Tag: hearing

Confirmation Hearing in Chapter 13 Bankruptcy

As I have previously written about the procedural steps involved in a Chapter 13 bankruptcy, once the debtor attends 341 hearing, and the bankruptcy plan is filed, the next important event is the confirmation hearing.

The date set for the confirmation of Chapter 13 plans varies depending on where the case is filed. Here in Rochester, the date for the confirmation hearing is typically set between 30 and 60 days after the 341 hearing.  The debtor(s) is required to attend it as the proposed plan is reviewied by the court and Chapter 13 Trustee.  If the debtor fails to appear for the hearing, the judge can prevent or delay the confirmation. In other Courts, such as those in the Northern District of New York, confirmation hearings are usually scheduled approximately 60 days after the proposed Chapter 13 plan is filed with the Court.

Unlike other jurisdictions, here in Rochester, Judge Ninfo reviews each Chapter 13 bankruptcy case and the circumstances that led the debtor to file for bankruptcy.  In addition, Judge Ninfo requires that a debtor file a checklist specifying the reasons that led to the filing.  In addition, if the amount of unsecured debt exceeds $75,000, the debtor will be also required to file with the court a detailed letter of explanation, describing how the debt was accumulated.  Also, approximately one week before the hearing, the Chapter 13 Trustee will file his report analyzing the case and either recommending confirmation of the plan or giving reasons why confirmation should be denied.

In cases where an objection to confirmation is filed, a confirmation hearing is held on the scheduled date and the objecting party, or its attorney, typically attends.  The views of the debtor’s attorney, the objecting parties’ attorney and the Trustee are heard by the judge, who either confirms the plan, denies confirmation, or sets an evidentiary hearing on the disputed matter (which could be a valuation issue, a bad faith objection, a disposable income objection, etc.).  Often the confirmation hearing is simply adjourned to allow the parties some time to try to resolve their differences.

The confirmation hearing is the critical step in any Chapter 13 bankruptcy.  It is the responsibility of the bankruptcy lawyer to present a plan that not only protects his/her client(s) interests by making the payments manageable, but also to make sure that the plan will be confirmed by the court.  That usually involves analyzing the parties’ income and expenses, and make certain that the budget is not excessive or has any frivolous expenses.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy attorney.

Chapter 7 Bankruptcy and Objections to Discharge

You have filed a Chapter 7 bankruptcy.  You and your lawyer went to the meeting of the creditors.  Everything seemed to be in order.  Then your lawyer calls you, and tells you that one of your creditors has filed an adversary proceeding in your Chapter 7 case, objecting to discharge of its debt.  So what exactly is taking place?

If a creditor determines that an objection with respect to discharge of its debt is warranted, the creditor will file an Objection to Discharge of its particular debt.  This filing begins what is known as an adversarial proceeding in the bankruptcy court.  An adversarial proceeding is simply a law suit within the bankruptcy, seeking to declare a particular debt as non-dischargeable.  The debtor responds to the complaint, evidence is gathered and supplied to both sides, and a hearing is held in front of the bankruptcy judge who decides the case.  Here in Rochester, Hon. John C. Ninfo, II, would hear the case.  Typically, neither the bankruptcy trustee nor the U.S. Trustee are involved in the adversarial proceeding.

A creditor may object to the discharge of its debt in a number of different situations.  An unsecured creditor may object using Section 523(a)(2) of the Bankruptcy Code, which contains several different types of non-dischargeable debt.  The debt under that section may not be dischargeable because it is: (1) $500 owing to a single creditor for the purchase of “luxury” goods within 90 days prior to filing of the bankruptcy; (2) $750 owing to a single creditor for a cash advance (i.e. balance transfers are cash advances) obtained within 70 days prior to filing of the bankruptcy; or (3) for money obtained under false pretenses, false representation, or actual fraud.  There are also additional reasons to declare a debt non-dischargeable.

With respect to situations (1) and (2), the applicable rules are known as  as the per-se rules.  That means that the creditor need not prove debtor’s intent (i.e. fraud), and needs to show only that the transactions meet the criteria stated.  Situation (3) means that the debtor made the charges/cash advances knowing that he/she was going to file bankruptcy, or made the charges/cash advances while insolvent and/or could not have had a reasonable expectation to pay back the debt, or made false representations in obtaining credit resulting in the debt he/she is trying to discharge at this time.

If the creditor is successful in having a debt declared non-dischargeable, the debtor will owe that debt until it is paid, with all accumulating interest,  and the debtor can never discharge that debt.

The following is a brief description of procedural issues applicable to the objections.  The complaint must be filed on or before 60 days from the first date set for the creditors meeting (also know as 341 meeting).  Typically, a creditor has less than 90 days after receiving notice of the bankruptcy case to file a complaint.  A creditor must act promptly to determine there are grounds to object to discharge.

Even if a creditor files an objection to discharge of its debt, the rest of the bankruptcy will proceed normally.  The debtor will recieve the discharge on time, and most of the time, the discharge will be received before the hearing in the adversarial proceeding.

Once the adversarial proceeding is filed, the debtor has a number of options with respect to the creditor’s claim.  The debtor can agree to repay all or a portion of the debt by signing a reaffirmation agreement.  A typical reaffirmation agreement results in the debtor paying 50% of the debt over 12-18 months.  The next option is fighting the objection.  The debtor will have to be able to either fight the objection on his/her own or pay an additional retainer to the attorney to fight the claim.

The way that a creditor proves its case, is by showing to the court that the debtor was in financial distress at the time the objectionable transactions were made.  Therefore, the debtor’s financial history will be disclosed through the discovery process, usually for a period of 12 months prior to the challenged transaction, and from the date of the transaction to the date of filing.  Since an adversarial proceeding is a civil matter, both parties may call witnesses, and the debtor may be called to testify by either side.  A creditor’s theory of the case in an adversarial proceeding is usually that no reasonable person could have expected to be able to pay off the debt, at the time that debt was taken out.

If the creditor wins, a judgment is entered, declaring the debt non-dischargable.  This judgment can ultimately be used in New York State court, or elsewhere, to obtain a  money judgment that can then be used to garnish wages, restrain bank accounts or conduct other collection activities.  That judgment will not be dischargeable in any subsequent bankrupcies and can only be extinguished by payment or by New York’s statute of limitations, presently 20 years.  Even if the creditor prevails, the debtor is not responsible for the creditor’s attorney’s fees and costs.

If the debtor wins, the debt is discharged, and, under appropriate circumstances, the creditor will have to pay debtor’s attorney’s fees and costs.

Thus, if an adversarial proceeding is brought, the debtor must choose between either settling or fighting.  The cost to defend an adversarial proceding is usually substantial.  Therefore, it should be compared to the cost of settling the case.  If the proposed settlement reduces the debt and the payments are affordable, especially if the settlement amount is less than the cost to defend, the debtor should consider settlement.

If you are dealing with debt problems in Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation.