disclose nature of job, physical address of employer, and length of time at this job.

(4)  If the debtor is living with someone in a common-law-marriage type situation, please disclose income and expenses of both parties as if they were married. Disclose everyone who is living with the debtor, even if there is no legal obligation of support between them; give the Trustee an accurate and complete picture of the debtor's living situation.

k.  Schedule J: [make sure to use the new, more detailed Form effective 12/1/13]

(1)  Use actual current expenses.

(2)  Try not to "bundle" expenses or show expenses on the extra lines. Please show each expense on the lines provided on the new form.

(3)  Please disclose any anticipated changes in expenses at the bottom of the form.

l.  Statement of Financial Affairs ("SOFA"):

(1)  Questions #1&2: Complete for all gross income during two previous years and current year, separately for debtor and spouse even if not a joint case.

(2)  Question #7: Be sure any religious contribution figures are the same as that on Schedule J, line 10, and Form B22C, line 45.

(3) Question #9: Be sure the figure for attorney's fees is the same here as on the attorney disclosure form and in the plan.

(4)  Questions #18-20 must be filled out for every business operated by the debtor in the past six years, even if it is no longer in existence.

m.  Disclosure of Attorney Compensation Form:  Disclose all amounts received, and specify which are costs and which are fees. Make sure amounts match paragraph 2 of the plan and question #9 on the SOFA; this is a common problem.

n.  Form B22C (CMI form):  The case law on interpreting this form is of course new and still evolving. Unless otherwise specified, the interpretations set forth below represent the position the Trustee will take as to how the amount on each line should be calculated. Unless otherwise noted, the Trustee's position is the same as that of the US Trustee program if it has announced a position on that issue.

All debtors' attorneys should read the 6/17/10 decision of the U.S. Supreme Court in the case of Hamilton v. Lanning, 560 U.S., #08-998. The Court held that in determining disposable income in an above-median case, the court should adopt a forward looking approach and interpret "projected disposable income" in Code section 1325 to include known or virtually certain changes in the debtor’s income and expenses since filing. In other words, the court may look beyond the amounts set forth on form B22C in determining the debtor's projected disposable income as of the confirmation hearing.

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(1)  Lines 2-3:

(a)  Include the income of the non-filing spouse. Some of this (e.g., expenses on which the non-filing spouse is solely obligated; retirement contributions) may be deducted later on Line 13 or 19, but at this stage all spousal income must be included.

(b)  If self-employed, put gross income on Line 3a. and deduct operating expenses on Line 3b. Such expenses can only be deducted once, so if they are used here, they cannot be deducted elsewhere in the form.

(2)  Lines 4-8:

(a)  Include income from all sources: rent, retirement, interest, dividends, mileage reimbursement from the debtor's employer. [In re Tinsley, #09-51194, 4/8/10 opinion (Krumm)], etc.

(b)  Include child or spousal support here; such amounts may be deductible later on Line 54.

(c)  Include regular contributions from others who are helping with living expenses, including payments made to third parties for the benefit of the debtors.

(d)  Include unemployment compensation and V.A. benefits, but not Social Security benefits. See In re Ranta, 2013 WL 3286252, (4th Cir. 7/1/13 decision): Social Security benefits are excluded from a debtor's projected disposable income for both above and below median debtors, but can be voluntarily offered by the debtor to show plan feasibility.

(3)  Line 16: Household size: Trustee will review multiple factors, including whether alleged dependents are claimed on tax returns; how long the group has been functioning as a family unit; whether the debtors are providing more than half of the person's support; and the Census Bureau's definition of family unit. Judge Krumm has denied a deduction for an 18-year old child living with the debtors. In re Kessee, #10-70465, 2010 ruling [no formal opinion]. He also held that a debtor cannot claim young children for whom he has visitation rights but not physical custody. In re Smallwood, #09-70529, 5/21/09 decision. See also In re Tanya R. Johnson, 686 F.3d 224 (4th Cir. 7/11/12 decision): It was not error for the lower court to use the "fractional economic unit" approach to determine household size for purposes of Form B22C.

(4)  Line 17: In In re Earl and Robin Hylton, 8/22/07 opinion by Judge Krumm, Case # 07-70320: the applicable commitment period is a temporal requirement, so above median debtors must propose a 60-month plan.

(4a)  Line 19: If the non-filing spouse's paycheck deductions are backed out on Line 19, be sure that you do not then claim these amounts on Lines 30 and 39.

(5)  Line 22: For loans against retirement plans which end before the plan ends, the balance owed as of filing (including interest) should be divided by 60.

(5a)  Line 24, 36, and 39: health related expenses: Debtor can't claim expenses on Line 39c for non-filing spouse; non-filing debtor's medical expenses are not medical expenses of the debtor and he is not a dependent of the debtor; a discussion of how these provisions are to be treated and computed. In re Heidi Elmore, W.D. Bankr. Ct., #12-51394, 5/9/13 opinion (Connelly). If you allege other expenses on Line 36, you will need to provide documents to prove their actual expenses equal the total amount of lines 24, 36 and 39c added together.

(6)  Lines 26, 34, 36, 42, 43 or 44: You will need to supply appropriate supporting documents when asserting expenses on these lines. See In re Minahan, #08-70118, an 8/20/08 decision by Judge Stone; also, In re Kessinger, #09-82328, 5/12/10 decision by Judge Krumm. The Court held that these expenses can only exceed the IRS allowances in unusual circumstances, and even then only by five percent, and that the actual amounts spent on these items by the debtors are not relevant in determining the appropriate Chapter 13 plan payment.

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(7)  Lines 28 and 29:

(a)  In Ransom v. FIA Card Services, 131 S. Ct. 716 (2011), the U.S. Supreme Court ruled that an over-median debtor could not claim a car ownership expense unless he had a loan or lease payment on a vehicle as of filing. The Court left open questions such as whether a creditor could move for an increase in plan payments if the loan ended early in the plan. This decision would appear to overrule Judge Krumm's 2007 decision in In re Earl and Robin Hylton, supra.

(b)  In In re Styles, 397 B.R. 771 (Bankr. W.D. Va. 2008), Judge Krumm held that one debtor may take deductions for two vehicles on Lines 28 and 29, but he went on to say that any such claim is subject to the good faith test set forth in his Hylton decision, 374 B.R. at 586. In Hylton, the debtor was required to add back into the unsecured "pot" any money being used by him during the plan to pay for a luxury vehicle he was keeping and for which he was deducting payments on Line 47. Styles will now have to be interpreted in light of the Supreme Court's Ransom decision.

(c)  If the debtor cannot claim a car ownership expense on a vehicle because there is no loan payment on it as of filing, the Trustee will not object to the debtor taking an "old vehicle allowance" of $200/mo. if as of filing the vehicle is either six years old or has 72,000 miles on it. This allowance is limited to one vehicle per debtor, and is only applicable if the debtor is not already claiming a car ownership expense on another vehicle. The deduction should be taken on Line 57. [Note: Judge Krumm ruled that this deduction can not be taken on Line 27 because there is no statutory basis for the deduction. In re Larry and Deborah Sisler, W.D. Bankr. Ct., #11-50597, 1/31/12 opinion.

(8)  Line 30: If the debtor received a large tax refund in the year prior to filing, the amount on this line should be decreased by 1/12th of the refund unless the debtor's situation, wage withholding, etc., has changed significantly. The debtor must offset taxes withheld with tax refunds to determine actual tax liability. In re Kessinger, #09-73238, Bankr. Ct., W.D. VA., 5/12/10 ruling by Judge Krumm [no formal opinion].

(9)  Line 32: The debtors should only claim the amount attributable to term life insurance, not the whole life portion of the premium.

(10)  Line 33: Do not include the arrearage portion of any support payment, as it will be deducted on Line 49. Only deduct court-ordered payments; any informal payments should be deducted on Line 57.

(11)  Line 36: Health care expenses:

(a)  Do not include health insurance or HAS premiums here; they should be put on Line 39. Any expenses listed here are only those in excess of the $60/person or $144/person allowance for medical expenses already listed on Line 24 and also exceed the amount in a health savings account on line 39c.

(12)  Line 37: Do not include telephone land line or basic cell phone service; they are already included in Line 25.

(13) Line 43:

(a)  Do not include preschool or college expenses.

(b)  Effective 1/1/11, the maximum deduction is $147.50/child.

(14)  Line 44: There is a statutory cap of 5% on this additional expense, and you will need to document both the expenses claimed and the justification for them.

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(15)  Line 45:

(a)  There is a statutory cap of 15% of gross income on this deduction.

(b)  The Trustee may ask for documents to support the amount and prior history (usually the most recent 24 months) of any charitable contributions. If the amount of the contribution has increased significantly on the eve of bankruptcy the Trustee will probably object.

(16)  Lines 47 and 48:

(a)  If debt is being paid in full in less than 60 months, or is a balloon payment, pro rate the payments over 60 months, including interest.

(b)  Do not deduct leased vehicle payments, as they are covered by Lines 25 and 28.

(c)  Arrearages: Deduct 1/60th of the total being cured in the plan, including interest. Per the statute, do not deduct arrearages owed on luxury items.

(d)  In In re McPherson, 350 B.R. 38 (Bankr. W.D. Va 2006), [Judge Anderson], the Court held that: debtors cannot deduct the amount of pre-petition contractual payments owed; they can only deduct the amount being paid by the Trustee in the plan on the secured portion of the debt.

(e)  In In re Kermit and Terri Ball, Case #06-70154, 5/17/06 opinion by Judge Krumm, the Court held that debtors cannot deduct the amount of pre-petition contractual payments if in their plan they are surrendering the collateral.

(f)  Good faith requirement: In In re Earl and Robin Hylton, 374 B.R. 579 (Bankr. W.D. Va. 2007), Judge Krumm stated that the confirmation requirement of good faith [§1325(a)(3) and (7)] still applies, and the Court will still examine such secured debt payments to determine "if the unsecured creditors are better off than they would be if the asset is excluded and the monthly payments on the secured debt are added into a monthly plan payment." To put it another way: the Trustee will object if the unsecured creditors are being asked to pay for the debtor’s boat.

(17)  Line 49: Deduct 1/60th of the priority payments being made in the plan. Do not duplicate arrearage amounts being paid through a separate ongoing state-court-ordered wage deduction.

(18)  Line 50: This amount should reflect the Trustee's commission on the actual monthly plan payment. The commission percentage can be found on the UST's website. On Line 50 a. use the amount of the monthly plan payment in the proposed plan.

(19)  Line 54: You can deduct here income on Line 7 from child support.

(20)  Line 55: Include actual retirement contributions, plus 1/60th of any loan being repaid in the plan, including interest.

(21)  Line 57:

(a)  Do not deduct student loan payments.

(b)  Per the statute [Code §1325(b)(2)], all expenses must be reasonably necessary for the support of the debtors and their dependents.

(c)  This is the line to use if you need to show a "Lanning adjustment," which is a significant change from any income or expense figures from the six months prior to filing and which were used on other parts of Form B22C. Examples might be significant changes — up or down — in the debtor's income from a new job or a reduction or raise in pay; an increase in expenses from the recent birth of a child; retirement; etc.

(22)  Line 59: Monthly Disposable income:

(a)  This is the net amount (after Trustee's commission) which must be paid to unsecured non-priority claims and attorney's fees in the plan. It does not include plan payments for priority claims, Trustee's commission, or secured debts. It is not the amount of the monthly plan payment, since that amount will have to include monthly payments on secured, administrative, and priority claims, plus the Trustee’s commission. The plan payment will always be larger than the amount set forth on Line 59.

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12.  Preparation of Plan:

a.  Before filing the plan, review it one last time and compare it with the schedules.

Most plan mistakes will be avoided if the attorney reviews the plan a final time and compares it with the final version of the schedules. Since most plans are not done at one sitting — many are revised several times before they are submitted, and schedules are often changed significantly as the debtors provide information — it is very common for the final draft of the plan not to match up fully with the final draft of the schedules. This is especially important if the plan has been drafted by a paralegal. Make sure that every scheduled secured and priority claim has been provided for.

b.  Determining the Applicable Commitment Period ("ACP"):

(1)  Above median: 60 months of payments are required, unless the plan pays 100% in a shorter period of time, and the ACP is a temporal requirement. In re Earl and Robin Hylton, 374 B.R. 579 (W.D. Va. 2007; Judge Krumm). The Supreme Court denied certiorari in an appeal from a 6th Cir. opinion which held that the ACP for above-median debtors with no disposable income is still 60 months. Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011), cert. denied, 132 S. Ct. 997 (1/10/12).

(a) Above median debtors with negative disposable income on B22 must remain in Chapter 13 for the full 60 months if their unsecured creditors have not been paid in full. In re Joe and Katherine Pliler, 4th Cir., #13 1445, 3/28/14 opinion.

(2)  Below median: 36 months of payments are required, unless 100% is being paid in a shorter period of time.

c.  Disposable income:

(1)  Above median:  Disposable income is to be determined using Form B22C.

(a) In Lanning, the Supreme Court stated that in above-median cases, the amount on Line 59 is what must be paid by debtors to their unsecured creditors unless the Court finds that there have been "changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation." The fact that the disposable income amount produced by Schedules I and J is different is not in and of itself grounds for deviating from the amount produced on Form B22C. Some attorneys have created false expectations in their debtors by failing to explain this new reality. As stated above, unless a "Lanning adjustment" has been made on Line 57 of From B22C, it will be the Trustee's expectation that the debtor's proposed plan will pay to unsecured creditors the amount set forth on Line 59, regardless of the disposable income figure produced on Line 20.c. of Schedule J.

(b) The amount of the plan payment in an above-median cases is not the amount set forth on Line 59, since the former will have to include monthly payments on secured, administrative, and priority claims, plus the Trustee's commission. The plan payment will always be larger than the amount set forth on Line 59.

(c) Disposable income is to be determined using Form B22C, but an analysis of the debtors' good faith is still applicable (e.g., continued payment of luxury secured debts will not be allowed to reduce the payments to general unsecured creditors; see previous section of outline). In re Earl and Robin Hylton, 374 B.R. 579 (Bankr. W.D. Va., 8/22/07 opinion by Judge Krumm); Lanning requires that a debtor's ATV payments not be deducted from disposable income: Morris v. Quigley, 673 F.3d 269 (4th Cir. 3/7/12).

(d) Computing the plan payments in an above-median, non-business cases. Since there is some confusion about what Form B22C requires above-median debtors to pay into a Chapter 13 plan, the Trustee offers the following as a worksheet:

Add the following amounts:  
(i)  60 x amount on Line 59 (amount to be paid to unsecured creditors, including attorney's fees) = $______________
(ii)  60 x amount on Line 50 (Trustee's commission) = $______________
(iii)  60 x amount on Line 49 (priority claims being paid by the Trustee) = $______________
(iv)  60 x each monthly secured debt payment* on Line 47 being paid by the Trustee (*: if interest is being paid on the claim, include in the monthly payment 1/60th of the total interest) = $______________
(v)  60 x each monthly amount on Line 48 (secured debt arrears) = $______________
Total of plan payments = $______________

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(2)  Below median:  The Trustee uses the disposable income figure set forth on Schedule J, unless he believes that the numbers on Schedule I or J are incorrect or claimed expenses are greater than reasonably necessary.

(a)  Some cases discussing disposable income in below-median cases: In re Tinsley, #09-51194, Bankr. Ct. W.D. Va.,4/8/10 Krumm opinion [mileage reimbursement is income; employer per diem amount is relevant evidence of actual expenses]; In re Donald and Regina Wallace, #10-72504, Bankr. Ct., W.D. Va., 7/8/11 Krumm opinion [Court rules on specific monthly living expenses; cigarette expenses not allowed because unnecessary]

d.  Computing percentage payout to unsecured creditors:  When computing plan payments, please assume a Trustee's commission of 10%, as that is the maximum rate that can be charged and is the figure the Trustee's staff will use in evaluating any proposed plan. So, for example, if the net total of payments to all creditors is to be $10,000, and you are trying to determine what the total of plan payments would have to be to yield that amount after deduction of the Trustee's commission, you would divide $10,000 by 0.9: $10,000 ÷ 0.9 = $11,111.11. Also, remember that when the plan provides for the surrender of the debtor's collateral on a secured debt and the debt exceeds the value of the collateral, you need to add the expected unsecured deficiency claim to the total of unsecured debts when calculating the percentage to be paid to unsecured creditors.

e.  Chapter 7 test calculations:  The Trustee follows the ruling of Judge Stone in In re Christopher and Angel Todd, Case #7-02-04451, 3/17/03 opinion in calculating the amount necessary to meet the "Chapter 7 test" of Code §1325(a)(4). That decision held that in evaluating whether a plan meets this test, both reasonable costs of sale and the Chapter 7 Trustee's statutory commission must be deducted from the fair market value of the property in question. For costs of sale the Trustee uses a 6% commission for improved real estate and a 10% commission for unimproved real estate and personal property; the Chapter 7 Trustee's sliding commission rate can be found at Code §326(a). Judge Stone has ruled that the "effective date of the plan"—the final hearing on plan confirmation—is the appropriate time to value property for purposes of the Chapter 7 test. In In re Allen, 240 B.R. 231, 237-238 (Bankr. W.D. Va. 1999) and In re Minahan, 394 B.R. 116 (Bankr. W.D. Va., 2008)

(Note: All references to the plan, below, are to the form plan approved by the Judges effective 12/1/09; this form can be found on the Court's website.)

f.  First page of the plan:  The Trustee will object if any of the following information is omitted from the first page of the plan:

(1) plan date;

(2) for a modified plan: the date of the plan it's replacing; the plan provisions being modified; the creditors being affected by the modification; and the date, time, and place of the hearing on the modified plan [for the last information, it is acceptable to refer the creditor to the attached notice of hearing].

g.  Paragraph 1 of the plan:  Plan payments.

