Here at Shenwick & Associates, one of the most common things we do for clients is the filing of proofs of claim in bankruptcy cases. We have written extensively before about proofs of claim hereand here, but essentially a proof of claim is a written statement setting forth the creditor's claim against the debtor and filed with the Bankruptcy Court (or, in certain "megacases" with many creditors, the Debtor's claims agent). Recently, a question arose about who could sign a proof of claim. A client wanted to file a proof of claim on his mother's behalf, and had a durable power of attorney for his mother. Was that sufficient? Could we sign it on her behalf, since we had been retained, but did not hold a power of attorney on her behalf? Rule 9010(c) of the Federal Rules of Bankruptcy Procedure provides: "Power of Attorney. The authority of any agent, attorney in fact, or proxy to represent a creditor for any purpose other than the execution and filing of a proof of claim or the acceptance or rejection of a plan shall be evidenced by a power of attorney conforming substantially to the appropriate Official Form. The execution of any such power of attorney shall be acknowledged before one of the officers enumerated in 28 U.S.C. §459, §953, Rule 9012, or a person authorized to administer oaths under the laws of the state where the oath is administered." So it is clear that attorneys may sign proofs of claim without the need for a power of attorney. In re Roberts, 20 B.R. 914, 917, n. 2 (Bankr. E.D.N.Y. 1982) also supports the proposition that an attorney may sign a proof of claim, citing to Collier on Bankruptcy (one of the leading treatises on bankruptcy law), which says that a "separate power [of attorney] is not necessary for the filing of a proof of claim." However, although attorneys may sign proofs of claim, that doesn't mean that they should. In In re Duke Investments, No. 10-36556, 2011 WL 2462681 (S.D. Tex. June 17, 2011), the Court almost disqualified an attorney who had signed his client's proof of claim. The Court refused to disqualify the attorney from representing his creditor-client in the chapter 11 case because the attorney was not a "necessary witness" to the merits of the claim, but the Court admonished attorneys against signing clients' proofs of claim in the future because of the risk that the attorney may become a necessary fact witness at his client's trial. The Court instead recommended attorneys have their clients sign the proof of claim. Following the Court's advice will allow attorneys to completely protect themselves from being disqualified as a necessary fact witness under similar facts. Attorneys should take notice of the holding in Duke when considering the obligations and duties owed to clients and avoid the potentially harmful but common practice of signing their clients' proofs of claim. For more information about proofs of claim and preserving your rights to payment in bankruptcy, please contact Jim Shenwick.
In another twist on the evolving interpretation of BAPCPA, a court in Texas has ruled that failure to extend the automatic stay in a subsequent filing does not affect property of the estate that is not claimed by the debtor as exempt. In re Scott-Hood, No. 11-53580 (Bankr. W.D. Tex. 6/15/12), which can be found here.In the Scott-Hood case, the Debtor had one prior chapter 13 case dismissed and then filed a new chapter 13 proceeding. However, the Debtor did not request an extension of the automatic stay pursuant to section 362(c)(3). JP Morgan Chase Bank filed a Motion for Order Confirming Termination of Automatic Stay which was granted. The Debtor then filed a motion for reconsideration arguing that section 362(c)(3) was limited to property of the Debtor, not property of the estate. The Court ultimately agreed.According to section 362(c)(3)(A), failure to request extension of the stay in a subsequent case means that:(T)he stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.Because the Debtor did not file a motion to extend the automatic stay, it was necessary for the court to determine what the consequence under section 362(c)(3)(A) was. The Court noted that there was a split in the cases as to whether the stay terminated as to all property or just the debtor’s property. The Court noted that this was important in the San Antonio Division of the Western District of Texas because the Standing Order for Chapter 13 cases provides that upon confirmation, property does not revest in the Debtor. The Court noted:Thus, in the San Antonio Division of the Western District of Texas, where property of the bankruptcy estate encompasses all property of the debtor as of filing, plus all property acquired post-petition and earnings from services performed post-petition, (citation omitted), an early termination of the stay under section 362(c)(3)(A) could be meaningless. Opinion, p. 3.After an analysis of the statutory text and legislative history, the Court concluded that the statute meant exactly what it said: “with respect to the debtor” was limited to the debtor’s property, not the estate’s property.The result reached by the foregoing textual analysis may be less than optimal. The fact that the scope of relief is less robust than creditors who lobbied for this legislation might have hoped for, however, is not reason to conclude that the statute is “truly