Chapter 6 (pp



Chapter 6 (The Chapter 13 Bankruptcy (Adjustment of Debts of an Individual with Regular Income)) (pp. 298-343)

299 6th bullet -- change "most" to "some"

8th bullet -- change "six" to "eight"

10th bullet -- after "A Chapter 13 debtor" delete "is in bankruptcy . . . years and" and replace with insert 6-1

Insert 6-1

with a median family income less than the median family income for the debtor's state is in bankruptcy for three to five years and a Chapter 13 debtor with a median family income greater than the median family income for the debtor's state is in bankruptcy for five years and in either case the debtor

300 2nd bullet -- change "is" to "may be"

insert 6-2 is a new ¶ and is to be added after the 2nd bulleted sentence and before the ¶ beginning "This chapter follows . . . ."

Insert 6-2

The following are changes to Chapter 13 caused by Bankruptcy Abuse Prevention and Consumer Protection Act

• Plan may be confirmed under some circumstances without paying all pre-petition domestic support obligations in full even though they are priority claims if payment is to a governmental agency

• Case may be converted or dismissed for failure to pay post-petition domestic support obligations

• Case must be dismissed or converted upon failure to file by the meeting of creditors the income tax returns for the four years preceding the bankruptcy filing

• Plan may provide for payment of post-petition interest on student loans if plan otherwise provides for full payment of all allowed unsecured claims

• Creates a means test to determine the applicable commitment period -- the minimum length of the term of the plan

• Requires confirmation hearing to occur within 20 to 45 days after meeting of creditors, unless court determines that the hearing should be held earlier

• Confirmation of the plan is dependent upon whether the debtor acted in good faith by filing the petition

• Requires that plan payments to holders of secured claims be paid in equal monthly amounts

• Precludes lien-stripping if the claim is secured by a purchase-money security interest in a motor vehicle purchased within 910 days before bankruptcy or secured by other purchase-money collateral purchased within one year of bankruptcy

• Plan confirmation is dependent upon payment of all Domestic Support Obligations that become payable after the bankruptcy filing

• Provides for a new definition of disposable income

• Requires that debtor begin making plan payments within 30 days of order for relief and allows direct payment to lessors of personal property and to holders of purchase-money claims secured by personal property

• Requires debtor to provide proof of insurance for personal property within 60 days of filing petition

• Precludes a debtor from receiving a chapter 13 discharge if the debtor has received a discharge in a Chapter 7, 11 or 12 case filed within 4 years of the filing of the Chapter 13 case, or if debtor has received a discharge in a Chapter 13 case filed within 2 years of filing the previous Chapter 13 case

• Precludes debtor from receiving a discharge until the debtor has completed an “instructional course concerning personal financial management."

300 add the following sentence (Insert 6-3) at the end of the last sentence on p.300

Insert 6-3

The attorney also explains the different options available to the debtor, including the distinctions between Chapters 7 and 13, and confirms that the debtor understands the process.

301 within the box for Exhibit 6-1, change the title from "Filing the Chapter 13 Plan" to "The Chapter 13 Process"

Exhibit 6-1 -- in the first box, after #6 add a new #7

7. Statement of Current Monthly Income and Disposable Income Calculation

Change old #7 to #8 and old #8 to #9

After the new #9 add Insert 6-4

Insert 6-4

10. All federal, state and local tax returns for the four years prior to bankruptcy

This is followed by a line and the entry "If the petition is . . . ." followed by another line. After this line and before the next entry ("The debtor has" -- add the following entries and lines

Insert 6-5

The tax returns must be filed no later than the date of the meeting of creditors

In addition, the debtor must provide the trustee with the debtor's most recent filed tax returns within seven days of the meetings of creditors

___________________________________________________________

Debtor has a duty to file tax returns that are due during the pendency of the case

____________________________________________________________

Debtor must provide proof of insurance for personal property within 60 days of filing the petition

_____________________________________________________________

303 last box -- the confirmation hearing. Divide the first sentence into two so they read

Insert 6-6

The court shall conduct a confirmation hearing within 20-45 days after the meeting of creditors unless the court determines that the confirmation hearing should be held at an earlier date

At the confirmation hearing, the court may confirm or deny confirmation of the debtor's plan

305 the left box -- full compliance discharge -- 3rd line from the bottom -- change from 523(a)(5) to 523(a)(1)(B) & (C), (2), (3), (4), (5), (8), (9).

