Kentucky Bankruptcy Law

Counsel with Care

Late Secured Claim Disallowed Under 12/01/2017 Amended Rules

Yikes! Debtors counsel need to pay close attention to this deadline.

Chapter 13 Trustee, EDKY: Trustee's Blog

A secured claim filed after the bar date is disallowed when objected to in the EDKY, even if it is provided for in a confirmed chapter 13 plan.  A copy of the order is available here.

The debtor’s confirmed plan provided that the creditor’s claim, which is secured by the debtor’s car, would be paid as a “910 claim.”  The creditor filed its proof of claim after the deadline for filing claims (the “bar date”).  I objected to the claim as being untimely filed.

In the Eastern District of Kentucky, the court has a long history of sustaining objections to the allowance of late unsecured claims in chapter 13 cases, strictly interpreting 11 U.S.C. § 502(b)(9) and the Federal Rules of Bankruptcy Procedure.  (In a nutshell, section 502(b)(9) says that if an objection to a claim is filed, the court shall allow the claim “except to the extent that proof…

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November 28, 2018 Posted by | Uncategorized | Leave a comment

Increases in Prime Rate of Interest and in EDKY Trustee’s Fee

Chapter 13 fees and interest rates every practitioner in the Eastern District should know.

Chapter 13 Trustee, EDKY: Trustee's Blog

On September 27, 2018, the prime rate of interest increased to 5.25%.

On October 1, 2018, my percentage fee increased to 7.1%.  If you are calculating how much a debtor must pay in order to adequately fund a plan, you need to add at least 7.7% to the total amount of secured claims, interest, attorney’s fee, priority claims, and whatever amount is needed to satisfy the liquidation test.

These increases apply in cases confirmed after the effective date of the changes.

The interest rate for secured IRS tax claims remains at 5%, at least through the end of 2018.  Secured claims filed by the Kentucky Department of Revenue are paid interest at 6% in calendar year 2018.

You can find other posts about interest rates by using the search feature or by clicking on the “categories” link on the right-hand side of the home page.


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October 17, 2018 Posted by | Uncategorized | Leave a comment

Delinquent Property Taxes and the EDKY Chapter 13 Plan

I still do the plan by hand because of these little quirks. Thanks for the information.

Chapter 13 Trustee, EDKY: Trustee's Blog

Where should fully secured delinquent property tax claims be listed in the new chapter 13 plan form?  Debtors’ attorneys and attorneys representing mortgage creditors need to make sure these claims are listed in the plan in such a way as to ensure they are paid in full.

For a refresher on property taxes under Kentucky law, how they should be paid in a chapter 13 case in general, and interest rates on the claims, click here.  For this post, we’re only looking at where in the plan fully secured delinquent property tax claims held by third-party purchasers should be listed.

The logical place to list the claims is under Section 3.2 of the plan: “Request for valuation of security, payment of fully secured claims, and modification of undersecured claims.”  It’s interesting that the heading includes “payment of fully secured claims,” but that’s easier said than done.

Start by reading…

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May 11, 2018 Posted by | Uncategorized | Leave a comment

Chapter 7 and Student Loans

Student loans are not automatically discharged in a bankruptcy. It requires an adversary proceeding, which is a lawsuit within a lawsuit, in order to determine if student loans are discharged. The factors that have to be met make discharge of student loans relatively rare. However, that is not the purpose of this post. Rather, I wanted to explain what does happen to the student loans.

Once the holder of the student loan is notified of the Chapter 7, the loan is recharacterized in their computer system and no action will be taken until the bankruptcy ends. Sometimes the characterization of the student loan as in bankruptcy never gets changes back, which can cause problems later on. However, the debtor can still make payments on the student loan during the Chapter 7, but they will be provided a different address to send the payments. Unfortunately, this notice may take months to be sent out.

If possible, I recommend that the debtor continue to make payments voluntarily during the bankruptcy. This avoids the interest piling up and increasingly the total amount due. It also helps satisfy one of the factors if the debtor later attempts to discharge these loans, even if the payments are less than the full payment due.

January 25, 2018 Posted by | Bankruptcy, Chapter 7, Student loans, Uncategorized | , , , , , , | Leave a comment

Bitcoin and Bankruptcy

There is probably already a post out there regarding bitcoin and bankruptcy because it seems all the rage these days. However, I have not seen one, so I will claim the first. Perhaps though, it is because there is really only one thing to say about bitcoin and bankruptcy. As opposed to the complexity of every other aspect of bitcoin, this is really quite simple: bitcoin is an asset in a bankruptcy so it must be disclosed.

I hope that is sufficient explanation. Now that I think of it, though, there could be one rather challenging aspect of bitcoin and bankrupty: what is its value? There have been cases where a chapter 7 has been held open so long that the trustee went after the increase in value of exempted real property as part of the estate – with how volatile bitcoin is, one would need to calculate its value right when the petition is filed (be sure to preserve documentation of that value at that moment). Then, one would just hope the trustee does not seek after the gains towards the end of the bankruptcy.

However, I cannot imagine anyone who owns bitcoin is going to be filing bankruptcy anytime soon, so we have time to figure this one out.

