AFTER A AFTER A BANKRUPTCY BANKRUPTCY

FILING – HOW TO FILING – HOW TO CONTINUE THE CONTINUE THE

COLLECTION COLLECTION EFFORTEFFORT Dominique M. Varner Dominique M. Varner

Hughes Watters Askanase, L.L.P.Hughes Watters Askanase, L.L.P.Partner Partner

Notice of Bankruptcy? Notice of Bankruptcy? STOP EVERYTHING! STOP EVERYTHING!

Evaluate your options. Evaluate your options. Automatic stay prohibits collection Automatic stay prohibits collection

effortsefforts enforced with punitive damages. enforced with punitive damages.

Stay terminates in certain casesStay terminates in certain cases secured creditors can exercise rightssecured creditors can exercise rights

The Automatic Stay: The Automatic Stay: Not So AutomaticNot So Automatic

Termination of automatic stay allows Termination of automatic stay allows repossession of collateral without repossession of collateral without costs.costs.

Second bankruptcy filing in the past Second bankruptcy filing in the past year?year? Automatic stay terminates on the 30Automatic stay terminates on the 30thth

day. day. Debtor can extend the stay.Debtor can extend the stay.

““PLEEEASE....”PLEEEASE....”

Debtor can extend stay if:Debtor can extend stay if: motion is filed;motion is filed; notice and hearing;notice and hearing; notice and hearing within 30-day stay; notice and hearing within 30-day stay;

andand Debtor proves new filing is in good faith Debtor proves new filing is in good faith

as to creditors to be stayed. as to creditors to be stayed. [1][1]

[1] [1] In re CollinsIn re Collins, 335 B.R. 646, 650 (Bankr. S.D. Tex. , 335 B.R. 646, 650 (Bankr. S.D. Tex. 2005);2005);

11 U.S.C. 11 U.S.C. § 362(c)(3)(B).§ 362(c)(3)(B).

Good Faith: “Really?” Good Faith: “Really?” Presumption of not filing in good faith ifPresumption of not filing in good faith if

more than one case filed within prior year;more than one case filed within prior year; case dismissed within prior year for failure tocase dismissed within prior year for failure to

amend as required by court/statute amend as required by court/statute provide adequate protection provide adequate protection oror perform a confirmed plan; perform a confirmed plan; OROR

No substantial change in financial/personal No substantial change in financial/personal situation. situation. [1][1]

[1] [1] In re CollinsIn re Collins, 335 B.R. 646, 650 (Bankr. S.D. Tex. 2005);, 335 B.R. 646, 650 (Bankr. S.D. Tex. 2005); 11 U.S.C. 11 U.S.C. § 362(c)(3)(B).§ 362(c)(3)(B).

Good Faith: “Yes, really.” Good Faith: “Yes, really.”

If presumption of not filing in good If presumption of not filing in good faith arises, debtor may rebut by faith arises, debtor may rebut by clear and convincing evidence. clear and convincing evidence.

Factors of good faith. Factors of good faith.

Factors of Good Faith:Factors of Good Faith:

Extension sought as to all or single Extension sought as to all or single creditor;creditor;

Timing of cases;Timing of cases; Reasons giving rise to presumption;Reasons giving rise to presumption; Change in financial or personal Change in financial or personal

affairs; affairs;

More Factors of Good More Factors of Good Faith:Faith:

Creditors position opposing extension;Creditors position opposing extension; Nature of debtNature of debt Nature of collateral Nature of collateral

Even of bankruptcy purchases;Even of bankruptcy purchases; debtor’s:debtor’s:

Conduct in new caseConduct in new case Reasons for seeking extension; ANDReasons for seeking extension; AND

Unique facts or circumstances to case. Unique facts or circumstances to case. [2][2][2] [2] In re CollinsIn re Collins, 335 B.R. at 652; , 335 B.R. at 652; In re WilsonIn re Wilson, ,

2005 Bankr. LEXIS 2388, * 24 (Bankr. E.D. Tenn. 2005 Bankr. LEXIS 2388, * 24 (Bankr. E.D. Tenn. Dec. 5, 2005).Dec. 5, 2005).

“ “ Charles II” Charles II” Analysis Analysis Creditors agree case filed in good faith Creditors agree case filed in good faith Creditors disagree Creditors disagree good faith exists? good faith exists?

Objective: is a discharge likely?Objective: is a discharge likely? Subjective: “totality of the circumstances”Subjective: “totality of the circumstances”

Debtor’s motivesDebtor’s motives Relationship with creditors Relationship with creditors

Totality of the Totality of the CircumstancesCircumstances

Factors:Factors: Nature of debts;Nature of debts; Nature of collateral;Nature of collateral; Eve of bankruptcy purchases;Eve of bankruptcy purchases; Debtor’s conduct in present case;Debtor’s conduct in present case;

Effort to obtain dischargeEffort to obtain discharge Why debtors wants to extend stay; andWhy debtors wants to extend stay; and other circumstances. other circumstances.