(1)  If plan payments change during the course of the plan, specify the date on which any such changes take place. (Instead of such "step up" plans, some attorneys amortize over the entire length of the plan payments that will end early; it's simpler for the debtors, and the Trustee will not object to such plans. Make sure the debtors understand the impact of such a plan on their monthly finances early in the plan.) As a general rule, if in a below-median case a fixed payment (e.g., car payment) being made directly by the debtors ends in less than 36 months, the Trustee will expect that the plan payment will be increased by that amount from that point onward.

(a)  Make sure the debtors understand that it will be their responsibility alone to ensure that the payments change on the specified dates, even if payment is by wage deduction. The Trustee always advises debtors at the 341 meeting that they will need to contact their payroll department to remind them at the time of a required increase in plan payments. Some attorneys calendar these payment changes and send out a reminder letter to the debtor at that time.

(2)  If payments other than regular monthly payments are to be part of the plan, specify the date they will be made and the source of the payment. E.g.: "$20,000 from sale of real estate no later than 1/30/14"; "pre-confirmation funds of $2,500 as of 11/30/13." The Trustee may object to any plan that calls for yearly lump sum plan payments of tax refunds; the debtors invariably neglect to make such payments, and thereby become delinquent in their plan payments. The Trustee recommends instead that the debtors adjust their payroll tax withholding at the beginning of the plan and thereby increase their monthly plan payment from the beginning. Note also that if a debtor wishes to receive his/her EITC (Earned Income Tax Credit) refund on a monthly basis instead of having to wait until April, the debtor can file a form W-6.

(3)  Review the fixed monthly payments required in the other parts of the plan to ensure that in every month the plan payment is sufficient to pay in full all the fixed payments plus the Trustee's commission.

(a)  If the debtor is paid weekly, ensure that four weekly payments (as opposed to the 4.33 weeks per month that those payments will "average" over the course of the year) will cover the required Trustee payments every month.

(4)  While the Court will not confirm a plan that specifically calls for more than sixty months of payments, the Court can, under appropriate circumstances, confirm a plan that calls in paragraph 1 for "funds received of $ as of [a date certain]" and then sixty months of payments, as long as the total number of months in the plan is only a few more than sixty.

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h.  Paragraph 2 of the form plan:  Administrative and priority debts.

(1)  "Payment and Term": The Trustee recommends that the Plan state "pro rata" in most instances for debt listed in paragraph 2 of the Plan. This will usually ensure faster payment than fixed monthly amounts, and will prevent underfunding of the plan.

(2)  Priority Taxes:  Make sure that only priority taxes are provided for in full in paragraph 2 of the plan; older taxes are not priority (income: 3 years; property: 1 year; withholding: no time limit) unless no return was filed or the tax was recently reassessed. [Note: The attorney should be aware that while income taxes older than three years are not priority taxes, they are non-dischargeable; in that regard, they are like student loans. Code §523(a)(1)(B)(i); 1328(a)9(2); 507(A)(iii). Also, there’s a split of authority as to the impact of if and when a return is "filed" when the IRS files a substitute return for the taxpayer.] For Virginia personal property taxes, state law gives the locality a lien on the vehicle for all taxes owed. Virginia Code §58.1-3942. So if the debtor still owns the vehicle, the claim is more properly classified as a secured claim, and should be listed in paragraph 3 or 5, not paragraph 2.

(a) Income tax return issues every spring:

(i)  If a case is filed between January 1st and May 1st, a problem with the taxing authorities usually arises. Both the state and the federal government will probably file claims for that year's personal income taxes because even though the returns aren't due until April 15th or May 1st, the tax is statutorily "due" as of January 1st. They will often base the amount of their claim on last year's return, which may result in a claim that is much larger than is in fact owed for the current year. Since a filed claim is "allowed" unless objected to, it's a confirmation issue that will need to be resolved before the case can be confirmed. Our experience is that the fastest way is take care of this problem is to call the Richmond office of the IRS (Linda Kormylo, 804 916 8063, or Robin Rinkewich, 804 916 8069) or, for the VDOT, Mark Ames at TACS [(804) 545-2500; mark@taxva.com]; send them a copy of the current year’s tax return showing no taxes owed; and ask them to withdraw or amend their claim asap. Once a debtor files a bankruptcy case, all Federal income tax returns are filed by mailing them directly to: Internal Revenue Service, Insolvency Units, 400 N. 8th Street, Box 76, Richmond, VA 23219-4838 [4/5/11 IRS notice].

(ii)  4/22/11 update from IRS office in Richmond (Linda Kormylo, 804 916 8063). The Richmond office of Special Procedures used to handle all Chapter 13 cases in the WD of VA, from beginning to end, but its responsibilities have changed. The Richmond office still reviews, and is responsible for, all Chapter 13 cases from the WD of VA "from filing through confirmation." It files the proof of claim in each case. After confirmation, the case is sent to the Philadelphia office. Any issues regarding post-confirmation plan payments by the debtors will be dealt with by the Philadelphia office. If any issues arise regarding post-confirmation taxes, the case will be sent back to Richmond and the Richmond office will handle the matter. Debtors or attorneys can always call the toll free number in Philadelphia (800 913 9358) if they have questions about a case; that office can answer most questions, and will refer the case to Richmond if need be.

(iii) Judge Connelly has held that where the IRS POC shows an amount is owing on a tax return which is "pending examination," confirmation will not be delayed where the debtor's plan does not provide for that amount, the debtors provide the Trustee with the tax return showing that $0 is owed, the IRS has not filed an objection to confirmation, and the debtors agree that they will object to the POC if it is not amended within a reasonable time after confirmation. In re Martelli Booker, #13-60624, 9/19/13 bench ruling. She held similarly in a case where the IRS POC showed a balance owed of $1,500 and the return was "not filed," the debtor showed the Trustee a tax return that showed $0 was owed, the IRS has told the attorney that it would amend the POC to $0, the IRS had not filed an objection to confirmation, and the attorney stated that he would object to the POC if it wasn't amended within a reasonable time after confirmation. In re Olivia Andrews, 13 61377, 9/19/13 bench ruling. Most recently she agreed with the Trustee that the following language should be added to the confirmation order in these situations: If the taxing authority's POC has not been amended to an amount approximately the same as that provided for in the plan within 30 days after the governmental bar date has passed, debtor’s counsel will promptly file and prosecute an objection to the claim. In re Eleanor Jackson, #13-62581, bench ruling.

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(3)  Child or Spousal Support Arrears:  If the DSO delinquency is being paid through an ongoing wage deduction, the Trustee will not oppose a plan provision that allows the arrears to be cured through such an existing wage order IF (i) it will cure the arrears within the term of the plan, (ii) the portion that will not be cured by the existing wage order is cured in the plan and the treatment is clearly disclosed in paragraph 2 of the plan, or (iii) the Virginia Division of Child Support Enforcement does not object to the proposed treatment.. Contact DCSE's attorney Suzanne Wade at Suzanne.Wade@dss.virginia.gov

(a) For a discussion how to determine support obligations vs. property settlement obligations, see In re Leslie Ludwig, W.D. Bankr. Ct., #12-51167, 2/25/13 opinion (Connelly).

(4)  Attorney Fees:  Debtors' attorney fees may be paid pro rata with support arrears and adequate protection payments, but not ahead of such payments.

(a) New fee disclosure language required: As of September 1, 2013, Judge Connelly is requiring that the following language be added to paragraph 2.A.2. of the plan to ensure that all plans accurately reflect all debtors' attorney’s fees which have been awarded or are being sought. If your software program will not allow you to add the language there, put "see para. 11" in para. 2 and put the additional language in para. 11. The Trustee will object to any plan which does not contain this language in either para. 2 or 11:

"The $_________ in Debtor(s)' attorney's fees to be paid by the Chapter 13 Trustee are broken down as follows:

(i) $ _________: Fees to be approved, or already approved, by the Court at initial plan confirmation;

(ii) $ _________: Additional pre-confirmation or post-confirmation fees already approved by the Court by separate order or in a previously confirmed modified plan [ECF# _________ :  $ _________ ;  ECF# _________ :  $ _________ ];

(iii) $ ________: Additional post-confirmation fees being sought in this modified plan, which fees will be approved when this plan is confirmed;

Suggestions for implementing this provision: Pursuant to Rule 2002(a)(6), any new fees in excess of $1,000 will still have to be noticed for a hearing to all creditors. The Court may allow negative notice for any such fee application. The easiest way to determine what other attorney fee orders have been previously entered by the Court is to (i) hit "Control F" on the ECF docket page for a case, and then type in "order granting application"; that will highlight all fee orders entered by the Court; and (ii) hit "Control F" and type in "order confirming plan," and review each confirmation order; and (iii) hit "Control F" and type in "plan" and review paragraph 2.A.2. of each plan that was confirmed.

(b)  "No look fee":  See para. I. I. 1., on page 12 of the outline, for a discussion of no look fees in the WD of VA. All fees must be disclosed in the plan and in the Form 2016(b) attorney fee disclosure statement.

(c)  Post confirmation fees:  Except for fees incurred for a post-confirmation modified plan, which fees will be added to para. 2.A.2. of the modified plan and detailed in the new supplemental language of that paragraph, at present all post-confirmation fees require a fee application and an order entered by the Court.

(d)  Amounts must match amounts set forth on Form 2016(b) and SOFA #9.

i.  Paragraph 3 of the plan:  Secured debts:  Motions to value collateral ("cramdown"), collateral being surrendered, adequate protection payments, and payment of certain secured claims:

(1)  Paragraph 3.A.:  Listing debts being crammed down

(a)  This paragraph requires the Debtors to list those secured debts which they are proposing to "cram down" [split the debt into two parts: a secured part, for which the creditor will be paid the replacement value of its collateral plus interest in fixed monthly amounts; and the balance, which will be made an unsecured claim and paid pro rata with the other allowed unsecured claims.] This part is only to list those debts which are being crammed down; the actual terms of the cram down payments will be set forth in paragraph 3.D., below.

Note: The Fourth Circuit has held that the "negative equity" portion of a purchase-money loan on a vehicle is part of the creditor's purchase-money-security-interest and cannot be crammed down in Chapter 13. In re Price, 562 F.3d 343 (4th Cir. 2009).[But note: The U.S Supreme Court denied cert. in a 2010 Ninth Circuit case that held that "negative equity" in a car loan is not purchase money for purposes of the hanging paragraph at the end of section 1325(a)(5). AmeriCredit Fin. Servs, Inc. v. Penrod, #10-1443, 10/3/11, 132 S. Ct. 108.] It has also held that a mobile home that is the debtor's principal residence and is still personal property can be crammed down. In re Donnie Ennis, 558 F.3d 343 (4th Cir. 2009). If the mobile home has become real property, it cannot be crammed down. In re Witt, 113 F.3d 508 (4th Cir. 1997).

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(2)  Paragraph 3.B.:  Real or personal property being surrendered.

(a)  Where the debtor is surrendering the collateral (house, car, furniture, etc.), the claim must be listed in this paragraph. Any unsecured deficiency remaining after the collateral is liquidated by the creditor will be paid by the Trustee pro rata with the other allowed unsecured claims. [Note: Don't forget to include in your paragraph 4.A. calculation of the estimated distribution to unsecured creditors the difference on Schedule D between the value of the collateral being surrendered and the amount of the creditor's claim.] Clearly identify the collateral (address of real property; year and make of car; etc.). Value and claim information must match what's on Schedule D. Surrender of collateral in full satisfaction of the debt has been prohibited by the 4th Circuit in Tidewater Finance Co. v. Kenney, 531 F. 3d 312 (4th Cir. 2008).

(b)  Judge Connelly has not objected to debtors adding to paragraph 11 — after alerting the creditor in paragraph 3 that it must also look at paragraph 11 — language such as:

"DEFICIENCY CLAIM: Any unsecured deficiency claim must include documentation showing that the debtor's collateral has been liquidated, and the proceeds of sale have been applied to the balance owed, in accordance with applicable state law."

"SURRENDER:  Any unsecured proof of claim for a claim of deficiency that results from the surrender and liquidation of collateral noted in Paragraph 3(B) of this plan must be filed by the earlier of the following or such claim shall be forever barred: (1) within 180 days of the date of the first confirmation order confirming a plan providing for the surrender of said collateral, or (2) within the time period for the filing of an unsecured deficiency claim as established by any Order granting relief from the automatic stay with respect to said collateral. Said unsecured proof of claim for a deficiency must include appropriate documentation establishing that the collateral surrendered has been liquidated, and the proceeds applied, in accordance with applicable state law."

The Trustee will object if this language is not included, since it both benefits the debtors and provides a limit on when the deficiency claim can be filed and can affect distribution of plan payments.

(c)  If real property is being surrendered and there are delinquent real estate taxes owed on the property, don't forget to list in this paragraph the locality to whom the taxes are owed and provide that these taxes will be paid outside the plan by the foreclosing trustee.

(d)  If the initially confirmed plan had the debtor retaining the residence and paying arrears, and the debtor is surrendering the house pursuant to an order lifting stay, you may want to modify the plan to surrender the house so that the discharge will cover the claim. Otherwise, this debt may not be covered by the discharge. Code §1328(a)(1) and §1322(b)(5).

(e)  Debtor can quitclaim real estate to the mortgagee in a clearly-worded and properly noticed plan. (Note that in this case the mortgagee failed to object or respond to the proposed plan, and there were no junior lienholders on the property.) In re Anthony Williams, Bankr. W.D. Va. #10 60519, 7/10/14 bench ruling (Connelly).

(3)  Paragraph 3.C.:  Adequate Protection Payments

(a)  There is no Code provision clarifying the amount or duration of adequate protection ("AP") payments. They are supposed to be payments made to a secured creditor prior to confirmation to compensate the creditor for the depreciation of the collateral between case filing and the beginning of the fixed monthly payments. This amount is usually 1% of the collateral value per month. Even over-secured creditors are entitled to adequate protection payments.

(b)  The Trustee will not object if additional terms clarifying AP payments are also put in paragraph 11, as long as there is a note in paragraph 3.C. advising the creditor to look also at paragraph 11. If AP payments are provided for in an unusual way, in the absence of clear instructions to the contrary, the Trustee will, pursuant to Code 1326(a)(1)(C), assume that AP payments are to be deducted from the principal amount being paid in fixed monthly amounts post-confirmation in paragraph 3.D.

(c)  The plan must provide for adequate protection payments to begin 30 days after filing for all creditors holding purchase money liens on personal property (not required for debts secured by real estate).

(d)  Notice:  The Court's Standing Order #9 [12/05/06] requires that within 5 days of filing the original or amended plan, you must file and serve notice of the proposed AP treatment, using the Court’s required form (found on its website under Local Forms). If an objection is filed by the creditor within 15 days of notice, the Court will set a hearing date. If no timely objection is filed by the creditor within 15 days, adequate protection payments may be disbursed without further notice, hearing, or separate order.

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(e)  Payments:

(i)  Under the column "Adeq. Protection Monthly Payment;" be sure to put the amount of the monthly payment; the Trustee will presume these payments will run through the date of initial confirmation. If you are going to run the adequate protection payments beyond the initial confirmation date, state how many months those payments should be made, and make sure that this number plus the number of months of payments in paragraph 3.D., if designated, produces the correct total of months of payments to each creditor (i.e., not more than the number of months in your plan, and in no event more than 60). E.g. "$__/mo. x __ mos."

(ii)  Under the column "To Be Paid By," the Trustee strongly recommends putting "Trustee." Every AP payment in every plan administered by the Trustee since 2005 has been paid by the Trustee; obtaining proof of payment if they are made by the Debtors would be a nightmare, and would delay confirmation of the Plan. For these reasons, the Trustee will object to any plan that provides that the debtors will make the AP payments directly to the creditor.

(4)  Paragraph 3.D.: Payment of Secured Claims on Property Being Retained (not including paragraph 5).

(a)  This paragraph sets forth the payments to be made by the Trustee to secured creditors (other than the mortgage loans or long term debts covered in paragraph 5). It covers cramdowns, judgment liens, tax liens, and secured debts to be paid in full by the Trustee (including "910 claims"). None of these payments can be made until the Plan has been confirmed.

(b)  In the 3rd column ("Approx. Bal...."), you will put (i) the "crammed down" value [replacement value of the collateral] if the debt is being crammed down, or (ii) the balance owed on the debt if it is a "910 claim" or the balance owed is less than the replacement value of the collateral. (If the claim amount for a "910 claim" or a claim being paid in full is different on the creditor’s proof of claim, the Trustee will adjust the monthly payment to pay the proof of claim amount, plus interest at the rate specified, over the number of months specified. The amount of the creditor's allowed claim will control the amount to be paid by the Trustee, not the amount estimated by the debtor in this paragraph of the plan. In re Carlton and Betty Cassell, #13-71980, 3/14/14 opinion (Black).

