Kentucky Bankruptcy Law

Counsel with Care

Making Chapter 13 Plan Payments in the E.D. Ky. – New Online Payment Option

This will add a much appreciated and helpful payment option so that clients do not have to be concerned about checks through the mail. I do receive inquiries by clients from time to time where they are concerned that a check they mailed had not yet cleared the bank.

Chapter 13 Trustee, EDKY: Trustee's Blog

Debtors can now make their chapter 13 plan payments in EDKY online (for a fee) through www.TFSbillpay.com (“TFS”).  Debtors’ attorneys, here is what you need to know about this new service.

First, payment by payroll deduction is still required by KYEB-LBR 3070-1, unless otherwise ordered by the court or agreed to by the trustee.

I generally agree to waive the payroll deduction requirement for debtors who:  do not receive regular income from wages; have seasonal employment; work part-time and don’t earn enough to cover the plan payment; or change jobs often.

Even if a debtor is making regular plan payments by payroll deduction, payments for tax refunds, bonuses, other lump-sum payments, or to catch up delinquent plan payments will not be made by payroll deduction.

In all of those instances, debtors might prefer to make online payment via TFS rather than paying by check, money order, or ACH bank draft. …

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October 31, 2016 Posted by | Uncategorized | Leave a comment

“I’ve Changed My Mind – I Want to Surrender My House”: What Effect Does Post-Confirmation Surrender Have on the Debtor’s Discharge?

The debtor’s attorney needs to take the time to discuss the probability of maintaining house and other secure debt payments over the course of the Chapter 13 – 3 or 5 years. A vehicle that may not survive the life of the bankruptcy but with significant debt may need to be surrendered at the outset.

Changing one’s mind about surrendering a house within a confirmed Chapter 13 could be a huge issue unless the debtor was eligible for a Chapter 7 at the inception of the Chapter 13. If they were eligible, but chose a 13 for other reasons, then the best practice would be to convert to a Chapter 7 and surrender the house in that bankruptcy.

Chapter 13 Trustee, EDKY: Trustee's Blog

If a confirmed plan provides that the debtors will cure arrearages through the plan and maintain ongoing payments on a mortgage or long-term car loan, and the debtors complete plan payments and get a discharge, those section 1322(b)(5) debts are not discharged per section 1328(a)(1).  The debtors still have personal liability on those debts after discharge, just as if the debtors signed reaffirmation agreements in chapter 7 cases.

But what happens if after confirmation the debtors change their mind – they can’t afford the house or the car, and they let the creditor get relief from stay.  Is the claim still a 1322(b)(5) claim that is excepted from discharge?

Even if a creditor gets relief from stay on a 1322(b)(5) claim after confirmation, the creditor’s claim remains a 1322(b)(5) claim according to In re Holman, 2013 WL 1100705 (Bankr. E.D. Ky. 2013).  Taken to its logical conclusion, any resulting…

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October 24, 2016 Posted by | Uncategorized | Leave a comment

Nondischargeable Debts in Chapter 13 Cases

This is such beneficial information for creditors, but also for debtors who suspect such a claim would be filed against them.

Chapter 13 Trustee, EDKY: Trustee's Blog

We all know that section 523 contains exceptions to discharge, but some of those nondischargeable debts, including 523(a)(6) debts (for willful and malicious injury) CAN BE discharged in a chapter 13 case when the debtor completes plan payments.   If you represent creditors, you need to know how and when to seek nondischargeability under 523(a)(6) in chapter 13 cases.

Look at the first sentence in 523(a):  “A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from” the debts listed in 523(a).

There are two discharge options in a chapter 13 case:

  • the debtor can get a discharge upon completion of plan payments under 1328(a); or
  • if the debtor has not completed plan payments, s/he can still get a so-called hardship discharge under 1328(b) if certain conditions are met.

Read the first sentence of 523(a) again – those 523(a) debts are nondischargeable…

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October 21, 2016 Posted by | Uncategorized | Leave a comment