306 2nd bullet, 2nd line, after schedules – add “statement of current monthly income and disposable income calculation,

Last ¶, 2nd line -- delete the sentence ("The Chapter 13 plan term . . . five years.) and replace it with Insert 6-7

Insert 6-7

The term of the plan, called the applicable commitment period, will depend on a means test, that is, it is determined by the debtor's family income measured against the median income for a like-size family in the debtor's state. If the debtor's family income is less than the median family income for the debtor's state, the Chapter 13 plan may be as short as three years or, with court's approval, as long as five years. If the debtor's family income is less than the median family income for the debtor's state, the Chapter 13 plan will be five years. 11 U.S.C.A. §§ 1322(d), 1325(a)(4), 1324(b)(4). If the debtor can pay all of his or her unsecured claims in a shorter period, the applicable commitment period of the plan could be less than the 3 to 5 years. 11 U.S.C.A. § 1325(b)((4)(B).

Next sentence after "during the life of the plan," add "some or all of"

308. paragraph after Problem 6.1, line 3, after “schedules” add “statement of current monthly income and disposable income calculations, and”

same paragraph, line 5 – delete “and”

end of same paragraph – change the period to a comma and add “and Form B22C (Statement of Current Monthly Income and Disposable Income Calculations. (See Exhibit 6-2.)

Problem 6.2 after the 2nd ¶ add a 3rd ¶ that reads:

"Also complete Bankruptcy Form B22C, Statement of Current Monthly Income and Disposable Income Calculation (See Exhibit 6-2.)"

last sentence of the page -- change "four" to "five"

309 after the first #2 (Mandatory Provisions), add the following (Insert 6-8) as #3

Insert 6-8

3. A Chapter 13 plan must provide for the full payment of a domestic support obligation unless the obligation is assigned to or owed directly to a governmental unit. 11 U.S.C.A. § 1322(a)(4).

Change the number of former #3 to #4 and former #4 to #5.

Change the new #5 to read (Insert 6-9)

Insert 6-9

5. If the debtor's household income is less than the state's median income for a family of like size, the

At the end of this sentence, add the following sentence (Insert 6-10)

Insert 6-10

If the debtor's household income is greater than the state's median income for a family of like size, the payment period under the plan must be five years.

2. Permissive Provisions -- at the end of #9. Delete "and" and change #10. to #11. and add a new #10 (Insert 6-11)

Insert 6-11

10. provide for payment of post-petition interest on student loans to the extent the debtor has sufficient disposable income after making provision for paying all allowed claims; and

3. A Sample Chapter 13 Plan -- The existing order in the 4th edition is very confusing. Currently the sample plan is located in the middle of the explanation of the plan. This needs to be reorganized so the explanation of the plan follows the sample plan. The following reorganizes "3. A Sample Chapter 13 Plan)"

Begin the text for this paragraph with the first paragraph as is. ("The format of a Chapter 13 plan . . . . )

Next insert the sample plan (Exhibit 6-2) (pp. 310-313). Change the name of Exhibit 6-2 from "Sample Chapter 13 Plan" to "Sample Chapter 13 Plan when Family Income Is Less than the State's Median for a Comparable Size Family"

Make the following changes within Exhibit 6-2 that appears on p.313. "Trustee Fee (6 percent)" -- citation should be § 326(b) rather than § 326(a)

After Exhibit 6-2 add a new Exhibit -- Exhibit 6-3 entitled "Sample Chapter 13 Plan when Family Income Is Greater than the State's Median for a Comparable Size Family." Exhibit 6-3 is the same as Exhibit 6-2 except Exhibit 6-3 is a 60 month plan while Exhibit 6-2 is a 40 month plan. (See Inserts pp. 313A, B, C, D).

Title: EXHIBIT 6-3 Sample Chapter 13 Plan when Family Is Greater than the State's Median for a Comparable Size Family

310. Change the number of Exhibit 6-2 to 6-3

Change the heading to read:

In re: McPherson, Eric )

McPherson, Jennifer )

(formerly Baxter, Jennifer) ) Case No.: 03-00000-R

)

Debtors ) Chapter 13

)

8110 South Windsor Drive )

_________ __________ ______ )

)

SS#: 1277 )

2787 )

313A length of plan changes from 40 to 60

IRS -- $200.00 changes to $133.33 and 40 changes to 60

State Tax Commission -- $87.50 changes to $58.33 and 40 changes to 60

Former Spouse -- $35.00 changes to $23.33 and 40 changes to 60

313B Second Mtg -- $170.00 changes to $120.23 and 40 changes to 60

Sears -- $14.75 changes to $10.62 and 40 changes to 60

Auto Finance -- $236.01 changes to $169.98 and 40 changes to 60

Rockwell -- $70.83 changes to $50.09 and 40 changes to 60

` Friendly Finance -- $47.88 changes to $35.68 and 40 changes to 60.

