Miscellaneous Hot Topics in the EDKY

This post briefly discusses the following topics: Amended Federal Rules of Bankruptcy Procedure eff. 12/1/16; Motions to Incur Debt for Purchase of Vehicle; Motions to Compel Debtors to File Notices of Address Changes; and the 2017 Judge Joe Lee Bankruptcy Institute.

AMENDED FEDERAL RULES OF BANKRUPTCY PROCEDURE BECAME EFFECTIVE 12/01/2016:  Of particular importance to creditors’ attorneys is Rule 3002.1(a), which governs notices relating to claims secured by a security interest in the debtor’s principal residence.  The rule is now applicable to claims “for which the plan provides that either the trustee or the debtor will make contractual installment payments.”  The amended rule also provides that unless the court orders otherwise, the notice requirements of Rule 3002.1 cease to apply when an order terminating the stay is entered.

All practitioners should note that Rule 9006(f) removes the 3-day additional time for taking action if service is by electronic means.

MOTIONS TO INCUR DEBT FOR PURCHASE OF VEHICLE NEED TO INCLUDE MORE INFORMATION:  If you’ve attended a court hearing in the last month, you know that the judges are concerned about allowing debtors to go into debt while they are in a chapter 13 case.  For several years, I have reviewed debtors’ requests to incur debt primarily from the standpoint of whether the debtors can afford to make the new car payment and their plan payment.  I have assumed that the market is limited, and I’ve looked only at the debtor’s cash flow.  However, the court is correct to re-assess its practice of allowing debtors to purchase new or replacement vehicles without additional information concerning the terms of the loan.  We should be looking at whether a car loan with a 20+% interest rate (for example) and payments spread over 6, 7, or even 8 years is in the debtors’ best interest financially, and debtors’ attorneys now need to provide that information in their motions.  Here are some suggestions (subject to change as we learn more from the court):

  • Make sure the motion adequately explains not only why the debtor needs a new (or different/additional/replacement/whatever) car, but why they need a car in the requested price range as well.
  • Set forth the proposed interest rate of the loan, and the loan’s proposed term.   If the loan has a high interest rate or is for a long term, explain to the court whether the debtor shopped around or if that was the only loan available to them.
  • If the debtor is replacing an existing car being paid through the plan, explain why it must be replaced, why it can’t be repaired instead, how the debtor intends to dispose of the existing car, and how the remaining balance owed on the secured claim is to be treated.  This might require a motion to modify the plan.
  • Finally, as always, you need to show the debtor can afford to make the projected car payment without negatively impacting their ability to make plan payments, which necessitates the preparation and filing of an amended Schedule I and J to support the debtor’s representation of ability to pay.

I have not updated the form motion to incur debt that has been used for several years, and without further direction from the court I am reluctant to do so.  In the meantime, I suggest the motion be more of a narrative rather than a fill-in-the-blank form so that all relevant information can be presented to the court.

WATCH FOR NEW MOTIONS TO COMPEL DEBTORS TO FILE CHANGE OF ADDRESS NOTICES:  We get a fair amount of returned mail that can’t be delivered to debtors at their last known address.  We then email debtors’ attorneys requesting a current address – with mixed results.  We also get quite a few informal written notices of new addresses – often written on a sticky note attached to a check the debtor has sent to the lockbox.  In the past we have changed the debtor’s address pursuant to these written notices, but then our records show an address for the debtor that is different from the court’s records.  So, from now on, if we get mail returned as undeliverable, or if we get an informal notice of address change, we will file a motion to compel the debtor to file with the court a notice of address change.  Debtors’ attorneys, please watch for these motions, contact your clients, and promptly file a notice with the court so we all have the most current mailing address for debtors.

REGISTER NOW FOR THE JUDGE JOE LEE BANKRUPTCY INSTITUTE:  The 18th Biennial Judge Joe Lee Bankruptcy Institute will be held on Thursday and Friday, June 8 & 9, 2017, at The Campbell House in Lexington, Kentucky.  Topics of interest to consumer practitioners  include:  Kentucky’s New Voidable Transfers Law; Medical Practices and Health Care Facilities in Bankruptcy; What Bankruptcy Practitioners Need to Know about the CFPB; the Bankruptcy Code and the UCC; LLC’s in Bankruptcy; Bankruptcy Appeals; and two hours of Ethics.   You cannot find a seminar of this caliber for the low price of $340 anywhere else.  Click here for the program brochure and registration information, or go to www.ukcle.com.  Register early before the seminar sells out.


One comment

  1. Reblogged this on Kentucky Bankruptcy Law and commented:
    Most of the items in this Chapter 13 Trustee’s blog post pertains mainly to your Chapter 13 attorney. However, the section about obtaining a new car while in your Chapter 13 is very pertinent to you as a Debtor. This is no longer a streamlined process. Now, you will have to have a more in-depth communication with you attorney. Also, you will need to plan on spending more time shopping around for the least expensive car that will meet your needs and a reasonable interest rate.

    You may think you are limited to the buy here/pay here type of car sales. However, most of the larger new and used car dealers are familiar with Chapter 13 issues and they will work with you. One of the things your car dealer needs to understand is that the new debt would not be discharged at the end of the Chapter 13 so it is “safe” to loan to you in that respect. It could be surrendered and discharged if you convert to a Chapter 7, but let’s not go there. No need to make your dealer nervous.

    Liked by 1 person

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