(c)  In the 4th column ("Interest Rate"), you must state the rate of interest to be paid on the claim. The interest rate must be in accordance with the Supreme Court's decision in Till v. SCS Credit Corp, 541 U.S. 465 (2004). Based on Till, the Trustee will usually not object to any rate of interest that is (i) at least the Wall Street prime rate on the first day of the month in which the case was filed, and (ii) no more than the Wall Street prime rate on that date plus two points. [Here's a web site where you can always check the current prime interest rate Wall Street Journal prime interest rate.

(d)  In the 5th column ("Monthly Payment..."), put the monthly amount. If you state the number of months these payments are to be made, be sure the total of months in this paragraph plus the number in paragraph 3.C. do not exceed the total number of months in the plan, or in any event 60 months. These payments should cover the principal value of the collateral/balance owed on the debt, plus interest at the rate stated in the 4th column. NOTE: When computing these payments, remember that the principal amount to be paid after confirmation must be adjusted to credit the total of payments made in para. 3.C. toward this claim. [Code §1326(a)(1)(C)] Lundin, Ch13online.com, sec. 449.1 (30).

(i)  On a 910 car claim, the allowed amount of the claim controls the total to be paid in para. 3.D., not the debtor's estimated amount. In re Carlton and Betty Cassell, W.D. Bankr., #13 71980, 3/14/14 opinion (Black).

(e)  Cross-collateralized debt. It can be confusing to provide for credit union debts or other bank loans where the lender has cross-collateralized several loans with the same collateral, often a car. Usually the result is that one or two of the loans are fully or partially secured, and one or two more are being crammed down and will be fully unsecured. In these situations the Trustee recommends that all these debts be listed in paragraph 3.D.; that any of them that are also purchase-money security interests be given Adequate Protection payments in paragraph 3.C.; and that the creditor be directed in paragraph 3.A. and 3.D. to also look at paragraph 11, where a complete explanation like the following can be given:

“Cross-collateralized Debt. Upon information and belief, the 2003 Honda that Debtor is financing through XYZ Credit Union is serving as collateral for both the direct car loan, a credit card, and 2 other loans she has with the Credit Union. The approximate payoff on the car loan is $4,500.00, which is less than the vehicle is worth. Debtor owes approximately $21,200.00 on her credit card and signature loans with the Credit Union. What Debtor is proposing therefore is to pay the Credit Union the value of the vehicle, $8,702.00, with interest through her Chapter 13 Plan, and bifurcate the remainder of the debts she owes to the Credit Union and pay those accounts pro rata with the other unsecured debts on Schedule F."

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(5)  Paragraph 3.E.:  Other debts:  This provision merely advises creditors that any secured debt which is a mortgage on the debtor’s primary residence, or any other long-term obligation (secured or unsecured) which is to be continued upon the existing contract terms, with the Trustee curing any default, will be treated in paragraph 5.

j.  Paragraph 4 of the plan:  Unsecured debts.

(1)  Paragraph 4.A.:  State the anticipated payout percentage to general unsecured creditors, excluding any unsecured claims which are being separately classified in paragraph 4.B. You must also state the payout percentage the general unsecured creditors would receive under the "Chapter 7 test" analysis [Code §1325(a)(4)]. Be sure to include in the total of unsecured debts you are using to calculate this percentage the likely amount of any unsecured deficiency claim on any secured claims for which the collateral is being surrendered in the plan.

(a)  Good Faith:  The Trustee may oppose a plan as proposed in bad faith if the percentage distribution to unsecured claims is too low or for a variety of other issues. See, In re Hylton, 07-70320 (Judge Krumm, 8/22/07 opinion) and In re Minahan, 08-70118 (Judge Stone, 8/20/08 opinion).

(2)  Paragraph 4.B.:  Separately classified claims. If the plan classifies unsecured claims to be paid at a higher or lower percentage, make sure you precisely identify the claim. The best way is to identify it by the number of the proof of claim filed by the creditor and the amount of the claim; if no claim has yet been filed, show the name of the creditor, the basis for the classification, the amount of debt to be paid, and the treatment (e.g., "pay 100%"). The Trustee will generally not oppose classification of co-signed debts, joint debts being paid from tenants by the entireties equity, or criminal fines that must be paid to keep a debtor out of jail. The Trustee will oppose more favorable treatment for student loan debts unless there is no negative impact on the other general unsecured creditors.

(a)  Suggested additional language for classified joint debts: “This debt is being paid in full to satisfy the Chapter 7 test, as the debtors believe this debt to be a joint liability. However, if the allowed claim filed by the creditor does not substantiate joint liability on this debt, the claim will be paid pro rata with the other general unsecured claims.”

(b)  Suggested additional language for student loans being paid directly outside the plan: "This debt shall be paid directly by ** , and the Trustee shall make no payments on any allowed claim filed by this creditor."

k.  Paragraph 5 of the plan:  Secured debts: mortgage loans on primary residence; long-term debts.

(1)  Paragraph 5.A.:  Debtor making regular monthly payment and Trustee paying the arrearage:  Note that the interest rate (column 5) is for interest on the arrearage that is being paid by the Trustee; it is very rare that the creditor's documents will authorize this, and the Trustee will usually object to any such interest. The Trustee usually recommends that you put "pro rata" in the last column ("Monthly Arrearage Payment"), thereby avoiding some complicated calculations and possible underfunding of the Plan. If you are putting in a specific monthly amount, you need also to state the number of months it is to be paid. Estimating the cure period (6th column) can be difficult; and the Trustee will not require precision; this section is asking for the number of months from the time the case was filed until the Trustee has paid in full the listed arrearage. Always try to get documents from the debtor showing the exact arrearage; debtors almost always underestimate the amount of the arrearage, often significantly. If there are both pre-petition and post-petition arrears on a particular claim, please designate those amounts separately; it will help to identify any problems with the creditor's proof of claim and will ensure there is no confusion as to when the debtor is to resume payments on the claim.

(a)  A plan proposed in paragraph 5.A. that the pre-petition mortgage arrears would be cured only by a loan modification; that if no loan modification was granted by the mortgagee, the debtor would surrender the property; and that no time frame would be imposed on this resolution. Both the Trustee and mortgagee objected. Judge Connelly held that she would not approve this approach because of the objections, because there was no cure "within a reasonable time" as required by the Code, and because the debtor could surrender the property and still apply for a loan mod. In re Franklin Bruce, #13-61314, 8/29/13 bench ruling. The Trustee will object to such language in para. 5.A.

(b)  Judge Connelly has ruled that the debtors may provide in this paragraph that the debtors will pay the ongoing student loan debt directly as a long term debt; be sure to state clearly that the Trustee will not make any payments on this debt. In re Shirley Hunter, #13 61463, 9/19/13 bench ruling. The Trustee takes the position that such payments are subject to the non-discrimination requirements of Code section 1322(b)(1), and the Trustee will object to any such proposal that allows the student loan creditor to receive during the term of the plan a significantly higher percentage payout than that being received by the other general unsecured creditors.

(c)  If a party other than the debtors are to make the ongoing payments directly to the creditor during the plan, state the identity of the party.

(d)  Debtor's possessory interest in her real estate even after a completed foreclosure sale is property of her estate, and her right to challenge the validity of the sale survived the bankruptcy filing. In re Rachel Ulrey, Bankr. W.D. Va. #13 70645, 6/2/14 opinion (Black).

(e)  Judge Connelly has denied attorney fees incurred by debtor's counsel while opposing a motion to lift stay in cases where an under-secured car payment was being made directly by the debtor, instead of being paid inside the plan, and the creditor filed a motion to lift stay because of a default in payments by the debtor. The Judge has cited the lack of benefit to the debtor from the direct-pay arrangement. E.g., In re John Whiting, 13 61936, 07/28/14 bench ruling.

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(2)  Paragraph 5.B.:  Trustee making both the regular monthly payment and paying the arrearage:  Again, the Trustee recommends that you put "pro rata" in the last column ("Monthly Arrearage Payment"), thereby avoiding some complicated calculations and possible underfunding of the Plan. If you are putting in a specific monthly amount, you need also to state the number of months it is to be paid.

(a)  In cases where the Trustee is to pay the regular monthly mortgage payment, it is crucial that the debtors' attorney file a "first day order" authorizing the Trustee to begin making the regular monthly payments prior to confirmation. Otherwise, the debtors will be late on their first few payments and incur late fees, etc. Be sure to submit to the Court a motion and order (for example, See [Form#4: PDF / RTF]) as soon as the case is filed which will authorize the Trustee to begin making mortgage payments prior to confirmation. Without such an order, the Trustee will not be able to begin making the regular mortgage payments until the case is confirmed, and the debtors may be charged late payments or be subjected to a motion to lift stay in the interim. The motion and order must clearly state the date upon which the Trustee will begin making payments, the exact amount of the payment, and the address for the mortgage company to which the payment shall be mailed. Also, you need to discuss with the mortgagee any issues regarding late payments and late fees for the first month or two of the plan, perhaps including them in the arrears amount to be paid. Generally, the Trustee will not have sufficient funds to begin making postpetition mortgage payments until the second month after the case is filed.

(b)  There are a variety of issues that arise when the Trustee is paying the ongoing monthly mortgage payment. They include: How will the first month's payment be made in a timely fashion, and by whom? Does the debtor's attorney need to quickly file a proof of claim if the mortgagee has failed to do so? What happens when the escrow payment is increased during the life of the plan, and what notice must the mortgagee give of such an increase? The Trustee is currently working with debtor and creditor attorneys to devise some standard language for paragraph 11 or a first day order which will provide guidelines for these issues; any such language will have to be approved by the Court. The debtors' attorney needs to be aware of these issues before proposing a plan that has the Trustee making the regular mortgage payments.

(3)  Paragraph 5.C.:  Restructured mortgage loans being paid in full during the Plan:  If the last contractual payment on the Debtors’ mortgage is due during the Plan, the Debtors can choose to modify the monthly payments, alter the interest rate using the Till case, and have the Trustee pay through the Plan the remaining balance due on the mortgage. You must specify the monthly payment amount and the number of months it is to be paid. If the claim amount is different on the creditor’s proof of claim, the Trustee will adjust the monthly payment to pay the proof of claim amount, plus interest at the rate specified, over the number of months specified. If such a restructuring is not required and has a dramatic impact on the payout to the general unsecured creditors, the Trustee may object to it.

l.  Paragraph 6 of the plan:  Unexpired leases and executory contracts:  Make sure that all contracts and leases are listed on Schedule G, that all contracts on Schedule G are listed in paragraph 6, and that all these creditors are listed on the matrix.

(1)  Paragraph 6.A.:  Contracts and leases being rejected:  Be sure to add to your percentage payout computation for general unsecured debts any balance that will be owed on a rejected lease or contract.

(2)  Paragraph 6.B.:  Contracts and leases being assumed:  The Trustee again recommends that any arrearage be paid pro rata (column 4). Note that Code §1322(b)(7) says that if plan fails to provide for the assumption of a lease of personal property, the automatic stay&co-debtor stay are terminated as of plan confirmation. Be sure to add to your percentage payout computation for general unsecured debts any balance that will be owed on an assumed lease or contract.

m.  Paragraph 7 of the plan:  Liens being avoided:

(1)  Remember that each creditor listed here must receive a Special Notice (supra, section I.C.).

(2)  See paragraphs m.(3)(b) and III. H. for the language that must be inserted into any order avoiding a lien.

(3)  The motion and/or adversary proceeding must recite specific facts for the Court to rule in the debtor's favor, ie. — value of property, balance of all mortgages, claimed exemption. Debtors' counsel may have to provide evidence of such information at a hearing on the motion/adversary proceeding.

(4)  Make sure service complies with Bankruptcy Rule 7004; especially make sure you have achieved certified service upon a named officer for any FDIC insured institutions. You may also have to serve the Trustee for every Deed of Trust on the property.

(5)  Paragraph 7.A.:  Judicial and non-possessory,non-purchase money liens under Code §522:

(a)  Partial avoidance of judgment liens is available under 522(f)(2). That section explains that math that must be used to determine what portion of the lien can be avoided.

(b)  Both Judge Anderson and Judge Krumm required that a separate motion and order be used to avoid liens under this section. See [Form#18: PDF / RTF] for the special language that Judge Anderson requires in any order avoiding lien; Judge Krumm required that any such order state that it is subject to Code §349(a). On 12/22/10, Judge Krumm ruled that a debtor could not use Code §522 to avoid a judgment lien against one debtor on property owned by that debtor and his spouse as tenants by the entireties with right of survivorship, because the lien never attached to the property. In re James and Virginia Smith, #10-50687.

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(6)  Judge Connelly is allowing debtors to docket the lien avoidance order in the appropriate state Circuit Court immediately. However, the order should have language alerting a title examiner to verify the case has not been dismissed or converted, such as:

"This Order is subject to 11 U.S.C. §348 and 11 U.S.C. §349, so that if the captioned bankruptcy case is dismissed or converted to another chapter pursuant to bankruptcy law, the Deed of Trust avoided in this Order is reinstated and revests the real estate interest as it was immediately before the commencement of the bankruptcy case."

(7)  Paragraph 7.B.:  Avoidance on grounds other than Code §522 (e.g., §506):

(a)  The moving party will have to file a separate Adversary Proceeding to avoid a lien under Code §506. The basis of such an action is that there is no equity for the junior lien to attach to: the property is worth less than the senior lien. The Fourth Circuit has reaffirmed that debtors can avoid junior liens on their primary residence if the lien is wholly unsecured. In re Derrick&Tracie Millard, #09-2266 (4th Cir. 12/15/10, unpublished opinion.)

(b)  If there is even $1 of equity for a junior lien to attach to, it cannot be avoided using Code §506.

(8)  Lien avoidance Cases:

(a)  A plan cannot require a secured creditor whose lien is being paid in the plan to release its lien prior to discharge. In re Stephen and Kathy Akers, W.D. Bankr. Ct., #12-70844, 12/10/12 opinion (Stone).

(b)  On 6/13/11, the Fourth Circuit upheld the decision of the for the Western District of Virginia (Judge Kaiser) and held that a Chapter 13 debtor need not file a Homestead Deed prior to avoiding a judgment lien on real estate using Code section 522. In re Annie L. Botkin, #10-1681 F. 3d.

(c)  The Fourth Circuit on 12/15/10 reaffirmed the right of debtors to avoid junior liens on their primary residence if the lien is wholly unsecured. In re Derrick & Tracie Millard, #09-2266 [unpublished opinion]. On 5/10/13, the Court ruled that a Chapter 13 debtor ineligible for a discharge may, upon completion of the plan, strip a wholly-unsecured lien. In re Davis, 716 F.3d 331. And on 6/6/13, it affirmed by an unpublished per curiam opinion that an objection to a secured claim seeking disallowance of the secured claim and allowance as an unsecured claim is, upon discharge, sufficient to void the creditor's lien on a vehicle. National Capital Management v. Lashauna Gammage-Lewis, #12-2286 judgment. It has also ruled that a married debtor cannot use Code §506(a) to strip a valueless lien off of T by Es property unless the spouse is also a debtor. In re Jose Alvarez, # 12-1156, 10/23/13 opinion.

(d)  Debtors cannot use section 522(f) to avoid a potential judgment lien against one debtor on tenants by the entireties property, because the lien does not attach if both debtors are alive and still married. In re James & Virginia Smith, #10-50687, Bankr. Ct., W.D. Va., 12/22/10 Krumm opinion. In light of this decision, the Trustee does not oppose listing such debts as unsecured claims on Schedule F instead of listing them as secured claims on Schedule D.

(e)  Debtor can still avoid a mortgage lien after he's surrendered the property in a confirmed plan; here the deed of trust was lost and never recorded. In re Charles and Christine Rector, #09-62669, Bankr. Ct., W.D. VA., 3/11/11 Anderson opinion. Liens can be avoided in a Chap. 13 cased filed close on the heels of a Chap. 7 case even though the debtors are not eligible for discharge, but in this case confirmation is denied because the case was filed in bad faith to avoid Dewsnup: In re Karen Helton, #11-60126, Bankr. Ct., W.D. Va., 8/12/11 Anderson opinion in A.P. #11-06028. In re Donna Hayes, W.D. Bankr. Ct., #12-61487, 10/11/12 opinion (Anderson) [no bad faith in the filing of this "Chapter 20," and lien avoidance will be allowed]

(f)  If a properly secured creditor files an unsecured claim, its lien can be immediately avoided under 506(d) by an adversary proceeding filed by debtors' counsel. In re Angela White, W.D. Va. Dist. Ct., #4:12cv00022, 11/7/12 opinion (Conrad).

(g)  The Chapter 13 Trustee can use his strong arm powers under Code §544(a)(3) to avoid an unrecorded deed of trust. In re Michael and Brandy Perrow, W.D. Bankrt. Ct., #09-61234, 9/5/13 opinion (Connelly); In re John G. McCormick, 669 F.3d 177 (4th Cir. 2/10/12). Chap. 13 debtor stopped from using §544 to avoid a lien because she had no exemption to protect. In re Lee, #10-1772, 2012 WL 29185, 4th Cir., 1/6/12 unpublished opinion.

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n.  Paragraph 8 of the plan:  Treatment and payment of claims

(1)  All creditors must file a proof of claim ("POC") to receive payment from the Trustee. The only exception is if there is a Court order specifically instructing the Trustee to pay a claim.

(2)  If a claim is scheduled as unsecured, but the POC has been filed as secured: If creditor doesn't timely object to confirmation, the creditor may be treated in the plan as unsecured. But the creditor can still enforce its lien after discharge.

(3)  If a claim is scheduled as secured, but the POC filed as unsecured: creditor will be treated in the plan as unsecured.

(4)  The Trustee can adjust the monthly disbursement amount as needed to pay an allowed secured claim in full.

o.  Paragraph 9 of the plan:  Vesting of property of the estate

(1)  Even though property "revests" in the debtor upon confirmation, the debtor needs Court permission to sell, refinance, put a lien on, or do a loan modification on the mortgage of real property.

(2)  For all motions to sell, refinance, or modify liens on property: Judge Krumm required that notice be given to Trustee, any creditor who has requested notice, and anyone else required by the Court's Local Rules. Judge Connelly has not ruled on the issue. Be aware that Local Rule 6004-3 (on the Court's website) requires 21-day notice to all creditors for a motion to sell or refinance real property post-confirmation.

p.  Paragraph 10 of the plan:  Incurring new debt

(1)  No Court permission is needed to incur a total of $5,000 (principal amount) in new debt during the Plan; this amount is cumulative, and applies to unsecured or secured debt. A loan against the debtor's retirement account for more than $5,000 must be approved by the Court. [In re Roxanee Campbell, #11-61608, 7/18/13 bench ruling].

(2)  Notice must be sent to the Trustee, any creditor who has requested notice, and anyone else required by the Court’s Local Rules.

q.  Paragraph 11 of the plan:  Other provisions

(1)  Except as otherwise specifically authorized (e.g., new language for para. 2.A.2), attorneys are not supposed to change or add to any of the text of the first ten paragraphs. The Judges' intent is that anything unusual be put into paragraph 11 and be clearly identified as to substance and parties affected.

(2)  If any other section of the plan affects creditors who have already been dealt with in a prior paragraph, the prior paragraph should clearly advise the creditor that it must also look at paragraph 11.

(3)  Both Judge Anderson and Judge Krumm put significant limits on the kinds of substantive provisions that can be inserted into paragraph 11. See, In re Maupin, 07-61051, and In re Jones, 07-50446, in which both Judges denied a debtor attorney’s attempts to provide for a variety of substantive and procedural issues in paragraph 11. Many of these proposed provisions would have affected substantive creditor rights (e.g.: negating contractual arbitration provisions; how payments were to be applied by creditors; releasing of title). The attorney should read these decisions before trying to use this paragraph in any new or creative ways.

(4)  The Court allows, and the Trustee will insist on, standard language being added to the form plan that limits the time within which a creditor may file an unsecured proof of claim for a deficiency on property being surrendered pursuant to paragraph 3.B. of the plan. This language will provide certainty and closure in situations where debtors must pay 100% of claims or want to pay off their plan early.

The following language (or something comparable) can be inserted into paragraph 11 of the plan: If you add this language, you need to state clearly in paragraph 3.B. that the creditor also needs to look at paragraph 11.

"Any unsecured proof of claim for a deficiency which results from the surrender and liquidation of the collateral noted in paragraph 3.B of this plan must be filed by the earlier of the following dates or such claim will be forever barred: (1) within 180 days of the date of the first confirmation order confirming a plan which provides for the surrender of said collateral, or (2) within the time period set for the filing of an unsecured deficiency claim as established by any order granting relief from the automatic say with respect to said collateral.

Said unsecured proof of claim for a deficiency must include appropriate documentation establishing that the collateral surrendered has been liquidated, and the proceeds applied, in accordance with applicable state law."

(5)  Surrender of property where there appears to be equity: In situations where property is being surrendered and there is a chance that there will be net proceeds to the debtors from the property's equity, this paragraph should be used to clarify to whom these proceeds will be paid. E.g.: "any net proceeds from the sale of the property will be promptly paid to the Trustee and applied toward plan payments."

(6)  Rule 3002.1 notices: In order to ensure clarity as to how Rule 3002.1 creditor notices of post-petition mortgage charges or defaults will be treated, the Trustee recommends inserting the following language into paragraph 11. This language is in accord with Judge Connelly's 8/26/13 order in the case of in re David and Amy Quesenberry, #12-62001. If you add this language, you need to state clearly in paragraph 5A or 5B that the creditor also needs to look at paragraph 11.

"Any fees, expenses, or charges accruing on claims set forth in paragraph 5A or 5B of this Plan which are noticed to the debtor pursuant to Bankruptcy Rule 3002.1(c) shall not require modification of the debtor's plan to pay them. Instead, any such fees, expenses, or charges shall, if allowed, be payable by the debtor outside the Plan unless the debtor chooses to modify the plan to provide for them."

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13.  Opting out of unsolicited offers of credit:  One problem for debtors in Chapter 13 is that they continue to receive unsolicited offers of credit even after their case has been filed. These offers can present dangerous opportunities to fall back into the credit cycle. There is now an "official Consumer Credit Reporting Industry" website that will allow debtors to opt out of such solicitations, either permanently or for five years. The website address is OptOutPrescreen.com.

14.  Service of process on corporations and financial institutions: helpful hints (04/28/11): See Bankruptcy Rule 7004.

(a)  To serve an insured institution, Bank:
First go to the FDIC web site to find out if the bank is federally insured (you only need to fill in the name, it will give you choices). This will tell you if the bank is insured, if there is a successor institution, and give the "official address." Second: google the bank name and "investor relations" or "corporate governance." The list of the Board of Directors including the CEO should appear on a letter or in the yearly report. (Serve the CEO at the official address by certified mail, then any other address - from a proof of claim etc.).

(b)  TO serve an insured institution, Savings and Loan:
First go to the OTS web site to find out if S&L is federally insured (you only need to fill in the name, it will give you choices). This will tell you if the S&L is insured, if there is a successor institution, and give the "official address." Second: google the S&L name and "investor relations" or "corporate governance." The list of the Board of Directors including the CEO should appear on a letter or in the yearly report.

(c)  TO serve a corporation:
Every state has a secretary of state which maintains a web site. In Virginia, you can find registered agents and officers for corporations by visiting https://cisiweb.scc.virginia.gov/z_container.aspx. You can search by Name of the Corporation. (I also use this site to find out if the debtors have additional corporations.) This will provide you with the name of the registered agent. If the Corporation is not registered in your state and have filed a proof of claim check the Secretary of State from the proof of claim address. The other favorite is https://delecorp.delaware.gov/tin/GINameSearch.jsp (Delaware - the haven for most large corporations).

II. CREDITOR'S (SECTION 341) MEETING

A.  English-deficient or deaf debtors:  If the debtors are not able to understand or converse in English, the Office of the US Trustee provides for access during 341 meetings to a phone-based translation service. If you have such a client, please advise the Trustee at least ten days ahead of the scheduled 341 meeting of your debtor's need for this service and his/her/their primary language so that the Trustee can make arrangements for a translator to be available by phone at the hearing. Failure to give adequate advance notice may result in continuation of the 341 hearing.

If the debtor is deaf, arrangements have to be made by the Trustee to retain an interpreter for the deaf. Such arrangements are more complicated, so please give the Trustee at least thirty days advance notice of the need for such a service. Failure to give adequate advance notice may result in continuation of the 341 hearing.

B.  Debtors' ID:  Please make sure that the debtors bring with them (i) an original of an official government-issued picture ID [driver’s license, military picture I.D., etc.] and (ii), (if the ID does not have the full Social Security number), an original or copy of Social Security cards or other official third-party documents (tax return; W-2; Medicare card) containing their full Social Security numbers. If they do not bring these documents, the creditors' meeting may have to be continued to a later date. It's probably a good idea for the attorney to bring to the meeting the debtors' most recent tax return; it can be used to provide the debtors' Social Security numbers if they've forgotten their original documents.

C.  Trustee's "Informational Pamphlet":  At the creditors' meeting, the debtors will be given a pamphlet prepared by the Trustee's office that contains important information for the debtors about the Chapter 13 process and their obligations in Chapter 13. (Note: The same information can be found in the FAQ part of the Debtor Information section of this website.) Please encourage them to read this pamphlet right away, as it will help them to understand the Chapter 13 process and provide them with other resources to assist them, such as:

1.  National Data Center: This 24/7 web site is available to all debtors at no charge. It will allow them to check the status of their case — payments, claims filed, claims paid, etc.— at any time in their case. The home page can be found at www.ndc.org.

2.  Credit report information: How to obtain a free credit report each year. (You can obtain one on-line, for example, by going to: www.freecreditreport.com.)

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D.  Conduct of the creditors' meeting:  The debtors' testimony will be under oath and will be digitally recorded. The Trustee or his staff attorney will have questions for the debtors, and creditors attending the hearings will be allowed to ask questions of the debtors. Debtors are also encouraged to ask questions of the Trustee. In addition, there will usually be a short talk by the Trustee or staff attorney about the debtors' obligations in Chapter 13.

At the end of the creditors' meeting, the Trustee and the debtors' attorney will determine, as best they can, if the case can be ready at the originally scheduled confirmation hearing. If it appears that there are appropriate reasons why it cannot be ready, the Trustee and the attorney may agree that the case should be set for a later confirmation date, and the Trustee's Report will so state. This approach will save both the attorney and the Trustee's staff from reviewing a case for the initial confirmation hearing if there is no chance that the case will be ready at that time. For example, in cases where claims issues pose problems (e.g., equity in the debtors' tenancy by the entireties property requires that joint unsecured creditors be paid 100%), the Trustee will probably suggest that confirmation be continued beyond the claims bar date. In this way the Court can be sure that these claims have been properly provided for in the plan, and both the Trustee and the debtors' attorney will only have to review claims one time. (Note: If the attorney prefers to confirm the case now and status it for review after the claims bar date, the Trustee will do that. However, the Trustee believes that it is more efficient for all concerned to continue confirmation in such cases beyond the bar date.)

E.  Trustee's Report and Objections Following Meeting of Creditors (the "Trustee's Report"):  The day after the creditors' meeting, the Trustee will file with the Court, the debtors, and the debtors' attorney his Trustee's Report. [Form#13: PDF / RTF] This is a detailed three page report which sets forth the Trustee's objections to confirmation, if any; any documents or information that still need to be submitted; any motions that need to be filed by debtors' counsel; and any other items that need to be resolved in order for the case to be confirmed.

Please note that: (a) this means that there is pending in every case a motion to dismiss until such time as the case is confirmed, and (b) the Trustee retains the right to ask at any subsequent confirmation hearing for dismissal of a case if either the debtors are not current in their proposed plan payments or the attorney fails to present appropriate reasons why matters in the Trustee's Report remain unresolved.

The Trustee's Report is the "road map" for getting a case confirmed. It contains everything that the Trustee needs in order to recommend to the Court that a case be confirmed, and until all items on it have been completed the Trustee will not be able to advise the Court that a case is "ready." The Trustee strongly recommends that the attorney meet with the debtors right after the creditors meeting to review what needs to be done, and to make sure the debtors understand the importance and time-sensitive nature of following through on the documents and information needed. Beginning work on these items promptly after the creditors' meeting is the key to getting a case confirmed on schedule.

III.  PERIOD BETWEEN CREDITORS MEETING AND CONFIRMATION

A.  Trustee's Goals:  The Trustee's goals during this crucial period between the creditors' meeting and case confirmation are as follows:

1.  Confirm cases at the original confirmation hearing if at all possible, or as soon as possible thereafter. In any event, a case should be confirmed within six months of filing unless there are extraordinary circumstances.

2.  Reduce to an absolute minimum the time spent by Trustee's staff on preparing a case for a given Court date if it is clear that the case will not be ready on that date.

3.  Over time, reverse the current practice whereby Trustee's staff take the initiative in determining readiness of a case prior to the confirmation hearing and report to the attorneys what he/she needs to do to have the case ready. Instead, the attorney needs to take the initiative and report to the appropriate Case Administrator when a case is ready, at which time the Case Administrator will review the case and confirm the attorney's assertion or advise the attorney of any remaining problems.

4.  Front-end-load the court preparation process so that attorneys forward Trustee Report items to Trustee's staff as soon as possible after the creditors' meeting, so that the process is ongoing from the filing date forward and not compressed into the days just prior to a scheduled Court date.

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B.  Debtors' Pre-Confirmation Affidavit:  This affidavit is to be submitted to the Court, with a copy to the Trustee, prior to confirmation. This form, which was significantly revised effective October 5, 2014, is available on the Court's website under Local Rule Form 3015-3A. It provides the Trustee and the Court with information and certifications which under BAP&CPA must be obtained before a case can be confirmed. Specifically, the debtors must affirm to the Court that they are current on all post-petition tax payments, support payments, and secured debt payments, and that they have filed all tax returns required to be filed in the past four years.

While this affidavit is not mandatory, the Trustee believes that it will save debtors and attorneys significant time and effort in the confirmation process. Literally every case filed in the WD of VA under BAP&CPA has made use of this affidavit. If the affidavit is not used, the debtors will either have to appear at the confirmation hearing and testify to the necessary facts, or provide other appropriate documents to achieve the same result.

The affidavit states that the information being certified by the debtors is true as of that date, and will also be true as of the date of the confirmation hearing, so the debtors have an affirmative obligation to notify the Trustee if, for example, they fall behind in support payments or secured debt payments after the affidavit is executed but prior to the confirmation hearing. The debtors' attorney needs to make sure the debtors understand this aspect of the affidavit. If a motion to lift stay is filed shortly after confirmation and it becomes clear that the debtors' affidavit was not correct as of the date of confirmation, the Trustee reserves the right to bring this problem to the Court's attention and ask for sanctions. The Trustee will object to any modified plan that seeks to cure a post-petition-pre-confirmation mortgage default by reducing the payout to unsecured creditors.

C.  Preparing cases for Court: Communication between the debtors' attorney and the Trustee's office:

1.  The debtors' attorney will be electronically served with a copy of the Trustee's Report (see paragraph II. E., above) within a day or so after the creditors' meeting, and the Trustee will also mail a copy to the debtors. As stated previously, this Report sets out all items which need to be completed or resolved before the Trustee will recommend to the Court that the case be confirmed. It is the attorney's responsibility to attend promptly to all these items, and to contact the Trustee's office once the attorney believes all items have been completed or resolved.

2.  As explained previously in section I.B., for cases in Lynchburg or Charlottesville, the attorney will contact one of three Case Administrators in the Trustee's office. All active cases are divided among these two staff members according to the last two digits in the Court-assigned case number. Contact information is as follows:

Case#  Case Admin.  E-mail address  Telephone
-00 to -49 Alexis Pennington APennington@cvillech13.net ext. 17
-50 to -99 Jennifer Wagoner JWagoner@cvillech13.net ext. 24

Trustee's motions to dismiss: CCarey@cvillech13.net   ext. 16

For cases in Staunton or Harrisonburg, please send all information to both:

Angela Scolforo AScolforo@cvillech13.net ext. 10
Jennifer Schindler JSchindler@cvillech13.net ext. 25

3.  It's crucial to begin working on the Trustee's Report items immediately after the 341 meeting, and to give the debtors a clear written list of what is needed from them and by when. As with pre-341 documents, send all documents as a single attachment to an e-mail, and specify on the subject line the debtor's name, case number, "conf docs," and the date of the confirmation hearing. If you send a large amount of documents for a particular issue (e.g., medical bills to establish monthly medical expenses), you must attach a summary that explains what the documents will show or the Trustee’s staff will not review the documents.

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4. Process for all cases for Charlottesville, Staunton, and Harrisonburg:

E-mails from the Case Administrators:

a.  In each case involving confirmation of an initial or modified plan, a motion to dismiss, or a status hearing, a Case Administrator ("C.A.") will send to your office prior to Court an e-mail detailing (i) our recommendation to the Court, (ii) if applicable, what statements will be read into the record in Court (e.g., any unusual confirmation order provisions), (iii) if applicable, the items that we believe must still be completed for a case to be ready or our motion to be resolved, and (iv) if applicable, a proposed continued Court date.

b.  If your office does not respond to that e-mail, we will assume that you are in agreement with what we've said. If there is any question about the e-mail address we're supposed to be using, please advise the C.A. right away.

c.  If you don't agree with the contents of the e-mail, please respond promptly to the C.A. to state your position and to see if he or she can assist you in resolving the matter prior to Court. When you respond, please make sure the subject line of the e-mail contains the debtor's name, the case number, and the Court date.

d.  We retain each of the e-mails—the ones we send and your responses—in an Outlook subdirectory, stored by case number, so that we have easy access to them at any time.

e.  If you know a case must be continued, we strongly recommend that you submit a proposed continuation order (the form is on the Court's website under Local Forms) to the case administrator at least two (2) days before Court which contains a deadline for filing an amended plan in paragraph 6 if a plan must be filed and itemize in paragraph 9 all outstanding Trustee Report items or action items. If the Court agrees to such an order the matter will be removed from the docket. We will not review such orders the day before Court. If the order has not been entered by the Court prior to the scheduled hearing, the attorney must still appear, as the Judge may have concerns about the proposed order that she wants addressed in Court.

Pre-Court phone call from the Trustee or the Staff Attorney:

f.  The Trustee or the Staff Attorney will call debtor attorneys a day or two before Court to discuss those cases in which (i) the Trustee is asking dismissal and the attorney has not previously indicated whether the debtors are opposing the motion; (ii) there are still issues that need resolving (disposable income; Chapter 7 test; etc.); or (iii) there is a question about what the continuation date should be.

g.  As has been the custom, the attorney is free during this call to bring to the attention of the Trustee or Staff Attorney any cases that from the attorney’s perspective need to be discussed.