absurd.” It has meaning. It just doesn’t have the meaning that the creditor wants it to have. So it often is with statutes. They fail to deliver on the expectations of those who zealously worked for their passage. By the same token, however, the statute does deliver more relief, in this court’s view, than the majority view says it delivers. That too is but another consequence of the way the statute is written and how it intersects with the rest of the Bankruptcy Code. The court’s job is not to select the optimal policy outcome but to discover the intent of the drafters of the legislation to the extent that can be done with the interpretive tools available. . . . After reviewing both the plain language of the statute itself, as well as its narrow context within section 362 and its broader context within the Bankruptcy Code, the court concludes that section 362(c)(3)(A) terminates the stay only with respect to the debtor individually, with respect to the debtor’s exempt property that stands as collateral for a debt of the debtor, and with respect to certain leases. It does not terminate with respect to property of the estate.Opinion, pp. 7-8. This result will provide a lot of relief to chapter 7 trustees and some relief to less than diligent debtor’s attorneys. For chapter 7 trustees, who may not see a case until 30 days after it is filed, it means that they do not lose control over non-exempt assets that are subject to a lien but may have equity. For debtor’s lawyers who may not be aware of this new provision (it is not even seven years old so far) or who fail to catch a prior case, the benefit may be less dramatic. Debtors typically file chapter 13 to protect their exempt property, such as homes and cars. Under Judge Clark’s ruling, exempt property of the debtor is still subject to early termination of the stay. However, there is an interesting quirk here. All property of the debtor, including exempt property, initially enters the estate. It is only when an exemption becomes final that the property leaves the estate. Consider this scenario: a debtor files a subsequent case and claims his truck as exempt. However, he does not file a motion to extent the stay. At the conclusion of 30 days, the stay terminates. However, the truck is still property of the estate. The property will not leave the estate until 30 days after the first meeting of creditors at the earliest. If the debtor’s attorney realizes his mistake during the period between 30 days after the petition date and the date that exemptions become final, he can simply amend his exemptions to delete the exemption. In that instance, the property remains property of the estate and the early termination clause never takes effect.
It was community property that garnered me my first hug from Doug Jacobs. Or rather, it was the absence of community property that did it. You see, Doug had described his dilemma with his case involving an elderly couple who had a home with lots of equity (that’s what tips you off to the age of this story) on a list serve I followed. The clients had credit card and medical debt that their income wouldn’t cover, but a bankruptcy case would leave substantial equity in their home exposed to sale by the trustee. California is one of the nine US states where spouses hold their acquisitions during marriage as community property. Bankruptcy Code section 541 says that all of the community property comes into the bankruptcy estate even if only one spouse files. So how to get this couple relief from their debts without losing the house? My question to Doug was whether he’d looked at the deed by which they held the house. Because, I reminded him, the presumption that property acquired during marriage is rebutted when title is held in joint tenancy. Bingo! They held as joint tenants, which meant that each spouse held their half of the house as their separate property. One spouse could file bankruptcy and bring only that spouse’s half of the property into the bankruptcy estate. Better yet, the BAP ruling in my McFall case (112 B.R. 336 (9th Cir. B.A.P. 1990)) established that one spouse was entitled to use the entire homestead exemption against his half of the house. Doug’s clients filed serial bankruptcies, each using the homestead exemption to protect their half of the house’s equity from the trustee and the creditors. And this fine result was made possible by a careful look at the way spouses hold title and how the result of state law characterization of marital property played in bankruptcy. When Doug and I finally met face to face at a NACBA event, I stuck out my hand in greeting. He refused to shake hands. I got a hug instead, celebrating what community property concepts can do in bankruptcy. I’ll be talking more about how marital property and community property law interact with the Bankruptcy Code on Thursday, July 12 in Mt. View. Check out the program. Image courtesy of wikimedia. Like This Article? You'll Love These! Bankruptcy as Means to Keep the House Five Reasons To Break Up Couples Writer’s Block And The Bankruptcy Schedules