Negotiate with home lenderNegotiate with home lender

Even if Good Faith, Even if Good Faith, Discretion to Consider Discretion to Consider

Equitable FactorsEquitable Factors

No creditors oppose No creditors oppose Best interests test met Best interests test met

Does Stay Terminate Does Stay Terminate as to Property of Estate? as to Property of Estate?

Case filed within prior year Case filed within prior year automatic automatic stay as to debtor terminates on 30stay as to debtor terminates on 30thth day day after new filing after new filing

Split of authority: statutory language Split of authority: statutory language ““with respect to the debtor” with respect to the debtor”

Include property of estate?Include property of estate? MajorityMajority: not include property of estate: not include property of estate

Comparison of other provisionsComparison of other provisions MinorityMinority: includes property of estate : includes property of estate

Congress’ intent and purpose in BAPCPACongress’ intent and purpose in BAPCPA Prevent repeat filers Prevent repeat filers

Dismissed Dismissed Automatically? Automatically?

Section 521 requires filing the following Section 521 requires filing the following within 45 days from filing date:within 45 days from filing date: creditorscreditors assets and liabilities assets and liabilities current income and expenses current income and expenses financial affairs [SOFA]financial affairs [SOFA] itemized monthly net income itemized monthly net income reasonably anticipated increase in reasonably anticipated increase in

income/expenses over one year following filing income/expenses over one year following filing date date

certificate of consumer counseling AND certificate of consumer counseling AND payment advices received within 60 dayspayment advices received within 60 days

Automatic Dismissal, Automatic Dismissal, unlessunless

party in interest requests dismissalparty in interest requests dismissal order must be entered within 5 days (7 order must be entered within 5 days (7

days after 12/1/09)days after 12/1/09) debtor timely requests extension debtor timely requests extension

within 45 days after filing datewithin 45 days after filing date no to exceed 45 daysno to exceed 45 days trustee objects: trustee objects: not in best interest of not in best interest of

creditors creditors split of authority: discretion to extend split of authority: discretion to extend

deadlinedeadline

To Extend or To Extend or Not to Extend ?Not to Extend ?

Not:Not: In re WilkinsonIn re Wilkinson: inadvertent duplicate payment : inadvertent duplicate payment

adviceadvice sua spontesua sponte Trustee did not seek dismissal Trustee did not seek dismissal No party in interest objected to confirmation No party in interest objected to confirmation

In re HallIn re Hall: missing monthly net income and : missing monthly net income and anticipated financial changes statements anticipated financial changes statements

Debtor did not request extension Debtor did not request extension Trustee did oppose dismissal Trustee did oppose dismissal

In re ParkerIn re Parker: debtor’s motion to dismiss denied: debtor’s motion to dismiss denied In re BonnerIn re Bonner: missing stub filed on 46: missing stub filed on 46thth day day

Trustee Saves the CaseTrustee Saves the Case

Trustee timely requests case not be Trustee timely requests case not be dismissed dismissed Within applicable periodWithin applicable period

Notice and hearingNotice and hearing Good faith to file required Good faith to file required

documents, anddocuments, and Best interests of creditors servedBest interests of creditors served

Credit Counseling 101Credit Counseling 101

Credit counseling course Credit counseling course and and Within 180 days before filing date Within 180 days before filing date

Otherwise, dismissal in most cases Otherwise, dismissal in most cases Debtor moves for temporary relief Debtor moves for temporary relief

File certificationFile certification Exigent circumstances merit waiver, Exigent circumstances merit waiver, Debtor requested but was unable to receive Debtor requested but was unable to receive

counseling within 5 days of request; counseling within 5 days of request; andand Court satisfied with certification. Court satisfied with certification.

To Extend or To Extend or Not to Extend?Not to Extend?

ExtendExtend In re BricksinIn re Bricksin: credit counseling outside 180-: credit counseling outside 180-

day period. Trustee’s motion to dismiss denied. day period. Trustee’s motion to dismiss denied. Very best efforts to comply with requirement and Very best efforts to comply with requirement and

substantial compliance, substantial compliance, Extensive pre-petition counseling and made Extensive pre-petition counseling and made

substantial payments, substantial payments, Need to file not obviated by additional counseling and Need to file not obviated by additional counseling and

debtors knew of bankruptcy filing implications,debtors knew of bankruptcy filing implications, Costs by taking counseling, Costs by taking counseling, andand Equitable considerations: start over, filing fees, Equitable considerations: start over, filing fees,

limitations of automatic stay. limitations of automatic stay.