Exhibit A for continued cases: [Form#14: PDF / RTF]

h.  Judge Connelly has, in almost every case, discontinued the use of the Exhibit A to the Court's standard continuation order. The continuation order will spell out those matters which still need to be resolved and the date by which actions must be taken.

This form may still be used by the Court in unusual cases.

Court's Electronic Docket:

i.  The Judge's Courtroom Clerk will publish on the Court's website an electronic docket for each upcoming Court date. Attorneys will need to monitor that site in the days before a Court date to ensure that they are aware of all of their cases schedule to be heard on that date. Note that the Clerk can add cases up until the day before Court, so it is wise to check the docket one last time late on the day before Court.

j.  The Trustee will usually have with him in Court a complete history of each case, including payment history and filed claims, but it will be on the laptop computer instead of on paper.

NOTE: If you file an amended plan within seven days of a scheduled confirmation hearing, notify the C.A. immediately by e-mail, since we do not check the Court website once a hearing is less than seven days away.

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Once the Trustee's office is notified that the attorney thinks the case is ready, if the Trustee's staff agrees with this assessment the case will be noted as ready for confirmation, pending only a last minute check to make sure the debtors are current in their plan payments as of the confirmation hearing date, and (ii) the deadline for filing objections to confirmation has passed and no objections have been filed. In order for the debtors to be considered "current," the payments received by the Trustee (as recorded by 13Network; see section I.2. above) must be up-to-date pursuant to the proposed plan, or the debtors must present recent paystubs showing that funds have been withheld by the employer sufficient to make them current once these funds are sent to the Trustee. If an automatic wage deduction is in place and working, as long as any "default" is less than one month's payment, the Trustee will consider the debtors to be current. Debtors paying directly must be fully up-to-date in their payments to be considered current.

"SEVEN DAY RULE": Given the other demands placed upon the Trustee's office, all documents and information required for confirmation of a case must be received by the Trustee's office at least seven days before the scheduled confirmation hearing. Any documents tendered to the Trustee's office less than seven calendar days prior to the hearing may not be reviewed by the Trustee's staff, and the case may be reported to the Court as not ready for confirmation.

D.  Continuation of the confirmation hearing:

1.  If the case will not be ready to be confirmed at the initial confirmation hearing, it is the attorney's responsibility to so advise the Trustee's office as soon as that becomes evident. As long as the debtors are making their plan payments as proposed and the attorney is making appropriate progress toward resolving the remaining issues, the Trustee will not object to a continuance beyond the initial confirmation hearing. It will of course be solely up to the Judge whether to grant any continuance. Judge Connelly hears each and every request for a continuance of confirmation, and she will want to hear specific reasons why a case is not ready, and how and when the attorney will resolve the remaining pre-confirmation issues. Generally, the Judge expects that any required documents will be sent to the Trustee, and any amended plan will be filed, within 14 days of the confirmation hearing that is being continued, unless there’s good reason to extend the time frame.

2.  In the Western District, the Court has issued a standard Continuance Order form; see the Local Forms portion of the Court's website, and look under Form B263. It is a two-page form used by the Judge to continue cases in which she wants to set forth specific tasks to be performed or specific deadlines. She will instruct the attorney in Court as to what needs to go in to each paragraph of the order. The attorney must draft the order, obtain the Trustee's endorsement (by sending the proposed order via e-mail to beskinorders@cvillech13.net with the name of the debtors, the case number, and the date the order is due in the subject line), and file it with the Court within ten days from the hearing. If the plan is nearly ready and no specific items or deadlines need to be stated in a continuance order, the Judge may just continue the case via "docket entry" in open Court, and not further order need be entered. As of December, 2013, the Judge has expanded the use of docket entries (rather than orders) to continue matters that only require continuance to a future Court date for the noticing of an amended plan.

3.  The Trustee can always submit a confirmation order to the Court for entry prior to the next scheduled confirmation hearing if the case becomes ready before that date. It is the responsibility of debtors' counsel to advise the Trustee’s office (usually the appropriate Case Administrator) that a case has become ready and the attorney is requesting that a confirmation order be submitted prior to the scheduled hearing.

E.  Filing and noticing amended and modified plans:

1.  If prior to confirmation an amended plan is filed, it must be filed with the Court and noticed to creditors at least 35 days prior to the scheduled confirmation hearing, or a new hearing date will have to be set. For a modified plan being filed after a plan has already been confirmed, an order will be issued by the Court setting a hearing date, and the attorney must serve that notice on creditors with the new plan. If the attorney believes that an amended or modified plan does not require noticing, the attorney must file with the Court a motion and order waiving service of notice on creditors. The order must be endorsed by the Trustee, and should be sent to the appropriate Trustee’s Case Administrator for review and processing. The Judge will want to be told in the motion why the new plan does not need to be noticed to creditors — i.e., why no creditor is being prejudiced,the date on which the plan was filed and the docket number of the plan. A sample of such a combined-into-one-form motion and order is attached to this outline [Form#15A: PDF / RTF]

a.  If the attorney files an amended plan, that has not been confirmed, and then files one or more subsequent amended plans, be sure that page one of the latest plan clearly states that it is "replacing the modified plan(s) dated ...".

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F.  Dismissal or conversion of case pre-confirmation:

1.  Attorney's fees: If a case is dismissed or converted prior to confirmation, all funds on hand with the Trustee except accrued Adequate Protection payments will, as required by the Code, be returned to the debtors upon dismissal unless the attorney has filed a written motion for fees within ten days after the hearing at which the case was dismissed. The Trustee will usually not object to the initial fee set forth in the proposed plan if the attorney has done everything required in the case up to that point and the dismissal or conversion of the case is not the attorney's fault. Note: Judge Krumm would not award attorney's fees to debtors' counsel in this situation unless the attorney's retainer agreement clearly stated that the client agrees to such an award; it is unclear at this time what Judge Connelly's position will be. Judge Connelly requires either that the debtor endorse any such fee order, or the matter be set for a hearing if the debtor refuses to endorse the proposed order; it is not yet clear whether she will allow the attorney to obtain the debtor’s endorsement via telephonic authorization as Judge Anderson did.

2.  Judge Connelly prefers not to have the case dismissed or converted until the order on attorney's fees has been entered, and she will usually postpone the conversion / dismissal until the next Court docket day so that the fee order can be entered.

3.  Trustee's commission: Effective October 1, 2012, the national Office of the United States Trustee reversed prior policy and authorized all Chapter 13 Trustees to take their usual commission on such refunds. This policy change was brought on by rulings by two courts (In re Antonacci, BK-S-08-23349-LBR, Dkt. # 153, Bankr. S.D. Nev. 2011; and In re Cryder, 11-56676, Bankr. S.D. Ohio 2012) that such fees were permissible. Because the Trustee's office expends considerable time and effort on these converted and dismissed cases, the Trustee has changed his policy effective October 1st, 2012, on cases dismissed or converted prior to confirmation to take his usual commission on any plan payments which are in his possession as of the dismissal/conversion date and are being returned to the debtor after that date.

G.  Preferential transfers by the debtors: In situations where a debtor within five years of filing transferred property of significant value without receiving full consideration, the Trustee will usually ask that a consent order be entered in which both the debtor and the transferee waive the statute of limitations on the recovery of such property by the Trustee until such time as the plan has distributed funds sufficient to make this issue moot. In return the Trustee will agree not to recover the property for the estate at this time. [Form#16: PDF / RTF] If the transferee refuses to cooperate, in cases where the value of the property is not great, the Trustee may ask that a comparable consent order endorsed only by the debtor be entered. [Form#17: PDF / RTF] In cases involving property of greater value, the Trustee may refuse to recommend confirmation or file an adversary proceeding to obtain an appropriate order.

H.  Viewing debtors' payment history on 13Network to make sure debtors are current in plan payments:  The Trustee strongly recommends that a few weeks prior to the confirmation hearing the attorney check the Trustee's 13Metwork website (see para. I. G., above) to make sure the debtors are current in plan payments at the time of the confirmation hearing. A case will not be confirmed if the debtors are not current, and can be dismissed if the delinquency is substantial. Evidence that plan payments are being regularly withheld from an employer (copies of recent paystubs, etc.) pursuant to a wage deduction order may be sufficient to show that the debtors are current in their payments.

1.  For cases that have not been confirmed, be aware that 13Network will determine if a case is "current" based solely on the initially filed plan. If the debtors have filed an amended plan pre-confirmation, the system may not be correct in determining if the debtors are in fact current pursuant to the most recently filed plan, and the attorney will need to make that computation himself or check with the Trustee's case administrator.

2.  Payments from debtors are first sent to the Suntrust lockbox in Memphis, Tennessee. They are then downloaded into the Trustee's case management system. A day later they are posted to the 13Network system. This means that payments received by the Trustee's office may take up to ten days to show up on 13Network.

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J.  Feasibility of plan.

1.  In a joint case, the Court can confirm a plan even if the wife has died after the 341 hearing but prior to confirmation. In re Ricky and Carol Clark, #10-63514, 12/19/11 bench ruling (Anderson).

2.  If the feasibility of the plan is put into question by the Trustee — even in situations where a significant portion of the debtors' Schedule I income has not materialized — the Court may still confirm the plan if the debtors have made regular payments and are current as of the confirmation hearing.

K.  Pre-trial conferences with Judge Connelly: The Judge will often hold pre-trial conferences (e.g., lien avoidance motions) via telephone conference call. Her law clerk will set up the call on a day other than the monthly Court docket day.

L.  Debtor refunds. Judge Connelly has announced that the Trustee is not to refund to the debtors any plan payments received by the Trustee prior to confirmation until and unless there has been an order entered authorizing such a refund. The Judge will require a motion from the debtors setting for the reason(s) for the request, and any proposed order must be endorsed by the Trustee. If the Trustee endorses the proposed order, in most instances no hearing will be required.

IV.  CONFIRMATION

A. The confirmation hearing:

1.  The Judge's process: Judge Connelly uses an electronic docket which lists cases in order of case number, oldest to newest. This docket is posted on the Court's website, and is updated by the Courtroom Clerk on a regular basis all the way up to the day before Court. In Court, the Judge first hears cases that are being recommended by the Trustee for confirmation. Then she will ask to hear any and all matters in which the parties are in agreement, either as to the resolution of issues or the date to which the case should be continued. The expected custom is for those attorneys with only a few agreed matters to approach the podium first, and for those attorneys with the most number of agreed matters to come later. Once all agreed matters have been heard, the Courtroom Clerk will call the rest of the cases in case number order, except that any lengthy hearings will usually be put at the end of the docket.

2.  Attorney's presence: The Trustee does not have the authority to excuse the attorney's presence at the confirmation hearing, even if a case appears to be fully ready to be confirmed. The Trustee strongly suggests that if an attorney will not be present at this hearing, she should either: (1) make arrangements for substitute counsel to appear on the attorney's behalf in case unanticipated matters arise, or (2) call the Judge's courtroom clerk to determine if the attorney's presence will be required. If the attorney cannot be present and obtains substitute counsel, the attorney needs to ensure that the substitute is familiar with the facts of the case and can answer the Judge's questions if anything arises. Judge Connelly will in some instances allow a telephonic appearance by counsel; permission for such arrangements must be obtained, with the consent of the Trustee, from the Judge's Law Clerk at least 24 hours prior to the hearing.

3.  Debtors' presence at the confirmation hearing: If a case is ready for Confirmation and there are no other unresolved matters pertaining to the case pending on that day's docket, the debtors will not need to be present in Court at the confirmation hearing. If a confirmation order has been entered by the Court prior to the hearing, the attorney need not appear. If the attorney has any questions about the need to appear, call the Judge's Courtroom Clerk, Jackie Hensley, at (540) 434 8317, ext. 218.

B.  Confirmation Order:  There is a standard form for the Confirmation order in the Western District. [Form#19: PDF / RTF] It is only one page long, and incorporates by reference the terms of the confirmed plan. This order will be prepared and submitted to the Court by the Trustee after the confirmation hearing has been concluded. The Trustee must first obtain the endorsement of (i) debtors' counsel if there are new substantive terms in the "Other Provisions" section (see below) that affect the debtors and this language was not noticed in the proposed plan, and (ii) any creditor whose rights are being affected by such additional language if the language was not noticed in the proposed plan.

The last section, entitled "Other Provisions," is a versatile section which can be used at the confirmation hearing for a variety of purposes, including: correcting math mistakes or typos in the plan; allowing the Trustee to retain a disposable income or Chapter 7 test objection; clarifying that the plan must pay 100%; requiring the attorney to make sure a wage deduction order is working; stating that a debtor is not eligible for discharge; stating that there is no automatic stay in the case; or increasing plan payments to an amount greater than that set forth in the plan. Such uses of the "Other Provisions" section allows confirmation of the plan without additional notice or hearing where the additional provisions do not prejudice creditors. Attached is a list of some of the standard "Other Provisions" used by the Trustee to expedite the confirmation of cases. [Form#20: PDF / RTF]

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C.  Continuation of the Trustee's motion to dismiss case:  In certain situations the Trustee may agree to recommend confirmation only if he is allowed to continue or retain an objection (usually a Chapter 7 test or disposable income test objection under Code §1325) to a future date. In this event, the "Other Provisions" section of the Confirmation Order will contain the continuation of his motion to dismiss, the retention of his objection, and either the date by which the debtors must provide him with certain documents or a future hearing date. If a future hearing date has been set, the attorney will need to provide to the Trustee, prior to the subsequent hearing, documents responding to the Trustee's pending objection.

1.  Debtor's affidavit regarding disposable income issues. The Trustee has developed a form affidavit [Form#20A: PDF / RTF] for use by debtors' attorneys when there are post-confirmation hearings involving changes (or lack of changes) in a debtor’s employment situation or disposable income. The use of this affidavit can sometimes resolve the Trustee's concerns and negate the need for further hearings.

D.  Espinosa Decision. On 3/23/10, the Supreme Court announced its decision in United Student Aid Funds v. Espinosa, U.S.130 S. Ct. 1367. The Court held that a confirmation order is not void under FRCP 60(b)(4) because a court lacked the statutory authority to confirm the plan in question; there was legal error, but the confirmation order is still enforceable and binding because the creditor had actual notice and failed to object. The Court went on to say that Code section 1325(a) requires bankruptcy courts to address and correct defects in a debtor's proposed plan "even if no creditor raises the issue." The Trustee may therefore feel compelled to bring certain issues to the Court's attention even if no other party is objecting or raising the issue.

V.  POST-CONFIRMATION  (Note: The Court requires the Trustee's endorsement of any and all of the orders described below. To obtain the Trustee’s endorsement, please send any such proposed order as an attachment to e-mail to: beskinorders@cvillech13.net)

A.  Review of claims within 30-day window after claims bar date: The Trustee expects that debtors' counsel will in every case examine the Court's claims register within 30 days after the claims bar date to ensure that all claims which are necessary for the successful completion of the debtors' plan have been timely filed. Under Bankruptcy Rule 3004 the attorney may, within 30 days after the bar date, file a claim on behalf of any creditor who has failed to file its claim. This is especially crucial for any priority or secured claims which the debtor needs to pay. Failure to review the claims register at this juncture and file necessary late claims can result in the Trustee filing a motion to dismiss the case, or in the debtors not obtaining the relief they have been assured by their attorney they would receive. When filing such a late claim, be sure to attach documentation sufficient to establish a secured or priority claim. The Trustee considers this to be an essential task of the debtors' attorney in every case.