When faced with a disputed lien strip, don’t discount the possibility of compromise. I wrote last time about the seeming impossibility of compromising a §707(b)(3) action. Next to that, lien strips are easy. Yet I see attorneys all around me folding the moment a secured creditor contests a motion to value. What opportunities squandered. Having just come off a day long trial where good faith, property value, feasibility, and profitability were all in play, a lien strip looks like child’s play. There is only one issue: property value. A contested lien strip is, in fact, a trial subject to most of the Part VII rules for adversaries. Take a look at Rule 9014. It imports most of the discovery rules that apply to adversaries. Here’s a chance to build your litigation skills in a setting that is about as straightforward as you can imagine. Consider compromise Having, I hope, pumped you up about acquiring some courtroom polish, let me argue the other approach to this dispute: consider compromise. A contested lien strip on a client’s home is, on it’s face, as black and white a contest as my 707(b)(3) matter: one dollar of equity for the challenged lien and your client is stuck with the junior mortgage. But the stakes are just as stark on the creditor’s side: one dollar short, and their lien is worthless. Presumably, you have two opinions of value, which suggests splitting the difference. Early on in the Great Recession, I saw little interest on the part of supposedly secured creditors in settlements. But just like loan modifications, I’m seeing more willingness to consider settlement. Neither side should lose sight of the cost of trying the matter, as well as the risk to both sides. Work out the terms If you can compromise on the face amount of the modified note, you need to agree on the terms. Best case for your client, the term of the note is unchanged. But that doesn’t need to be. Perhaps you agree to shortening the term as a sweetener to reach a deal. Just as in loan modifications,be concerned as to how you document the modification and make sure it becomes part of the public record, either in the bankruptcy court or the land records of your county. I quake at the thought of the trainwreck ahead with all the modified loans with little or no supporting paper. Don’t leave your fingerprints on an inadequately memorialized deal. Image courtesy of castle79. Like This Article? You'll Love These! But She’s Not a Creditor! How Long Can Underwater Lien Hold Its Breath? Business Partners: Another Phantom Creditor
In a major decision interpreting chapter 15 of the Bankruptcy Code, Judge Harlin Hale has denied recognition of the provisions of the “Concurso” order obtained by Vitro, SAB in Mexico which would have released the liability of its non-bankrupt U.S. subsidiaries. The Court carefully avoided any rulings which would have cast aspersions upon the Mexican legal proceedings while finding that U.S. law would not recognize the specific provision. In re Vitro, SAB, No. 11-33335 (Bankr. N.D. Tex. 6/13/12). The opinion can be found here. What Happened Vitro S.A.B. de C.V. is a holding company formed in Mexico in 1909. It operates its business through a network of subsidiaries. It is the largest manufacturer of glass containers and flat glass in Mexico and its name is Latin for glass. Vitro borrowed approximately $1.225 billion in unsecured notes which were guaranteed by virtually all of its subsidiaries. Vitro also agreed to repay approximately $2.0 billion to its subsidiaries under circumstances which raised questions from its third party creditors.When the global recession hit in 2008, Vitro could not pay its debts. In November and December 2010, proceedings were filed in four different jurisdictions seeking to address the Vitro debts.1. On November 17, 2010, some of Vitro’s American creditors filed involuntary petitions against fifteen of Vitro’s American subsidiaries in the Bankruptcy Court for the Northern District of Texas. Ultimately, four of the debtors consented to relief and an additional two debtors filed voluntary petitions. 2. On December 2 and 9. 2010, Vitro’s American creditors filed suit against Vitro and 49 of its subsidiaries in state court in New York.3. On December 13, 2010, Vitro filed a a voluntary judicial reorganization proceeding under the Ley de Concursos Mercantiles (the “Mexican Business Reorganization Act”) in the Federal District Court for Civil and Labor Matters for the State of Nuevo León, the United States of Mexico, seeking approval of a pre-packaged, “concurso” restructuring plan.4. On December 14, 2010, Vitro filed a chapter 15 proceeding in the Bankruptcy Court for the Southern District of New York. While these filings set up the multinational squabble, this was only the beginning. In Mexico, the pre-pack was rejected based on a finding that the subsidiaries were not entitled to vote. The initial chapter 15 petition in New York was withdrawn after this filing. On appeal, the Mexican court reversed and allowed the subsidiaries to vote. A new chapter 15 proceeding was filed in New York. However, the New York chapter 15 proceeding was transferred to the Bankruptcy Court for the Northern District of Texas. The Bankruptcy Court for the Northern District of Texas granted a preliminary injunction against proceedings against the Vitro parent but not the subsidiaries. The American creditors sought an order prohibiting the American subsidiaries from voting upon the Mexican concurso but were rebuffed. The Mexican concurso was ultimately approved based upon the votes of the subsidiaries. The concurso provided that the guarantees of the