Exigent Circumstances?Exigent Circumstances?

In re DavenportIn re Davenport: creditor actively : creditor actively seeks to repossess debtor’s only car, seeks to repossess debtor’s only car, but because counseling taken 2 days but because counseling taken 2 days after filing, dismissed.after filing, dismissed.

In re HendersonIn re Henderson: : Pro SePro Se debtors get debtors get a break.a break. Urgent situation render debtor unable Urgent situation render debtor unable

to comply? to comply? Legal advice: prepetition or postpetition Legal advice: prepetition or postpetition

Exigent Circumstances?Exigent Circumstances?

Foreclosure Foreclosure Notice Notice

OtherOther ResourcesResources Language barriersLanguage barriers IncapacityIncapacity Disability Disability Active duty Active duty

Dismiss v. StrikeDismiss v. Strike

Automatic stay Automatic stay Debtors prefer case be stricken.Debtors prefer case be stricken.

Uncertainty Uncertainty Return of filing feesReturn of filing fees Trustee compensation Trustee compensation

No consensus:No consensus: Congress did not intend for counseling Congress did not intend for counseling

requirement to limit relief requirement to limit relief Encourage debtors to do it right the Encourage debtors to do it right the

first time first time

Commencement of CaseCommencement of Case

Automatic Stay Automatic Stay In re RiosIn re Rios: no commencement if debtor : no commencement if debtor

fails to obtain counseling. fails to obtain counseling. In re TomcoIn re Tomco: commencement when : commencement when

petition is filed.petition is filed. Depends on whether all requirements Depends on whether all requirements

are met. are met. Problem: uncertainty among creditors. Problem: uncertainty among creditors.

Stay violations Stay violations

Tax ReturnsTax Returns

Section 521(j): taxing authority may Section 521(j): taxing authority may move for conversion or dismissal if move for conversion or dismissal if not filed or no extension. not filed or no extension. If not filed within 90 days, court must If not filed within 90 days, court must

convert or dismiss convert or dismiss Best interest of creditors and estate Best interest of creditors and estate

Diamond Necklace: Diamond Necklace: $10,000.00$10,000.00

Section 523: Section 523: Credit card companies may except:Credit card companies may except:

Cash advances Cash advances $825.00$825.00 Consumer open end credit plan Consumer open end credit plan On or within 70 days prior to order for relief On or within 70 days prior to order for relief

Luxury goods or services Luxury goods or services Consumer debtConsumer debt $550.00$550.00 On or within 30 days prior to order for relief On or within 30 days prior to order for relief

Presumed nondischargeable Presumed nondischargeable

Fraud, Actual FraudFraud, Actual Fraud

Presumption Presumption Rebuttable Rebuttable Shifts burden of going forward Shifts burden of going forward Burden on proof on plaintiff Burden on proof on plaintiff Circumstantial evidence Circumstantial evidence Intent to repay Intent to repay Mere inability to pay not sufficient Mere inability to pay not sufficient

Is it a Luxury?Is it a Luxury?

Reasonably acquired for support or Reasonably acquired for support or maintenance of debtor maintenance of debtor

Extravagant, indulgent, or nonessentialExtravagant, indulgent, or nonessential In re PaesanoIn re Paesano: Citibank moves for SJ : Citibank moves for SJ

for:for: $208.80 Four Seasons Enterprise$208.80 Four Seasons Enterprise $716.54 Value City $716.54 Value City $475.90 Priceless Kids $475.90 Priceless Kids $10,000.00 Tiffany & Co., would meet MSJ $10,000.00 Tiffany & Co., would meet MSJ

standards standards

Luxury Purchases? Luxury Purchases? Think Twice Think Twice

ZemanZeman: : Judicial notice:Judicial notice: La Fogata, USPS, HEB Grocery, Target, La Fogata, USPS, HEB Grocery, Target,

Exxon, PetsMart, Walgreens, Hertz, Exxon, PetsMart, Walgreens, Hertz, Whataburger Whataburger

““The court can only shake its head in The court can only shake its head in bemusement at plaintiff’s suggestion that bemusement at plaintiff’s suggestion that these merchants would be described as these merchants would be described as ‘high end luxury retailers.’” ‘high end luxury retailers.’” [3][3]

[3] [3] In re ZemanIn re Zeman, 347 B.R. 28, 30 at n.1 (Bankr. W.D. Tex. , 347 B.R. 28, 30 at n.1 (Bankr. W.D. Tex. 2006).2006).

Maybe a Luxury, Maybe a Luxury, But DischargedBut Discharged

In re LaBovickIn re LaBovick: : Within 60 days of filing date:Within 60 days of filing date:

6 gift cards: $3,500.006 gift cards: $3,500.00 Gold chain: $285.05Gold chain: $285.05 Watch: $171.71Watch: $171.71 Bed, cookware, small electrical items, Bed, cookware, small electrical items,

clothing, bedding, and a rug: $7,608.67clothing, bedding, and a rug: $7,608.67

All discharged. All discharged. Extreme facts: 30 year account, no late Extreme facts: 30 year account, no late

payments, move due to son’s house arrest for payments, move due to son’s house arrest for manslaughter manslaughter

Suits for Suits for Nondischargeability Nondischargeability

60 days after 341 meeting 60 days after 341 meeting Fraud Fraud Fraud in fiduciary capacity, embezzlement, or Fraud in fiduciary capacity, embezzlement, or

larceny larceny Willful and malicious injury Willful and malicious injury Debts incurred to pay I.R.S. or other Debts incurred to pay I.R.S. or other

governmental units, federal election fines or governmental units, federal election fines or penalties penalties

Debts owed to spouse, former spouse or child Debts owed to spouse, former spouse or child incurred in connection a divorce or incurred in connection a divorce or seperation seperation

Home Sweet HomeHome Sweet Home

Section 522(p) Homestead Exemption Section 522(p) Homestead Exemption 1,215 days 1,215 days Exceeds $125,000.00Exceeds $125,000.00 In re RogersIn re Rogers: :

title acquired outside period, but title acquired outside period, but homestead not claimhomestead not claim

Interest: vested economic interest Interest: vested economic interest Title and equityTitle and equity Can be ascertained when debtor acquires it Can be ascertained when debtor acquires it

California or Florida?California or Florida?

State exemptions State exemptions Reside for 730 days prior to filing Reside for 730 days prior to filing Otherwise, longest period during Otherwise, longest period during

180 days prior to 730-day period 180 days prior to 730-day period

Proof of Claim:Proof of Claim:Just in Case Just in Case

Most Chapter 7 cases: no-asset notice Most Chapter 7 cases: no-asset notice If assets If assets re-notice re-notice 90 days to file from notice90 days to file from notice Otherwise, 90 days from first 341 Otherwise, 90 days from first 341

meeting meeting Attach documents supporting claim Attach documents supporting claim Chapter 11: no need to file Chapter 11: no need to file Chapter 13: must file even if on Chapter 13: must file even if on

schedules schedules

Let’s Negotiate Let’s Negotiate

Unsecured creditor’s failure to Unsecured creditor’s failure to negotiate pre-petition negotiate pre-petition reduce reduce claim by up to 20%claim by up to 20% Nonprofit budget and credit counseling Nonprofit budget and credit counseling

agency agency Repayment offer of 60% or more of debt Repayment offer of 60% or more of debt Within 60 days of filing date, Within 60 days of filing date, andand Unsecured creditor refuses to negotiate Unsecured creditor refuses to negotiate

Contacting the Debtor:Contacting the Debtor:Do You Dare?Do You Dare?

Secured debts Secured debts Reason to communicate: collateral Reason to communicate: collateral Automatic stay or discharge Automatic stay or discharge

injunction injunction

““Ride-Through”Ride-Through”

Debtor must declare intentions as to Debtor must declare intentions as to collateralcollateral 45 days from notice of intentions45 days from notice of intentions

Otherwise, termination of automatic stay as to that Otherwise, termination of automatic stay as to that collateral collateral

redeem, surrender, or reaffirm redeem, surrender, or reaffirm ““ride-through:” ride-through:”

comply with contract, keep collateralcomply with contract, keep collateral bankruptcy clause defaults bankruptcy clause defaults

Creditor’s neglectCreditor’s neglect Creditor’s desire to keep payment stream payments Creditor’s desire to keep payment stream payments

If after discharge If after discharge estopped from foreclosing (waiver) estopped from foreclosing (waiver)

What or Who is What or Who is Discharged?Discharged?

Only personal liability of debtor Only personal liability of debtor Collateral is still liable Collateral is still liable Creditor can repossess, foreclose or Creditor can repossess, foreclose or

contact debtor: contact debtor: Mortgage on principal residenceMortgage on principal residence Security interestSecurity interest Act or communication Act or communication

ordinary course of business ordinary course of business Limited to seeking or obtaining periodic payment in Limited to seeking or obtaining periodic payment in

lie of pursuit of lie of pursuit of in rem in rem relief. relief. Section 524(j).Section 524(j). No coercion (9th Cir.)No coercion (9th Cir.) Written or oral? Written or oral?

Collection ScriptCollection Script

In rem In rem communications communications Options of curing default or foreclosure Options of curing default or foreclosure Acknowledge discharge of personal Acknowledge discharge of personal

liability in all communications liability in all communications DisclaimersDisclaimers

No coercion and not seeking personal No coercion and not seeking personal liability liability

Evidence? Evidence?