1.  Objections to claims. Judge Connelly has issued an important decision concerning objections to proofs of claim. In re Glenn and Julie Hilton, #12-61102, 12/02/13 opinion. (See also In re Jack Riggs, Jr., #12-71294, 9/19/13 opinion; and In re David and Amanda Falwell, #08-60495, 11/5/09 Opinion by Judge Anderson). Both opinions cover burdens of production and proof; acceptable bases for objection; and other related issues, and cautions attorneys not to object solely on the basis of no documents being attached to the creditor’s proof of claim. [Regarding attorneys' fees recoverable for such objections, see paragraph V.I., Attorney's fees for post-confirmation work.] In re Magic Wand, LLC, W.D. Bankr. Ct., #12-70404, 10/12/12 opinion (Stone)[Chap. 7 case][A claim's lack of documentation is not by itself sufficient grounds to object when the debtor has not disputed the validity of the debt]

a.  Other cases: In re Randall and Tina Woods, #10,62058, W.D. Va. Bankr. Ct., 1/27/11 Anderson opinion [in an objection to claim based on the statute of limitations the debtor must provide evidence, since he has both the burden of production and of persuasion]; In re Reginald Ponton, #10-61515, W.D. Va. Bankr. Ct., 1/27/11 Anderson opinion [a second claim filed by a secured creditor as a supplemental claim for repossession is a separate claim]; In re George Tomaras, #10-60785, W.D. Va. Bankr. Ct., 2/9/11 Anderson opinion [an objection that the debtor has made other arrangements outside of bankruptcy to pay the claim is not a valid grounds]; In re Frank and Sandra Zacchino, #10-62312, Bankr. Ct., W.D. Va., 4/8/11 Anderson opinion [fact that a claim is contingent or unliquidated is not a basis for disallowing the claim]; In re Chrystalene McCutcheon, #09-64035, Bankr. Ct., W.D. Va., 10/6/10 order [Court lacks jurisdiction to hear objection to claim asserting that it is not a joint claim]. In re Nolan Burnett, W.D. Bankr. Ct., #11-71622, 11/18/11 opinion (Stone)[the intentional filing of an unsecured claim by a properly secured creditor may violate Rule 9011 and subject the creditor to possible sanctions; in re Robert Brooks, W.D. Bankr. Ct., #09-61690, 12/22/11 bench ruling (Anderson) [No laches applied to second lien holder who filed deficiency claim 18 months after foreclosure sale; creditor will be allowed to receive prospective distributions from the Trustee]; In re Judith Burke, W.D. Bankr. Ct., # 11-51585, 6/14/12 opinion (Krumm) [Court has no discretion to allow a late filed unsecured claim; it must be disallowed.]; In re Jason and Tammy Davis, #13-61853, 1/16/14 bench ruling [if a creditor withdraws its POC after the debtor has objected to it, the debtor is entitled under Rule 3006 to an order sustaining his objection].

b.  The Clerk's Office has advised attorneys that each objection should be on a separate pleading, and a hearing on an objection should be scheduled with no less than 45 days notice.

c.  Where the creditor has filed an amended claim prior to the entry of an order disallowing the original claim: Judge Anderson did not believe that an order disallowing the initial claim affected the validity of the amended claim, and that the amended claim would be an allowed claim unless a separate objection to it was sustained. (no formal holding) Judge Connelly has not ruled on this issue. She has, however, stated that a filed objection to an initial claim will also apply to any subsequently filed amended claim, and that debtors will generally be allowed to amend their Schedule F to indicate that a claim has become "disputed."

d.  Objection where the creditor cannot identify the claim. Where the Trustee has been advised by letter from the creditor that it cannot identify the account, and the Trustee objected to the claim and sought permission to redistribute the money to other creditors, the Trustee's objection was denied, and the Trustee instructed to send the money in the name of the creditor to the Bankruptcy Court Registry. In re Richard and Carlette Duperior, #08-63190, 8/29/13 bench ruling.

e.  Service issues on objections to claims. Judge Connelly agrees with Judge Stone and Judge Mayer that service must be accomplished via Rule 7004, and that any service must also be made upon the Registered Agent if there is one. If a creditor is a corporation, serving an objection to claim on a general corporate mail box address is not sufficient process. She will follow Judge Anderson's ruling that if the creditor has designated a specific person (e.g., attorney, law firm, or corporate employee) and an address at the top of the POC form, then service on that party at that address does satisfy the Rules. In re Keith and Lucy Holmes, #08-62195, Bankr. W.D. Va., 6/5/09 Order (Anderson). Judge Connelly has said that one should always serve the entity who filed the claim.

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B.  Trustee's objections to claims:  The Trustee will generally object to any filed proofs of claim that are filed late. The Trustee will not generally object to unsecured claims where (i) the claim has been listed on Schedule F, (ii) a proof of claim has been filed in approximately the same amount as that set forth in Schedule F, and (iii) the proof of claim does not have the usually-required documentation. The Trustee may also object to other claims (secured, priority, or unsecured) for inadequate documentation, but in accordance with Judge Connelly's recent Hilton decision (#12-61102, 12/02/13 opinion), the Trustee must also have other legally sufficient grounds for such an objection.

If a secured claim is filed late but the payment of the claim is important to the debtors' rehabilitation and plan success, the Trustee will generally not object to the secured portion of the late claim, but may object to any payments being made on the unsecured portion of the claim. A copy of the standard order on such an objection by the Trustee is attached. [Form#22: PDF / RTF]

The Trustee is required by the US Trustee to review all mortgage proofs of claim. If discrepancies, excessive charges, inadequate documentation, or other problems are found, the problem will usually be referred to the debtors' attorney so that the attorney can take whatever actions are deemed to be in the best interests of the debtors. Egregious problems, or ongoing problems with a particular creditor, may result in the filing of an objection by the Trustee or referral to the US Trustee.

C.  Change in debtors' work or home address:  Please promptly advise the Trustee and the Court in writing if the debtors have moved their residence; if the debtors move and cannot be found, the Trustee may file a motion to dismiss the case. The address lodged with the Court is the only official address for the debtors, and all service of process from our office will be sent to that address.

Similarly, if the debtors are making their plan payments by wage deduction and they change jobs, please promptly notify the Trustee in writing and file an amended Wage Deduction Order for the new employer.

D.  Semi-annual Trustee's case reports:  Twice a year (usually March and September) the Trustee will send to all debtors and their attorneys an interim statement of all payments received from the debtors and all disbursements made in their case, and a cover letter explaining how to read the report.

E.  Resolution of debtors' default in payments prior to the Trustee filing a motion to dismiss case:  If debtor's counsel is attempting to "nip the problem in the bud" and resolve a delinquency before the Trustee has filed his motion to dismiss the case, the Trustee has devised a motion and consent order which will allow the debtors to adjust or increase their plan payments over the balance of the existing plan term and thereby resolve the problem without having to file an amended plan. It is called the "Motion to Amend Plan to Extend Plan Payments/Amend Plan to Alter Plan Payments/Clarify Plan Terms/Resolve Trustee's Motion to Dismiss" and "Order" of the same title. [Form#23: PDF / RTF] The motion and order are "check box" forms that allow the attorney to check off those paragraphs that apply to the case at hand. They allow the debtors to increase their plan payments by adjusting the amount of the monthly payment, extending the length of the plan, increasing the total of payments, or some combination of these three changes. The order does not require notice to all creditors, since it is only benefiting the unsecured creditors and not changing the treatment of any secured or priority creditors, and so can be used to solve certain problems in a very short time frame. It can be also be used to resolve certain issues that involve the failure of a confirmed plan to provide for later-filed claims. In such instances the attorney will usually also have to file an amended wage deduction order to provide for the new payment amount. We call this form "the order resolving." The debtors will be required to endorse any such order; the attorney may endorse the order on behalf of the debtors based upon telephonic authorization. The order may also include a provision authorizing the award to the attorney of fees for the preparation of the pleadings. The usually allowed debtor's attorney fee for drafting and filing this pleading is $150 as of 10/13.

F.  Resolution of a Trustee's motions to dismiss case:  The Trustee will generally file a motion to dismiss the case when: (i) the debtors are cumulatively two months behind in their monthly plan payments; (ii) the debtors have failed to make a scheduled plan payment from tax refunds, sale of property, etc; or (iii) an allowed claim reveals that the confirmed plan has failed to provide for a claim that must be provided for, and the debtors need either to modify their plan or object to the claim. In these situations the Trustee will set the hearing far enough in the future to allow the attorney to take steps to correct the problem prior to the hearing, and will work with the attorney to resolve the issue. The Trustee has developed a variety of ways to resolve these problems:

1.  Filing Documents Needed to Respond to the Trustee's Motion to Dismiss:  When e-mailing documents to the Trustee that are needed to respond to a Trustee's Motion to Dismiss, the subject line would read: "07-60579 T&E Johnson TMTD 2/20/13," where 2/20/13 is the date of the hearing on the motion.

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2.  Continuation of the motion to dismiss:  The Trustee will generally not object to a continuance beyond the first scheduled hearing if the attorney is making progress toward solving the problem. As with the continuation of the Trustee's Motion to Dismiss in the pre-confirmation context, continuation will require use of the Court's Order of Continuance (see "continuation of the confirmation hearing" in section III. D., above), which can be found in the Local Forms section of the Court's website unless the Judge allows the matter to be continued by use of a docket entry. The Judge will usually not continue the dismissal motion unless a delinquent debtor has appeared with a payment, or the attorney has presented a concrete plan for resolving the Trustee's concerns in the near future; merely asking for more time to solve the problem will usually not be sufficient, and may result in dismissal at the first hearing.

3.  Filing of a modified plan:  In many cases the debtors must file a modified plan under Code §1329 to address the problem(s) raised in the Trustee's motion. Whether or not such an amended plan will have to be noticed to all creditors will depend upon the nature and extent of the changes being proposed. Fourth Circuit case law [In re Murphy and In re Goralski, 474 F.3d. 143 (4th Cir. 2007)] dictates that the debtors must show an unanticipated and substantial change in the debtors' financial circumstances in order to decrease plan payments, so the Trustee will expect amended Schedules I and J, recent pay stubs, and third-party proof of any significant increases in living expenses in those situations. Judge Connelly has stated that she does not at this time have a hard and fast rule as to whether an amended Schedule I and J, or an amended Form B22, will control when above-median debtors are seeking to meet the Murphy test. She will look at the facts of each case as of the hearing date to determine if there has been a substantial change. In re Christopher Lennon, #12-62098, 2/10/14 bench ruling.

When constructing a modified plan, the attorney needs to review all of the following documents to ensure that the modified plan is accurate: (i) the most recently confirmed plan; (ii) the most recent confirmation order, including especially the "other provisions" section; (iii) any prior "order resolving" [see next paragraph]; (iv) any post-initial-confirmation orders lifting stay; and (v) any post-initial-confirmation orders allowing additional compensation to debtors' counsel. Our office sees a large number of mistakes in modified plans that arise because counsel has not reviewed, and incorporated into the modified plan, the relevant provisions and dollar amounts from all these sources especially the Other Provisions section of the prior Confirmation Order. Remember, for example, that if the debtor is choosing to surrender collateral on a secured claim that (i) the Trustee was paying through the plan (e.g., a car), or (ii) the Trustee was paying arrears while the debtor was making the regular monthly payment (e.g., house mortgage), the modified plan must state the amount that the Trustee has already paid on this secured claim and that the Trustee will make no further payments on this secured claim. Also remember that any modified plan must still pay enough to the unsecured creditors to satisfy the Chapter 7 test. If your proposed modified plan is replacing a previously filed and unconfirmed modified plan, be sure to fill in the boxes on page 1 that explain this and identify the date of the prior plan.

For a discussion of how the Trustee should apply interim payments received between the time a modified plan is prepared and the date it's actually filed, see In re Robinette and In re Stamback, W.D. Bankr. Ct., #11-70557 and 11-71617, 4/1/13 opinion (Stone).

4.  The "Motion to Amend Plan to Extend Plan Payments/Amend Plan to Alter Plan Payments/Clarify Plan Terms/Resolve Trustee's Motion to Dismiss" and "Order" of the same title: ["the Order Resolving"]  [Form#23: PDF / RTF] See paragraph F. on the prior page.

5.  "Drop dead" order:  There may be instances where the Trustee will agree to not seek dismissal of a case, but may insist on a "drop dead" order. [Form#24: PDF / RTF] This order will stipulate that if the debtors fall more than 30 days behind in their plan payments at any time in the future, the case will automatically be dismissed, without further notice or hearing, if the Trustee certifies such a default to the Court. This order is usually required only where the debtors have had numerous problems with their plan payments or have incurred a significant delinquency without good reason.

a. Judge Connelly has indicated that where the current hearing is not the debtor's first default in plan payments, she will require that some form of drop dead order going forward be a part of any resolution of the matter. She will not simply allow the Trustee to withdraw his motion to dismiss if the debtor has become current as of the hearing date. She will usually require an automatic wage deduction order as part of any resolution.

b. Note that Judge Connelly may not allow an amended plan to cure a second default in payments where the prior plan or Order Resolving contained a drop dead order that has been violated. Absent a showing of good cause, she may not allow a debtor multiple opportunities to resolve repeated defaults in payments.

6.  Importance of checking 13Network the day before the hearing:  If a Trustee's motion to dismiss is set for a hearing, debtors' counsel should always check the Trustee's 13Network web site [see section I. I. 2. of this outline] the day before the hearing (or, better yet, the day of the hearing) in case a late payment by the debtors or an employer has posted to the Trustee's system at the last minute. Such payments can mean the difference between a case being dismissed or not. Remember that this website may be as much as ten days behind in showing payments sent by debtors, so obtaining evidence of recent payments from the debtors or an employer may be required.

7.  Conversion of case to Chapter 7: If the debtors acknowledged that they could not cure the default and expressed an intention to convert the case to Chapter 7, Judge Anderson would allow them ten days in which to convert the case or it would be automatically dismissed. Judge Connelly has changed that policy; she will usually continue the case until the next Court docket day with the expectation that it will be converted by that date.

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G.  Motions to lift stay:

1.  In order to expedite the processing of creditors' motions to lift stay, the Trustee has developed certain language which must be included in any order resolving such a motion. The required language [Form#25: PDF / RTF] clarifies when the Trustee is to cease making payments on the creditor's secured claim for pre-petition arrearages; sets a time limit by which any unsecured claim for deficiency must be filed; and, if the stay is to be lifted at some future date without any further Court order, sets out a process for notifying the Court and Trustee if the creditor is enforcing its rights to liquidate the collateral. The Trustee will not endorse any order lifting stay unless it contains this language.

2.  Also attached is the language which should be included in any order lifting stay where a party is seeking permission from the Bankruptcy Court to proceed in state court against the debtor's insurance company. [Form#26: PDF / RTF]

3.  Judge Connelly has held that if a modified plan is filed after an order lifting stay has been entered, and the plan pays mortgage arrears, the plan cannot be confirmed without the affirmative consent of the mortgagee. She has also held that after an order lifting stay has been entered, the mortgagee need not be noticed of a subsequent modified plan that surrenders the property.

H.  Attorney's fees for post-confirmation work:  The Trustee makes recommendations to the Court regarding post-confirmation fees for debtors' attorneys based on the policy set forth below, which policy was initially put in place by Judge Anderson in 2010. This policy is subject to change by Judge Connelly. In a nutshell, the policy is that the first post-confirmation attorney's fee should be paid from the unsecured creditors' "pot," and all subsequent ones will be added to the total of plan payments. This will be accomplished by simply adding a sentence to the order awarding fees, thereby doing away with the prior need to amend the confirmed plan or submit an order adjusting the total of plan payments.

1.  All such fees, except those for post-initial-confirmation modified plans, must be sought by application filed with the Court by debtors' counsel, and an order approving the fees, endorsed by the Trustee, must be entered by the Court before the Trustee can pay any such fees to the attorney. The fees for post-initial-confirmation modified plans will simply be added to paragraph 2 of the modified plan and detailed in the additional language of that paragraph now required by Judge Connelly; the confirmation of the modified plan will serve as approval of these fees.

a.  Judge Connelly has stated that if a debtors' attorney is seeking an unusually large amount of post-confirmation fees and there is an objection to the request, she will continue Judge Krumm's policy of requiring the attorney to show contemporaneous time records for all fees incurred in the case, not just the additional post-confirmation fees.

b.  The Judge has also stated that she will continue Judge Anderson's policy regarding submission of applications for attorney's fees. Absent a showing of good cause, debtors' counsel will have 90 days from the date on which he or she has completed the work justifying the fees to submit to the Court both the fee application and the order allowing the fees. If the attorney fails to meet this deadline, no fees will be awarded by the Court. If the Trustee declines to endorse the proposed fee order, the attorney must within 90 days from the date the work has been completed set a hearing on the requested fees, or no fees will be allowed. While the Judge may allow some leeway on this deadline, she has stated that she expects such applications to be filed "promptly".

c.  The Judge does not like awarding debtors' attorney's fees after an order dismissing or converting a case has been entered. So if an attorney's request for fees has not been granted prior to a case being dismissed or converted, the attorney may need to quickly ask the Court to postpone the dismissal or conversion until a fee order can be entered.

2.  The order awarding post-confirmation fees will designate whether the fees are to be added to the total of plan payments.  If the fees are being paid from the existing unsecured creditors' "pot," the order will simply say that the Trustee is to pay the fees.  If the fees are to be added to the plan payments, the order will contain a separate paragraph stating that:

"The total of plan payments in the most recently confirmed plan is hereby increased by $**.00."

[**: the amount of the fees being awarded in this order, plus the Trustee's 10% commission thereon, which in most cases will be $250.00 + $28.00 = $278.00 or $150.00 + $17.00 = $167.00]

There will be no need to file any other pleadings (amended plan, order extending payments, etc.) to provide for these additional fees. 

              

3.  The Trustee will not object to the first post-confirmation fee being paid from the unsecured creditors' "pot" if there are sufficient funds in that "pot" to cover the fee and still leave at least $1000.00 to be distributed to the general unsecured creditors. It will not matter how long after confirmation the problem needing attention occurred.

4.  After the first post-confirmation fee has been paid from the unsecured creditors' "pot," the Trustee will ask that the amount of any subsequently awarded fee, plus the Trustee's commission thereon, be added to the total of plan payments.

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5.  If the problem arose pre-confirmation, but is only discovered post-confirmation (e.g., a motion to lift stay filed shortly after confirmation for mortgage payments missed prior to confirmation), the Trustee will ask that the amount of any subsequently awarded fee, plus the Trustee's commission thereon, be added to the total of plan payments, because such a motion means that the debtors' pre-confirmation affidavit was incorrect.

6.  In cases involving the defense of a motion to lift stay, the Court requires that debtors' counsel execute a certification [Form#28: PDF / RTF] that the attorney has consulted with the debtors, negotiated with the creditor's counsel, etc., before any such fees will be awarded. This certification should be submitted to the Trustee as an attachment to the order allowing the supplemental fees when the order is sent to the Trustee for his endorsement, or it can be set forth in the introductory portion of the order itself.

7.  All such fees must be sought by application filed with the Court by debtors' counsel, and an order approving the fees, endorsed by the Trustee, must be entered by the Court before the Trustee can pay any such fees to the attorney.

8.  For attorney's fees for creditor's counsel in motions to lift stay, Judge Anderson ruled that in cases where the parties have agreed to a proposed settlement order resolving the matters in controversy without the need for a hearing, the fees which the Court will approve for the moving party will be $500.00 in attorney's fees plus reimbursement of the filing fee of $150.00, for a total of $650.00. In re Beverly Horsley, 07-61657, 4/49/08 Order. Judge Stone ruled in In re Sara Travis, #08-71735, W.D. Va. Bankr. Ct., 1/19/11 opinion, that a debtor attorney's request for fees incurred in defending a motion to lift stay would be denied because it was two weeks after a modified plan was filed and counsel's "reactive approach" to the problem and failure to contact the creditor’s attorney were not sufficient. Judge Connelly has not yet announced any decisions or standards for such fees.

9.  For creditor's attorney's fees for Rule 3002.1 notices: $425 fee assessed by mortgagee against a totally current debtor is disallowed, and debtor is awarded $500 in attorney's fees. In re Jerrilan Keys, W.D. Bankr. Ct., #11-62887, 10/25/12 order (Anderson); creditor did not appear.

For objections to claims, Judge Anderson has set forth the following standards: (i) 1-2 claims where no response filed by the creditor: no additional fees; (ii) 3 or more claims where no responses filed or responses filed but matters settled without a hearing: $250; (iii) 1 or more claims and a matter was contested: $250; (iv) matters of unusual complexity: attorney may keep contemporaneous time records and request additional compensation. Judge Connelly has not yet announced any decisions or standards for such fees.

10.  Judge Connelly may, effective December, 2013, approve post-confirmation attorney fee applications for separate matters (motions to lift stay, motions to incur debtor or sell property, motions to dismiss, etc.) using docket entries instead of orders.

I.  Sale or refinancing of debtors' property, loan modification, and early payoff of case:

1.  Court permission required:  Debtors are required to seek Court permission, after notice to all parties, before selling or refinancing real estate or modifying an existing loan (a "loan mod"). . In these situations Local Rule 6004-3 requires that the notice must state: (i) the amount of sale / refinancing; (ii) the amount to be paid to the Trustee; (iii) whether the transaction will pay off the balance owed on the plan; and (iv) if the plan is not being paid off, the amount to be received by the debtors.

2.  Additional language. The Trustee requires that certain additional language be inserted into the order authorizing the sale, refinancing or loan modification before he will endorse any such order. [Form#29: PDF / RTF]

3.  Transfers of personal property. The Court also requires prior authorization in the form of a Court order before selling, transferring, or refinancing other property. If the value of the property being transferred is small, the process may not require notice to all parties. Judge Connelly has authorized the Trustee to "sign off" on transfers of property valued at $500.00 or less without the need for a motion or an order being filed with the Court. In order to approve any such transfer, the Trustee will need from the attorney appropriate documentation to establish the current fair market value of the asset, and an explanation of the reason for the transfer and how the funds will be applied.

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4.  Loan modifications:  Judge Connelly allows Court approval of proposed loan modifications by negative notice to parties. For an example of a form which she has approved, see [Form#29A: PDF / RTF]. She requires that the Trustee endorse any order approving the modification. The Trustee asks that the loan modification agreement be attached to the motion, and that the motion state the following: the change in monthly payment, interest rate, and principal balance; the total of any fees and charges being assessed against the debtors; the amount of arrears being included in the new loan; and the amount of any cash being received by the debtors. Attorneys should review Local Rule 6004-3 regarding sale or refinance of property post-confirmation. If the transaction is in fact a true refinancing, as opposed to a loan modification, the Judge will insist on strict compliance with the noticing and language requirements of this Rule. If under the confirmed plan the Trustee was paying pre- or post-petition arrears to the mortgagee, the order must contain the following language.

"The Trustee shall make no further payments to this creditor on the arrearage portion of it secured claim after the date on which this Order is entered. This provision supersedes any language to the contrary in the confirmed plan and/or the Confirmation Order. The amounts paid to this creditor by the Trustee through the date of this Order on the arrearage portion of the creditor’s secured claim are hereby approved. If the Debtor defaults under the terms of the loan modification being approved herein or wants the Trustee for any other reason to resume making arrearage payments to this creditor, the Trustee will not be able to resume making payments to this creditor on the arrearage portion of its secured claim until either (i) a modified plan reinstating such payments has been confirmed by the Court, or (ii) the Trustee has been instructed to resume such payments by other order of this Court."

5.  Obtaining payoff information from the Trustee's office:  In any situation where the debtors are attempting to pay off their case early, it is the policy of the Trustee's office to provide the payoff in terms of the total amount of payments remaining according to the confirmed plan. This is known as the "base gross payoff." It is possible that the actual payoff could be different if fewer creditors filed claims, or if creditors filed claims in amounts less than anticipated by the confirmed plan; this is known as the "payoff by claims." The Trustee's office will provide this information only in writing, not orally or over the phone.

The accuracy of the payoff by claims cannot be guaranteed unless and until the Trustee's staff proceeds to take all steps necessary to close a case. Since this is a labor-intensive process generally reserved for completed cases, the staff will not provide the payoff by claims unless there is a large difference between the base gross payoff and the payoff by claims, and if the amount of the payoff affects the viability of a refinancing loan to payoff a Chapter 13. Those requests will be considered on a case-by-case basis. For most purposes, the safest figure to use is the base gross payoff. But even this base gross figure is an estimated figure which is subject to change pending a full case review.

When funds sufficient to pay the base gross figure or the payoff by claims figure are received by this office, any excess funds will be refunded to the debtors following the case-closing review. A copy of the standard explanatory letter and disclaimer issued by the Trustee's office whenever a payoff figure is requested is attached. [Form#30: PDF / RTF]

6.  Impact of 4th Circuit Murphy decision on debtor motions to sell real estate: Trustee's motion to modify plan pursuant to Code §1329: In In re Murphy, 474 F.3d 143 (4th Cir. 2007), the 4th Circuit held that a Chapter 13 Trustee may, using Code §1329, seek an increase in plan payments when the debtor experiences a substantial and unanticipated increase in the value of his property and is selling it. The Trustee interprets this decision to mean that in situations where the debtors are seeking Court permission to sell real estate, the Trustee is obligated to determine (i) the amount the asset has appreciated since the case was filed, and (ii) whether as a result of this increase the debtors' plan should be modified to increase the total of plan payments and the payout to unsecured creditors.

a.  Please provide the Trustee with documentation of the current value of the real estate and the net proceeds that the debtors will receive when the motion to sell is filed.

J.  Motion to incur debt:  If the debtors need to incur debt in excess of the $5,000 limit allowed by the form plan (see paragraph 10), they must obtain prior approval from the Court. The $5,000 figure is the principal amount of new debt, and is a cumulative figure for the entire duration of the plan.

The Trustee will want to know the reason for the motion, the terms of the loan being sought, and how the new obligation affects the feasibility of the plan; the last requirement may require amended Schedules I and J and recent paystubs. If the debtors are trying to purchase a replacement vehicle, the Trustee and the Court will want to know what efforts the debtors have made to ensure the lowest possible interest rate and monthly payment. A sample motion is attached. [Form#31: PDF / RTF]

K.  Debtor requests for refunds:  With one exception, the Trustee is not authorized to refund any plan payments to debtors unless counsel has obtained an order from the Court authorizing such a refund. There is no Court-approved form for such an order, but the Trustee will endorse an order if the debtors are paid ahead or there is other good cause; usually no hearing will be required by the Court. Any such order should state the reason for the refund; the amount of the refund; and the refund will not reduce the total amount which the debtors are required to pay under the plan. A sample of such a motion is attached [Form#32: PDF / RTF] The exception is garnished funds that have been sent to the Trustee by the employer or creditor. Such funds will be refunded to debtor's counsel without the need for an order once the source of the funds has been determined to be a garnishment.

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1.  Wrecked cars: One recurring problem involves debtors' cars. If the Trustee is paying for the debtors' car in the plan, the car is totaled, and the insurance company sends the Trustee proceeds which exceed the balance owed on the secured portion of the debt, the debtors will have to obtain a Court order before the Trustee can send them the excess funds to purchase another car. A simple consent order is sufficient, and no notice to creditors is required. A sample of a motion and order to obtain such excess funds for the debtors is attached. [Form#33: PDF / RTF] A copy of the standard letter which the Trustee sends to insurance companies and other parties to explain this process is attached. [Form#34: PDF / RTF] The Trustee recommends that any insurance proceeds come through his office, rather than be paid directly by the insurance company to the secured creditor, because otherwise the debtors' base gross (total of plan payments) will not be reduced by amount of the insurance proceeds, and the debtor will end up "paying twice" for the vehicle.

L.  Modification of a confirmed plan under Code §1329 to reduce or increase plan payments.

1.  Murphy standard. The Fourth Circuit has ruled that in order for debtors to have the right to reduce the payments required by their confirmed plan, they must show that they have experienced a change in their post-confirmation financial condition that is both substantial and unanticipated. Similarly, the Trustee must meet the same standard if he is seeking to have the debtors increase their plan payments: In re Murphy and In re Goralski, 474 F.3d 143 (2007). The Court has also held that Code §1306(a) extends the reach of Code §541 in Chapter 13 to include in the debtors' estate an inheritance received more than 180 days after filing, and to allow the Trustee to seek to add those funds to the debtors' plan. In re Rickey and Cheri Carroll, #13-1024, 10/28/13 opinion.

a.  Judge Connelly has ruled that debtors cannot reduce the total of plan payments just because the mortgage arrears turned out to be less than expected, even if the attempted reduction would still pay the general unsecured creditors more than the confirmed plan had provided. Debtors must still meet the Murphy standard of a significant and unforeseen change in their financial situation. In re George and Deborah Sellers, #11 62774, 10/21/13 bench ruling. See also In re Grover Clark, #5-00-00969, 4/1/04 opinion (Krumm) [tax debts turned out to be less than expected]

2.  Documents needed when seeking a reduction in plan payments. Where the debtors are seeking to reduce their plan payments, the Trustee will ask to see (i) at least two months of recent paystubs from the debtors, (ii) amended Schedules I and J if the debtors are claiming a change in their financial situation, and (iii) supporting documents for any living expenses that have changed significantly. For an above median case, the Trustee will ask for the same documents and information, but it is unclear at this time whether Judge Connelly will rely on amended Schedules I and J, or will ask for an amended Scheduled B22, in these situations.

3.  Trustee seeking increase in plan payments. Generally, the Trustee will only seek upward modification of plan payments if he is made aware of a significant and unforeseen increase in either the debtors' income or the value of their assets. Examples of such situations include the receipt of an inheritance, life insurance proceeds, or a divorce settlement; a dramatic reduction in the mortgage payment as part of a loan modification; or a new job that provides substantially higher income.

4.  Subsequent modified plan. If the attorney files a modified plan, and then files a subsequent modified plan, the first plan should be withdrawn so that there is only one proposed plan pending before the Court.

5.  When modified plans need to be noticed. Judge Connelly has stated that if the amount of money going to the general unsecured creditors (the "unsecured pot") in a modified plan is being reduced, generally the plan should be noticed to those creditors. She is less concerned about the need to notice general unsecured creditors if the percentage payout is being slightly reduced, since paragraph 4 of the form plan states that the percentage payout is just an estimate.

M.  Immediate reduction or suspension of plan payments due to unexpected change in the debtors' financial situation:  In situations where the debtors have experienced a sudden and unexpected reduction in their income or an increase in their living expenses, the Trustee will work with debtors' counsel to deal with such emergencies. The Trustee has developed a consent order which allows the debtors to immediately reduce or suspend their plan payment and existing wage deduction with the understanding that the debtors will cure their default within a specified period of time or an amended plan or Order Resolving will be filed within a specified period of time to cure any resulting default. [Form#35: PDF / RTF] When the attorney sends the proposed suspension to the Trustee, she should explain in the motion why it is necessary. An example of a motion to suspend payments is attached. [Form#35A: PDF / RTF] Judge Connelly has authorized the Trustee to endorse an order seeking a suspension of plan payments, regardless of the length of the suspension, if the Trustee has no objection and finds that the plan will remain feasible after the suspension period. So any motion should explain in detail the justification for the request and the length of the suspension. If the Trustee is paying the ongoing mortgage payment in the Plan, the mortgagee must be noticed, and its right to seek a lifting of the stay will not be affected by any suspension granted by the Court. The Trustee will usually not recommend a period of suspension greater than 90 days absent extraordinary circumstances. Based upon the attorney's proffer of good cause, in emergency situations the Trustee may not require supporting documentation of the alleged change in circumstances until the amended plan is filed. If the attorney fails to file the promised Order Resolving modified plan within the agreed period, the Trustee will file a motion to dismiss the case.

N.  Notice required for modified plans that do not prejudice creditors:  As stated previously, if debtors' counsel believes that a modified plan does not require noticing because no creditors are being prejudiced, the attorney should file with the Court a motion and order waiving service of notice on creditors. The order must be endorsed by the Trustee, and should be sent to the appropriate Trustee's Case Administrator for review and processing. The Judge will want to be told in the motion why the new plan does not need to be noticed to creditors—i.e., why no creditor is being prejudiced. A sample of such a motion and order is attached to this outline [Form#15A: PDF / RTF]

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O.  Practice pointers:

1.  Notice required for various motions: Look at Rule 7004 and check with the Court clerks to make sure proper notice has been given in each instance.

2. Wording of motions:

a.  To incur debt:  To save having to redo such motions if an expected loan falls through, the Trustee suggests adding the following language to any motion and order involving approval of the debtor's request to incur debt: "... from lender X at the following terms: ... or from any other lender/seller at terms equal to or more favorable to the debtor."

b.  To sell real estate:  When selling real estate, the Trustee suggests using "sale free and clear of liens" language in both the motion and the order, so that if a previously-unknown lien is discovered in the title work-up it won't delay the sale: "Sale to be free and clear of liens, with all valid deeds of trust, judgments, tax liens and other encumbrances being removed from the title to the real property and impressed upon the sale proceeds without change in priority."

3.  Sale or refinancing of real estate: problem regarding who pays arrears:  If the confirmed plan provides for the Trustee to pay arrears, but for whatever reason they are instead to be paid at closing, debtors must still pay the full balance of the base gross (total of payments) of the confirmed plan to obtain their discharge; the Trustee has no authority to reduce the base gross unless the plan is amended. The Trustee will probably oppose reducing the base gross by the amount of the arrears being paid at closing because of the holdings of Murphy (4th Cir.) and Grover Clark (Judge Krumm). Check with the Trustee prior to filing the motion to discuss this issue if it will cause problems for the debtors.

P.  Conversion and Dismissal generally: A case filed under Chap. 13 and converted to Chap. 7 is subject to §707(b), and cause to dismiss a case pursuant to that section includes bad faith. In re Terrance and Leslie Reece, W.D. Bankr. Ct., # 11-51044, 8/29/13 opinion (Connelly).

Q.  Distribution of plan funds at dismissal or conversion of case.

1.  Conversion:  It is the Trustee's position, based on the language of paragraph 3 of the form Chapter 13 plan, that he is required to distribute to creditors pursuant to the confirmed plan any funds in his possession as of the date the Court enters an order converting the case to another chapter. In a situation where a debtor obtained permission to sell his real estate, sent the proceeds to the Trustee, and then tried to convert his case to Chapter 7 and have the funds sent to the Chapter 7 Trustee, the Court agreed that the funds should be distributed by the Trustee pursuant to the debtor's confirmed plan. In re David and Mary Halterman, #07-50584, 6/8/10 opinion by Judge Krumm.

2.  Dismissal:  It is the Trustee's position, based on the language of paragraph 3 of the form Chapter 13 plan, that he is required to distribute to creditors pursuant to the confirmed plan any funds in his possession as of the date the Court enters an order dismissing a case based on the debtor’s request for dismissal. In a situation where a debtor obtained permission to obtain a reverse mortgage on his property and promised to send the proceeds to the Trustee to pay off his plan, and then tried to voluntarily dismiss his case and have the proceeds returned to him, the Court agreed that the funds should be distributed by the Trustee pursuant to the debtor's confirmed plan. In re Arley J. McCreery, #09-60858, 8/30/10 opinion by Judge Anderson.

R.  Reopening a dismissed case. When a case has been dismissed but has not been closed by the Court, Code §350 doesn't allow the Court to reopen the case, so debtor's motion is improper; the motion must be filed under Rule 9024. In re Leroy and Mary Jane Mull, W.D. Bankr. Ct., # 12 71486, 2/5/13 opinion (Connelly).

S.  Reconverting a case back to Chapter 13 from Chapter 7. In a case where the attorney mistakenly converted the debtors from Chapter 13 into Chapter 7 and later wanted to bring them back into Chapter 13, Judge Connelly has ruled that (i) she does not have the authority to vacate the debtors' initial conversion from Chapter 13 to Chapter 7, even though the attorney admitted it was due to his "mistake," but (ii) she does have the authority to reconvert their case back to Chapter 13. In re Brett&Laura Bryant, #12-62595, 12/16/13 bench ruling.

T.  Miscellaneous post-confirmation issues

1.  Creditor request for documents (tax returns) pursuant to Code sec. 521 in 59th month of plan denied. In re Robin Tomer, #08-61265, Bankr.W.D. Va., 3/14/14 opinion (Black).

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VI.  COMPLETION OF PLAN PAYMENTS, DISCHARGE, AND CLOSING OF CASE

A.  Completion of plan payments, stopping of wage deduction order, and debtor refunds:

1.  Seeking additional time where debtors are struggling to complete plan payments. While the Judge has stated that she does not have the authority to extend plan payments beyond sixty months from the date of initial plan confirmation, she has allowed the Trustee to continue his motion to dismiss a case to a date a few months beyond this deadline to allow debtors nearing the end of their case to complete their plan payments. In re Martha Price, #08-60707, 07/18/13 bench ruling. This process can be used, for example, at the end or beginning of a calendar year to give debtors time to receive and forward to the Trustee their income tax refund.

2.  Stopping the wage deduction. Once the debtors have completed all the payments required by their confirmed plan, any automatic wage deduction in place should be immediately stopped. While the Trustee has his own system for keeping track of when plan payments are completed, it is not a perfect system, and the Trustee may sometimes be a month or so late in becoming aware that all plan payments have been made. Debtors should therefore be advised to keep track of when they have completed their plan payments and should be urged to advise the Trustee immediately when payments have finished; debtors can log onto 13Network (see section I. G., above) at any time to find out the status of their plan payments.

Once the Trustee has been made aware that all plan payments have been completed, he will so advise the Court and it will issue a Wage Release Order stopping any ongoing wage deduction. The order will be sent to the debtors, their attorney, and any employer that is doing a wage deduction. The debtors should call the employer's payroll office immediately to ensure that the proper person has received the order and the deduction is being stopped. If problems arise, the debtors should promptly contact their attorney.

If excess funds have been sent to the Trustee's office because the wage deduction continued beyond its proper ending point, the debtors should notify the Trustee's office. If in fact excess funds have been sent to the Trustee's office, a refund to the debtors can be made at the next regularly scheduled monthly distribution after the employer's checks have cleared the bank and the Trustee's office has completed its case closing review of the case. (Note: The Trustee is not permitted to write checks on any funds until they have been on deposit in the Trustee's account for 14 calendar days.)

3.  Trustee's case closing procedure. The Trustee's staff conducts a thorough closing procedure for every case once plan payments have finished. It usually takes 4-6 weeks to conduct this process. Sometimes this process will reveal that the debtors are entitled to a refund (for example, where not all creditors filed claims and every creditor was unexpectedly paid in full), but no such refunds to debtors can be issued until this closing process has been completed.

B.  Early completion of plan payments. Judges Anderson and Krumm allowed debtors to pay off their plans early: in less than 36 months for below-median debtors, and in less than 60 months for above-median debtors. Judge Stone ruled in In re Richard and Shirley Niday, W.D. Bankrt. Ct., #11-72491, 8/27/13 opinion, that a debtor must first modify his plan under §329 and prove good faith. Judge Connelly stated on 12/12/13 that for now she will not require such a plan modification as long as the Trustee, after determining how and why the case is finishing ahead of schedule, after determining how and why the case is finishing ahead of schedule, is not objecting to the early completion of the case.

C.  Discharge procedure: Pursuant to Local Rule 4008-1, once the Trustee has certified to the Court in a BAP&CPA case that the debtors have completed their plan payments, the Court will issue to the debtors a "Notice to File Certification of Compliance with 11 U.S.C. §1328." The debtors will then have 60 days to execute and file with the Court and the Trustee the "Debtors' Certification of Compliance with USC §1328" form that accompanies this Local Rule and which can be found on the Local Forms section of the Court's website, Form 4008-1A. In this Form the debtors are certifying, among other things, that they have taken the personal financial management course required by Code §1328(g).

Once the debtors have filed the Certification form with the Court, the Clerk's Office will notify all parties that the debtors have applied for a discharge, and that, absent any objections, the discharge will be issued after a specified date. If no objections are filed, the discharge will be automatically issued; if any objections are filed, the Court will set a hearing date. If any objections to the discharge are filed, debtors' counsel will need to be prepared to present appropriate evidence the hearing. If a hearing is scheduled, be sure to make it clear to the debtors whether they need to appear for the hearing.

D.  Failure to file the required certification. Note: If the debtors fail to file the required certification form within the 60-day period, the case may be closed by the Court Clerk's Office without the issuance of a discharge. At present, the Court's policy is to close such cases without a discharge 30 days after the expiration of the 60-day period. The Court may, in some instances, allow the reopening of a case for the purpose of complying with this certification process.

E.  Discharge procedure where debtors are not eligible for a discharge:  Upon receiving the Trustee's report of completion of plan payments in a case where the debtors are not eligible for discharge, the Court will not issue the "Notice to File Certification of Compliance with 11U.S.C. §1328"; instead, it will wait for the Trustee's Final Report and close the case after the 30-day time frame has passed.

F.  Hardship discharge under Code §1328(b): The Bankruptcy Code allows debtors to apply for a discharge before they have completed their plan payments only in certain restricted circumstances. This is the so-called "hardship discharge." Before the Trustee will be able to make a recommendation to the Court in these situations, he will need to be provided with evidence that shows the debtors have met the three pronged test of this section [the failure to complete plan payments was due to circumstances beyond the debtors' control; the amount of funds already distributed to unsecured creditors meets the "Chapter 7 test"; and no modified plan is practicable]. Always check the Chapter 7 test first; if it has not been met, the other two tests are moot and no hardship discharge can be granted.

Note: At present there is a split between the Judges as to whether someone who dies after confirmation is eligible for a hardship discharge. See In re Sandra Stockton, Case # 04-00792, 5/8/07 opinion by Judge Krumm (discharge denied); Judge Anderson allowed it in one case where there were no objections filed by creditors. Judge Connelly has yet to rule on this issue.

Check local practice for the kinds of evidence that must be presented to the Court to obtain a hardship discharge. Judge Krumm, for example, required clear evidence that any alleged disability is permanent. E.g., In re Stockton, #5-04-00792, 5/8/07 opinion; In re William and Catherine Shifflett, #05-50345, 12/14/07 opinion.

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G.  DSO Letters:  At the time of discharge, the Trustee is required by BAP&CPA to send notice to any DSO (Domestic Support Order) payee and the state agency in charge of collecting child support. The notice alerts them to the issuance of the discharge and certain information about the debtor and any of his/her non-dischargeable debts. [Form#36: PDF / RTF]

H.  Rule 3002.1 notices:

1.  In cases where the Trustee is paying either the mortgage arrears or the regular monthly mortgage payment, the Rule requires the Trustee to file with the Court and send to the debtor, debtor's attorney, and the holder of the claim a notice when he has completed making these payments. The notice triggers an obligation by the holder to respond within 21 days if it disagrees that the account is current. The new Rule also requires the claim holder to file with the Court and notice the debtor and Trustee of any (i) increase in the post-petition mortgage payment, or (ii) any post-petition expenses, fees, etc., incurred by the holder and to be paid by the debtor. The former is to be filed at least 21 days before the changes take place; the latter must be filed within 180 days after the expenses have been incurred. There are two Official Forms which must be used in this process.

2.  These notices, filed by creditors for post-petition charges against the debtors, are not claims; the Trustee cannot pay them unless they are filed as claims; and filing them is an administrative function that should not require an attorney. In re David and Amy Quesenberry, W.D. Bankr. Ct., #12-62001, 8/26/13 consent order (Connelly). See also In re Johnny and Christina Sheppard, E.D. Bankr. Ct., #10-33959-KRH, 4/18/12 opinion (Huennekens).

3.  In a case where the loan documents allowed for fees where there had been a default or where the creditor’s interests had been materially affected, Judge Connelly denied the creditor's request for a $275.00 for "Bankruptcy Attorney Fees" where the debtor was current at filing and current throughout the case. There was no controversy, no arrears, nothing that materially affected the creditor’s interests. It was not reasonable for the debtor to have to reimburse the creditor for fling a proof of claim in this case. While the creditor could charge these fees, the creditor should pay them. Debtor attorney's request for $500 in attorney fees was denied. In re Phyllis C. Williams, #12-62381, 7/18/13 bench ruling.

I.  Debtor refunds where debtors' whereabouts unknown: Occasionally there is money to be refunded to the debtors upon completion of their plan, but the refund check to the debtors is returned because the debtors have moved. In those situations if the Trustee's staff cannot reach the debtors by phone, an e-mail or fax is sent to the attorney asking if the attorney has a better address. If no better address is forthcoming from the attorney, the Trustee is required to send the check to the Bankruptcy Court registry. The money will remain there for a specified period of time so that the debtors can claim it. Given the importance of this money to the debtors, the Trustee asks that attorneys respond promptly to such an inquiry, and that they exert reasonable efforts to use information in the file to locate the debtors.

J.  Revocation of discharge. In re Cathy Knupp, #06-50342, Bankr. Ct., W.D. Va., 7/26/11 Krumm opinion [a case of first impression in the W.D. of Va; Court sets out the standards and elements that must be proven and finds that in this instance the discharge should be revoked].

K.  Practice pointers:  The Trustee strongly recommends that the debtors' attorney take the following steps at the conclusion of the debtors' case:

1.  Notify credit reporting agencies of discharge:  Assist the debtors in notifying the three major credit reporting agencies of the successful completion and discharge of their case. Sending a copy of the schedules and the discharge will increase greatly the odds that the case is properly recorded in their records. The names and addresses of these agencies are in "the Gold Booklet" given to each debtor at the creditors' meeting; this booklet is reproduced in the Debtors Information section of this website.

Advise the debtors to check their credit report again in six months or so to make sure that their case and their discharge have been properly recorded on their credit reports.

2.  Closing letter to debtors:  Send a closing letter to the debtors outlining the effect of the discharge, how to follow up on the correct reporting of their case to the credit reporting agencies, what to do in case of a violation of the discharge injunction, etc.

3.  Retention of the bankruptcy papers: Impress upon the debtors the importance of retaining in a safe place their bankruptcy papers. As we know all too well, they will need them over the next few years for a variety of reasons.

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VII.  MISCELLANEOUS

A.  Debtors' complaints about their attorney:  The Trustee receives complaints from debtors about their attorneys on a regular basis. It is the Trustee's policy to take all such calls himself, and, pursuant to Code §1302(a)(4), advise debtors of their options. The Trustee explains to each debtor that the first step in any such situation is to arrange a meeting with the attorney to express the debtor's concerns face to face; that most of these problems are the result of a misunderstanding or lack of communication and can be resolved; that if requested, the Trustee will send the debtor a letter outlining the debtor's options [Form#37: PDF / RTF]; and that if requested the Trustee will provide the debtor with the names of other experienced bankruptcy attorneys in the relevant geographical area if the debtor wants a second opinion or to seek substitute counsel.

B.  Withdrawal of counsel. Judge Anderson's policy on withdrawing as counsel of record in a Chapter 13 case was as follows; the Trustee believes at this time that Judge Connelly will follow a similar process. If the debtor signs the withdrawal order and Trustee endorses the order, the withdrawing attorney should submit her motion and order to the Court, and in most cases the Judge will enter it without a hearing. If the debtor has not signed the order, the matter needs to be set for an actual hearing, and the debtor and the Trustee must be given appropriate notice of the hearing date and time. The Trustee will always ask what arrangements have been made to find the debtor substitute counsel, and he may postpone his endorsement of the order until substitute counsel has been obtained.

C.  Complaints about Trustee staff or communications:  The Trustee's office is committed to providing prompt, courteous, and accurate service and information to debtors, attorneys, and creditors involved in Chapter 13 cases. Any complaints concerning Trustee staff will be handled directly by the Trustee, Herbert L. Beskin, and can be transmitted to him using the phone, fax, or e-mail contact information found on the home page of this web site.

D.  Internet Resources for Bankruptcy Lawyers: Nova Southeastern University published in the summer of 2011 Legal Studies Paper No. 11-003 entitled "The Bankruptcy Lawyer's Guide to the Internet," by Pearl Goldman. It contains a variety of sites that practitioners might find helpful. The paper can be downloaded without charge from The Social Science Research Network Electronic Paper Collection. The National Consumer Law Center has created a website that deals with problems associated with mortgage-related issues: www.bankruptcymortgageproject.org".

E.  Bankruptcy petition preparers:  For a case discussing the statutory provisions governing non-lawyer bankruptcy petition preparers, see In re Jane Brown, Bankr. W.D. Va., # 13-70356, 1/24/14 opinion (Stone [petition preparer fined $3,500 by the Court pursuant to Code sec. 110].

F.  Creditor request for documents pursuant to Code §521:  A creditor with a non-dischargeable debt was denied the use of sec. 521 to obtain copies of the debtor's tax returns in the 59th month of the debtor's plan. In re Robin Tomer, #08-61265, 3/14/14 opinion (Stone).

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(Version #41,  Updated 10/24/11)

TRUSTEE'S FORMS REFERRED TO IN THE OUTLINE OF COURT'S AND TRUSTEE'S POLICIES AND PROCEDURES


IMPORTANT NOTE TO ATTORNEYS - August 14, 2014:  We are still in the process of updating the forms that are linked to the Debtor Attorney Information section of the website, but we wanted to go ahead and update the text of the section in the meantime. If you have any questions about the forms referenced in this section, call the Trustee's paralegal, RC Johnson, at (434) 817-9913, ext. 20, or e-mail him at RCJohnson@cvillech13.net.


I. FILING OF THE CASE   Form     Page
  1A.

Motion&Order to allow temporary continuance of automatic stay, and use of negative notice to schedule a second hearing (Judge Anderson)  PDF / RTF 6 
  2. Forms for Wage Deduction Orders and Pay Direct Orders  PDF / RTF 7 
  3. Order permitting direct payment by debtors because of special circumstances  PDF / RTF 7 
  4.

Sample motion and order to authorize the Trustee to make regular mortgage payments prior to confirmation  PDF / RTF 7 
  5.

Wage Deduction Order for employer to pay directly to mortgagee the debtors' regular monthly mortgage payment  PDF / RTF 8 
  6. Trustee's "Master Case Checklist"  PDF / RTF 8 
  7. Trustee's "Introductory Letter to Debtors"  PDF / RTF 8 
  8. Trustee's monthly "Profit and Loss" form for self-employed debtors  PDF / RTF 9 
  9. Debtors' affidavit where no federal tax returns were required to be filed  PDF / RTF 9 
  10. Trustee's "Affidavit of Financial Assistance" from debtors' friends/family  PDF / RTF 10 
  11. Trustee's "Debtor Questionnaire"  PDF / RTF 10 
  12.
Trustee's letters at beginning of case to DSO payee and state child support agency  PDF / RTF 13 
II. CREDITORS' (SECTION 341) MEETING    
  13. "Trustee's Report&Objections Following Meeting of Creditors"  PDF / RTF 32 
III. PERIOD BETWEEN CREDITORS' MEETING AND CONFIRMATION    
  14. Trustee's Exhibit A to Court's Continuation Order  PDF / RTF 34 
  15A. Motion and Order Waiving Service of Notice on Creditors for an Amended/Modified Plan  PDF / RTF 35 
  16.

Consent order tolling statute of limitations on recovery of assets preferentially transferred by debtor: both debtor and transferee endorsing order  PDF / RTF 36 
  17.

Consent order tolling statute of limitations on recovery of assets preferentially-transferred by a debtor: transferee refusing to endorse order  PDF / RTF 36 
  18. Language which must be inserted into any order avoiding lien  PDF / RTF 28 
IV. CONFIRMATION    
  19. Confirmation Order  PDF / RTF 37 
  20. Some standard "Other Provisions" used in Confirmation Order  PDF / RTF 37 
  20A. Continued hearing on disposable income: debtor's response  PDF / RTF 38 
V. POST-CONFIRMATION    
  22.
Order allowing secured portion of late-filed secured claim but not unsecured portion  PDF / RTF 39 
  23.


Motion and Order to Amend Plan to Extend Plan Payments/Amend Plan to Alter Plan Payments/Clarify Plan Terms/Resolve Trustee’s Motion to Dismiss [the "Order Resolving"]  PDF / RTF 39 
  24. "Drop dead" Order (automatic dismissal)  PDF / RTF 40 
  25. Required language for Orders lifting the automatic stay  PDF / RTF 41 
  26. Required language for orders lifting stay to obtain insurance coverage  PDF / RTF 41 
  28.

Certifications required by debtors' counsel for attorney's fees incurred in defending a motion to lift stay  PDF / RTF 42 
  29. Required language in Orders authorizing sale or refinancing of real estate  PDF / RTF 42 
  29A. Form and Title is pending  PDF / RTF 43 
  30. Trustee's letter to parties explaining plan payoff figure  PDF / RTF 43 
  31. Motion to incur debt  PDF / RTF 43 
  32. Debtor’s motion to refund plan payments made post-confirmation  PDF / RTF 43 
  33.

Sample motion and order to obtain from Trustee excess funds from insurance settlement for debtors' car being totaled  PDF / RTF 44 
  34.

Trustee's letter explaining how insurance proceeds for wrecked cars are applied and distributed  PDF / RTF 44 
  35.

Consent Order immediately reducing or suspending debtors' plan payments and requiring the filing of a modified plan within a fixed period  PDF / RTF 44 
  35A.
Form and Title is pending  PDF / RTF 44 
VI. COMPLETION OF PLAN PAYMENTS, DISCHARGE, AND CLOSING OF CASE    
  36. Trustee's letters at end of case to DSO payee and state child support agency  PDF / RTF 47 
VII. MISCELLANEOUS    
  37.

Standard letter from Trustee to debtors explaining the debtors' options when they are complaining about their attorney  PDF / RTF 48