subsidiaries could not be enforced. Thus, the subsidiaries were able to vote in favor of a plan which released their guarantees. This set the stage for the Mexican representative of Vitro to seek an order from the Bankruptcy Court for the Northern District of Texas recognizing the concursoand enforcing the order to release the subsidiaries from their guarantees. To summarize:1. Vitro borrowed over a billion dollars guaranteed by its subsidiaries.2. Vitro filed a pre-packaged bankruptcy plan in Mexico.3. Vitro’s pre-pack was approved based on the votes of its subsidiaries.4. The Mexican plan released the subsidiaries from liability.5. The Bankruptcy Court for the Northern District of Texas was asked to recognize the order from the Mexican Court. The Comity Question This left the Bankruptcy Court with a difficult question: should it enforce the Mexican concursoas a matter of comity or was there a countervailing rule under American law? Fortunately for the court, chapter 15 provides some guidance. Under section 1507(b), an American bankruptcy court may provide “additional assistance” to a foreign debtor, but only if five conditions are met, including that American creditors are treated fairly and the distribution scheme is substantially the same as provided under title 11. Additionally, section 1506 allows the Bankruptcy Court to decline to enforce the order of a foreign court if it would be manifestly contrary to the public policy of the United States.” Whether to recognize a foreign court order under section 1507(b) is largely a matter of comity. While comity and comedy sound very similar they have strikingly different meanings. According to Judge Hale: Comity should be the Court’s primary consideration when applying § 1507(b). (citation omitted). Comity has been defined as the “recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protections of its laws.” (citation omitted). Granting comity to judgments in foreign bankruptcy proceedings is appropriate as long as U.S. parties are provided the same fundamental protections that litigants in the United States would receive. . . . “The principle of comity has never meant categorical deference to foreign proceedings. It is implicit in the concept that deference should be withheld where appropriate to avoid the violation of the laws, public policies, or rights of the citizens of the United States.” (citations omitted). Opinion, pp. 7-8.In ruling upon the parties’ contentions, the Court divided its ruling into objections it rejected, objections it sustained and issues it did not reach.The Court rejected the argument that it should not enforce the Mexican order because of corruption in Mexico. While the creditors’ expert presented evidence of corruption in Mexico in general, it did not connect this to the specific case. Additionally, the objecting creditors’ expert on Mexican law testified that in forty years’ practice, he had never bribed a judge. While the Court’s conclusion appears to be sound, as well as avoiding offense to America’s neighbor to the south, the implicit suggestion that corruption should be proved by bringing testimony from a witness who has personally participated in corruption is a bit unsettling.The Court also dismissed a number of arguments based on fairness and compliance of Mexican law on the basis that these were issues best left to the Mexican court system. However, in the end, the Court concluded that American law would not allow a plan of reorganization which granted wholesale releases to non-debtor parties. The Court stated: Generally speaking, the policy of the United States is against discharge of claims for entities other than a debtor in an insolvency proceeding, absent extraordinary circumstances not present in this case. Such policy was expressed by Congress in Bankruptcy Code Section 524, and in numerous cases in this circuit. (citations omitted). This protection of third party claims is described both in terms of jurisdiction and also as a policy. (citations omitted). The Fifth Circuit has largely foreclosed non-consensual non-debtor releases and permanent injunctions outside of the context of mass tort claims being channeled toward a specific pool of assets. (citations omitted).Opinion, p. 25. The Court ultimately concluded that the guarantor release provision of the concursowas contrary to American law and should not be enforced. While the Court’s conclusion may be sound, it is curious that the Court did not discuss case law out of the Northern District of Texas allowing a plan to enjoin pursuit of claims against a non-party who contributes property necessary to the success of a plan which was approved by the creditors and will pay unsecured creditors 100% of the amount of their claims. In re Bernard Steinhard Pianos USA, Inc., 292 B.R. 109 (Bankr. N.D. Tex. 2002); In re Seatco, Inc., 257 B.R. 469 (Bankr. N.D. Tex. 2001). Perhaps the Court felt that those cases were too far different from those of Vitro. However, an acknowledgement of what would constitute “extraordinary circumstances” would have been welcome. The bottom line here is that comity is a good thing, but not when it means an end run around American law as applied to American creditors of an American subsidiary of a foreign company.The Fifth Circuit has approved a direct appeal and has temporarily stayed enforcement of the decision.
