Part V of XI
Written by Beckett Cantley and Geoffrey C. Dietrich
This article follows the outline contained in Part I, which can be read at www.cantleydietrich.com.
A Chapter 13 repayment plan need not pay unsecured claims in full as long it provides that the Chapter 13 debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under Chapter 7. In Chapter 13, "disposable income" is defined as income less: 1) amounts reasonably necessary for the maintenance or support of the debtor or dependents; and 2) charitable contributions up to 15% of the debtor's gross income. If the debtor operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses. The "applicable commitment period" depends on the debtor's current monthly income.
Prior to the BAPCPA, the Bankruptcy Code provided for payment of projected disposable income for a “three-year period,” unless the court allowed a longer time of up to five years. The BAPCPA modified section 1322 of the Bankruptcy Code to provide separate standards for above-median and below-median income debtors. Post-BAPCPA, the applicable commitment period shall be three years if the debtors’ current monthly income is less than the state median for a family of the same size, unless the court, for cause approves a longer period of up to 5 years. The applicable commitment period, post-BAPCPA, may be up to 5 years if the current monthly income is greater than the state median for a family of the same size.
Section 102 of the BAPCPA amended section 727(b)(2) of the Bankruptcy Code to provide that a debtor will be denied a discharge if a debtor has received a discharge in a prior Chapter 7 case filed within 8 years of filing the present case. Prior to the BAPCPA, a Chapter 7 debtor would be denied a discharge if such debtor had received a discharge in a prior Chapter 7 case filed within 6 years of filing the present case. Therefore, the BAPCPA effectively extended the amount of time required to pass, after filing a Chapter 7 case, before the debtor is allowed to file a subsequent bankruptcy petition. The extended waiting period provisions are obviously aimed at curbing a perceived serial filing problem.
The BAPCPA limited the protections that the automatic stay would have otherwise provide in some re-filed cases. Section 362(c)(3) of the Bankruptcy Code, as amended by the BAPCPA, provides that, if a debtor files a consumer bankruptcy case within one year of the dismissal of an earlier consumer bankruptcy case, the automatic stay in the present consumer bankruptcy case shall terminate 30 days after the filing, unless the debtor or some other party in interest files a motion and demonstrates that the present case was filed in good faith with respect to the creditors being stayed. Congress may have intended to limit the duration of the automatic stay to 30 days in circumstances where an individual debtor had a single prior bankruptcy case dismissed within one year prior to the current bankruptcy filing. However, a majority of the courts have interpreted the statutory language of this provision to provide that the stay would not expire after 30 days as to “property of the estate,” as opposed to actions solely against the debtor. This majority view instead provides that the automatic stay remains in place until the case is dismissed or the debtor receives a discharge. Nevertheless, a growing number of courts have disagreed, holding that the stay also terminates as to property of the estate in a Chapter 13 case.
If the present case is a third filing within one year, other than a case re-filed under a chapter other than Chapter 7 after dismissal for “abuse” of the Chapter 7 system, the automatic stay does not go into effect at all, unless the debtor or any other party in interest files a motion to impose the stay that demonstrates that the third filing is in good faith with respect to the creditors being stayed. However, the presumption that a repeat filing is not in good faith would not subsequently arise if a debtor’s prior case was dismissed due to the creation of a debt repayment plan. Serial filers are probably discouraged by these BAPCPA provisions that limit automatic stay eligibility.
The BAPCPA also limited the applicability of the automatic stay in eviction proceedings. The automatic stay does not prevent an eviction proceeding from validly taking place if the landlord obtained a judgment of possession prior to the bankruptcy case being filed. Post-BAPCPA, the automatic stay also does not prevent an eviction where such eviction is based on “endangerment” of the rented property or illegal use of controlled substances on the property. However, where a landlord wishes to limit the application of the automatic stay in eviction proceedings based upon endangerment or the illegal use of controlled substances on the property, the landlord must file with the court and serve on the debtor a certificate of non-applicability of the stay. This certificate of non-applicability must allege facts which show that the debtor, within the 30 day period prior to filing, has “endangered” the property or has used or allowed the use of controlled substances on the property. A debtor may contest the assertions in a landlord’s non-applicability certificate under the process described in section 362(m) of the Bankruptcy Code. Furthermore, applicable state law may give a debtor an additional right to cure the default, even after an order for possession is entered.
This is the fifth of eleven installments of this article. The entire article may be found at www.cantleydietrich.com.