January 18, 2018 Posted by | Assets, Bankruptcy, Chapter 7, Exemptions, Uncategorized | , , , , , , | Leave a comment

The New Chapter 13 Plan in Operation: The Good, The Bad, and The Ugly

Here is an argument for hiring an attorney to do your bankrutpcy for you even though a debtor can file one without an attorney.

Chapter 13 Trustee, EDKY: Trustee's Blog

The new chapter 13 plan form has been in use for a month now.  I’ve looked at about 125 plans, mostly from Best Case and CinCompass, with a few prepared in MS Word.  Some aspects of the plan form work well, but attorneys for debtors and for creditors need to be aware of common glitches and errors to watch for.


1) These boxes on page 1 of the plan are almost always checked correctly:plan notices included not includedI have seen a handful where all of the “included” boxes are checked, but none of the provisions is actually included.  A mistake or an exercise of caution?

2)  With plans prepared using a software program, if a section is marked “none,” the rest of the section is not reproduced.  A 10-page form can be condensed into a much shorter plan to be printed and served. if none is checkedTHE BAD:

1) The total amount of plan…

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January 5, 2018 Posted by | Uncategorized | Leave a comment

Prime Rate; Bar Dates; & Other New Plan-Related Topics

Stuff to know.

Chapter 13 Trustee, EDKY: Trustee's Blog

This post includes a little bit of information on several topics:

  • the most recent increase in the prime rate of interest:
  • bar dates in cases that convert to chapter 13;
  • estimated trustee fees in the plan;
  • problems with 522(f) lien avoidance calculations in the plan.

Prime Rate

The prime rate of interest increased to 4.5% effective December 14, 2017.  Click here for a previous article on interest rates on secured claims.

Bar Dates for Filing Proofs of Claims in Converted Cases

The amended bankruptcy rules that became effective on December 1 apparently apply in a case that was filed as a chapter 7 case before December 1 but that converted to chapter 13 after December 1.  Therefore, creditors have only 70 days from the date of conversion within which to file claims in a case converted to chapter 13 after December 1, regardless of when the case was initially commenced.

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December 20, 2017 Posted by | Uncategorized | Leave a comment

Trends and New Developments: Learning from Court Orders

So helpful!

Chapter 13 Trustee, EDKY: Trustee's Blog

When I see a similar order entered in two or three (or more) chapter 13 cases, I begin to watch for new developments or trends:  Is the court communicating an expectation that a particular procedure should be followed?  Are multiple practitioners making the same mistake but the court can only fix the problem one case at a time?

Recently I’ve seen a couple of issues that warrant attention and (re-) education.

The first issue relates to motions to extend the automatic stay.  I’ve noticed that the court has entered the same order in different cases (filed by different attorneys) to  summarily overrule a motion to extend the automatic stay.  The orders, which have been entered within a day or so after the motions are filed, say:

Debtor(s)’ Motion/Application to Extend the Automatic Stay (“Motion”) is hereby DENIED without prejudice because (a) no hearing is scheduled within 30 days of the…

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December 7, 2017 Posted by | Uncategorized | Leave a comment

Summary of Changes to Federal and Local Rules and Forms Eff. Dec. 1, 2017

The bankruptcy rules, they be a’changin’.

Chapter 13 Trustee, EDKY: Trustee's Blog

Here is a brief summary of the changes to federal and EDKY local rules and forms that become effective starting in cases filed Friday, December 1. 

Effective Date

  • Amended rules take effect on December 1, 2017, “and shall govern in all proceedings in bankruptcy cases thereafter commenced and, insofar as just and practicable, all proceedings then pending.”

Rule 2002

  • 21 days’ notice of deadline for filing objections to confirmation;
  • 28 days’ notice of date set for the confirmation hearing.

Rule 3002

  • Bar date for creditors other than governmental units: 70 days from the date of the petition (or date of conversion to 13).
  • Bar date applies to secured creditors.
  • If secured creditor does not timely file a claim,
    • it will not have an allowed claim, but
    • lien is not void due only to its failure to file a claim.

Rule 3007

  • Requires service of a Notice of Objection to Claim…

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November 27, 2017 Posted by | Uncategorized | Leave a comment

Plan Payments by Payroll Deduction

This blog post about monthly plan payments is a crucial one. Many of the persons that I assist in a Chapter 13 do NOT want their employer to know they filed bankruptcy. However, I have never seen an employer have a problem with it and the payroll deduction is the best way to prevent problems with the plan later down the road.

Chapter 13 Trustee, EDKY: Trustee's Blog

Plan payments in the EDKY must be made by payroll deduction unless otherwise ordered by the court or agreed to by the trustee.  Many debtors’ attorneys are inadvertently causing their clients to get behind in plan payments because the attorneys and their staff don’t know the rules.  Download this detailed Attorney Info Sheet on Mandatory PDO’s 08252017, and keep reading for important reminders for debtors’ attorneys and their staff regarding payroll deduction orders and plan payments.

If the debtor’s income is from employment, the debtor’s attorney must submit a completed payroll deduction order (“PDO”) at the same time the plan is filed.  Tender the payroll deduction order to the court promptly.  Expect that it will take 4 to 6 weeks for the employer to get the payroll deduction set up, and advise your clients accordingly.

A debtor’s first full monthly plan payment is due 30 days after the…

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September 6, 2017 Posted by | Uncategorized | Leave a comment