Usually my posts here have a message or a lesson imbedded. This one doesn’t, unless readers can help me find it. But it was a prickly case that resolved well, for unanticipated reasons. Perhaps, there’s a lesson lurking somewhere here. The clients were well above median income: a high tech engineer and a stay at home mom with two children under 9. The major creditor was the contractor whose remodel of their house caused them ultimately to lose the house. Rumor said the contractor’s partnership broke up over the botched project as well. Net, net, net, emotions ran high. After an unsuccessful attempt at a Chapter 13 case, we dismissed and filed Chapter 7. The intent was to let the house go. But the secured debt on the house was an available deduction on B-22, in 7 anyway. Enter the UST who brought a motion to dismiss under §707(b)(3). She had a laundry list of disputed expenses, including appropriate care for two children with learning differences and sports and music lessons. She also seemed offended at a mother who wasn’t in the workforce. The hearings on the issue extended over months, with the judge apparently leaning our way, but looking for deeper record on some of the issues. The frustrating thing for me was that there seemed to be no settlement possibilities available. Chapter 13 wasn’t affordable since we relied on the mortgage interest deduction on the house-to-be-surrendered to avoid monthly disposable income. It seemed to be a win or lose confrontation. When up popped the issue of some stock options that we thought the trustee had abandoned. The trustee reversed himself and said, “no, those are mine”. I ended up saying halleluiah. Because with the prospect of an asset in a case heretofore a no asset case, the UST withdrew the motion to dismiss. The loss of the stock options was far less expensive than funding a Chapter 13 plan without the home mortgage payment deduction. We had a perverse sort of settlement of the abuse motion. Is there a takeaway? The outcome had lead me to wonder whether leaving some money on the table, some asset for creditors, in a case where the 707 issues lurk might not be a cheaper way out of such disputes. Make a preferential payment. Leave unexempted cash. Put the UST to a decision about whether they want to dismiss an asset case in a fight over income. What do you think? Image courtesy of Graham Binns If you are in the Northern District of California, consider joining me for a 2 hour exploration of community property issues in bankruptcy cases July 12 5-7 at the Computer History Museum in Mt. View. We’ll look at all the strange and wonderful things that happen when married people, or formerly married people, file bankruptcy. Sign up info. Like This Article? You'll Love These! Means Test Income And The Annual Bonus Means Test: Getting Business Income Correct Use All Channels to Educate Bankruptcy Debtors
Once parties to a legal dispute have entered a settlement agreement, the Defendant may jeopardize the Plaintiff’s ultimate recovery under the agreement by filing for bankruptcy. In order to reduce the risk associated with Defendant’s bankruptcy, the Plaintiff’s lawyer may: (1) Structure the payments so that they do not exceed $5,475 in one 90-day period, as this is the threshold for some preference actions under 11 USC 547. (2) Try to structure the settlement so that most of the payments are made by third parties, or get a third party to guarantee Defendant’s payments. (3) Get the Defendant to represent that, as of the formation of the settlement agreement, they/he/she are/is financially solvent. (4) As soon as possible, take a security interest in Defendant’s (preferably non-exempt) property. (5) Be careful about including broad language releasing all claims in the settlement agreement. Include language in the agreement conditioning the release on Plaintiff’s ability to reap the full economic value promised in the agreement. (6) Beware of novation, which occurs where a settlement agreement converts otherwise non-dischargeable debt, such as that for willful and malicious injury to person or property, into a dischargeable contract debt. In cases where non-dischargeable debt is being settled, have the Defendant specifically admit to the specific charges or other facts that make the underlying obligation non-dischargeable. Anyone with questions regarding bankruptcy-proofing settlement agreements should contact Jim Shenwick.
A Chapter 13 Bankruptcy can last anywhere fromm 36 to 60 months. Three to five years is a considerable amount of time and a lot of things can change. There are a number of issues that may affect your bankruptcy. Some of the most common changes that need to be addressed are:1. Change in Income. Over the course of your bankruptcy you may find that you change jobs, become employed when you previously were not, or get a promotion or pay raise. Any change in income should be reported to your attorney, regardless of whether it is a pay increase or decrease. You attorney may advise that you need to amend certain schedules and/or amend your Chapter 13 repayment plan. 2. A need to replace a vehicle arises. Your vehicle may break down, or perhaps it is just time to replace your current vehicle. If possible you should speak with your attorney before a new vehicle is an absolute necessity. The steps your attorney will need to take depend on the situation. If you are purchasing a new vehicle outright, free and clear of loans, you may need to explain where the funds for the vehicle came from. If you want to purchase a vehicle with a loan your attorney will need to file a motion to incur debt. You will have to show that you can afford your plan payment and the vehicle. A motion has to be filed with the court and you must allow at least 21 days for objections. If there are not any objections your attorney will file an order with the court allowing the purchase of a vehicle. If your previous vehcile was being paid through your chapter 13 repayment plan you and your attorney may need to amend your plan to reflect the changes.3. If you become entitled to receive a lump sum of money or property. You could become entitled to receive money for a variety of reasons, including an inheritance, proceeds from a lawsuit or settlement, cashing out a 401k. This list is not all inclusive. If you receive a sum of money for ANY reason you should contact your attorney. Generally, if you receive a sum of money while in a Chapter 13 that will have to be turned over to the trustee to be distributed to your creditors. Generally, this will be added to your plan base and may mean that you are paying off more of your creditors.This is not an all inclusive list. If something changes while you are in a bankruptcy you should contact your attorney. If you have questions, or would like to schedule a consultation, please contact a St. Louis Bankruptcy Attorney Today.
<p>A Chapter 13 Bankruptcy can last anywhere fromm 36 to 60 months. Three to five years is a considerable amount of time and a lot of things can change. There are a number of issues that may affect your bankruptcy. Some of the most common changes that need to be addressed are:</p><p>1. Change in Income. Over the course of your bankruptcy you may find that you change jobs, become employed when you previously were not, or get a promotion or pay raise. Any change in income should be reported to your attorney, regardless of whether it is a pay increase or decrease. You attorney may advise that you need to amend certain schedules and/or amend your Chapter 13 repayment plan. </p><p>2. A need to replace a vehicle arises. Your vehicle may break down, or perhaps it is just time to replace your current vehicle. If possible you should speak with your attorney before a new vehicle is an absolute necessity. The steps your attorney will need to take depend on the situation. If you are purchasing a new vehicle outright, free and clear of loans, you may need to explain where the funds for the vehicle came from. If you want to purchase a vehicle with a loan your attorney will need to file a motion to incur debt. You will have to show that you can afford your plan payment and the vehicle. A motion has to be filed with the court and you must allow at least 21 days for objections. If there are not any objections your attorney will file an order with the court allowing the purchase of a vehicle. If your previous vehcile was being paid through your chapter 13 repayment plan you and your attorney may need to amend your plan to reflect the changes.</p><p>3. If you become entitled to receive a lump sum of money or property. You could become entitled to receive money for a variety of reasons, including an inheritance, proceeds from a lawsuit or settlement, cashing out a 401k. This list is not all inclusive. If you receive a sum of money for ANY reason you should contact your attorney. Generally, if you receive a sum of money while in a Chapter 13 that will have to be turned over to the trustee to be distributed to your creditors. Generally, this will be added to your plan base and may mean that you are paying off more of your creditors.</p><p>This is not an all inclusive list. If something changes while you are in a bankruptcy you should contact your attorney. If you have questions, or would like to schedule a consultation, please contact a St. Louis Bankruptcy Attorney Today.</p>
When an inexperienced Chapter 13 practitioner asks how much a plan has to propose to pay, I envision the Carnac the Magnificent routine from the Johnny Carson show. Carnak, in turban and robes, puts the sealed envelope with the question to his forehead, provides an answer, then opens the envelope to read the question. The results were uniformly hilarious. Not so when a bankruptcy lawyer answers the question without facts. What says the code? The Bankruptcy Code tells us what the plan must provide and what it may provide. The baseline for your plan lies in the statute. a) The plan— (1) shall provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan; (2) shall provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title… (3) if the plan classifies claims, shall provide the same treatment for each claim within a particular class…1322(a) But the Code doesn’t supply all of the answers. What are the client goals? A Chapter 13 plan only exists to further the client’s financial reorganization. Tell me what drove the selection of Chapter 13 over Chapter 7 and I have some clues as to how much money it takes. Is the debtor trying to pay taxes? Then tell me what the priority taxes total. Is the debtor trying to cure mortgage arrears? How much are the arrears? Does the debtor have non exempt property he wants to keep? Walk me through the liquidation analysis. How much are the unpaid attorneys fees? The avoidable transfers? More like juggling Drafting a Chapter 13 plan that works is akin to juggling, or a balancing act. You’ve got to get enough money into the plan to do meet your goals, all the while proving that the debtor has enough real world income to do the trick. I’ve come to appreciate a printing calculator, amortization tables, and step plans. The power of Chapter 13 for the client makes it worthwhile to do the math. Image courtesy of Wikipedia. Coming to Mt. View in July: Yours, Mine & Ours Community Property in Bankruptcy http://bit.ly/M3WrCQ Like This Article? You'll Love These! The Chapter 13 Plan Light Bulb Moment Differing Dollars In Chapter 13 Plan vs. Claim Learn the Bankruptcy Lingo