313C the percentage changes from 18.75% to ******%

313D Amount to be Paid by Debtors Under Plan -- $40,000 changes to $60,000 and 40 changes to 60.

Three lines below the table becomes:

$60,000.00

- 3,600.00

$56,400.00

-18,575.00

$37,825.00

next line -- $19,025.00 changes to $37,825.00

Trustee Fee in Exhibit 6-3 -- typo -- § 326(a) should be § 326(b)

After the Sample Plans (Exhibits 6-2 & 6-3) return to p.309 and pick up with the second paragraph ("Following are the . . . . ) In this sentence add the word "The" before following and lower case "following"

Continue with the attorney's explanation of the plan (bottom of p.309, middle of p.313, all of p.314, bottom of p.316, all of p.317). All of the attorney's explanation should be contiguous. After the explanation follow with former Exhibit 6-3 (pp. 315-316) (renumber 6-4), followed by Problems 6.3 and 6.4. If it works better in page formatting, Exhibit 6-3 could come after Problem 6.4 and before "Section B. The Debtor's Payments under the Plan"

The following changes go with the attorney's explanation of the plan, p.309.

3. A Sample Chapter 13 Plan -- ¶ 3, line 3 -- change § 1325(b)(2)(A) to §§ 1325(b)(2) & (3) and delete "as income which is received" through the end of the quote on line 4. Replace the deleted material with the following block quote (Insert 6-12):

Insert 6-12

(2) For purposes of this subsection, the term "disposable income" means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended --

(A)(i) for the maintenance or subject of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and

(ii) for charitable contributions (that meet the definition of "charitable contribution" under section 548(d)(3) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made; and

(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business.

(3) Amounts reasonably necessary to be expended under paragraph (2) shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has current monthly income, when multiplied by 12, greater than --

(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(B) in the case of a debtor in a household of 2, 3, or four individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.

The remainder of the paragraph, beginning with "The McPhersons . . . . " begins a new ¶ that ends with "$1,000 in disposable monthly income."

Then add the insert 6-13 as a new ¶

Insert 6-13

Once the disposable monthly income has been calculated, the means test must be applied to determine the applicable commitment period (length of the plan). 11 U.S.C.A. §§ 1322(d), 1325(b)(4).

Applicable Commitment Period

(1) Number of persons in debtor's household ________

(2) Median family income in the applicable

state for the number of persons in the

debtor's household $_______

(3) Current disposable monthly income of

of debtor and debtor's spouse $_______

(4) Multiply (3) by 12 months $_______

If (4) IS NOT LESS THAN (2) (i.e., debtor and spouse's monthly income times (12 months) is greater than the applicable state's median family income for the comparable number of persons in the debtor's household) -- then the plan may not provide for payments over a period that is longer than 5 years and no shorter than 5 years unless all of the unsecured claims are paid in full.

All of the priority claims must be paid in full with the exception of domestic support claims paid to a governmental unit.

The plan cannot be confirmed if the best interests of creditors test cannot be satisfied within the 5 year term of the plan.

If (4) IS LESS THAN (2) (i.e., debtor and spouse's monthly income times 12 (months) is less than the applicable state's median family income for the comparable number of persons in the debtor's household) -- then the plan may not provide for payments over a period that is longer than 3 years unless the court approves a period longer than 3 but no more than 5 years

All of the priority claims must be paid in full with the exception of domestic support claims paid to a governmental unit.

The plan length may be extended beyond 3 years to meet the best interests of creditors test but plan cannot be confirmed if the best interests of creditors test cannot be satisfied within the 5 years.

The plan could be shorter than 3 years if all of the unsecured claims are paid in full.

The attorney knew that the McPherson's household has 4 members and that their gross income was $60,000. The attorney found the applicable state's median family income for a comparable number of persons in the debtor's household at ). A number of states had median family income for a family of 4 above $60,000 and a number had median income for a family of 4 below $60,000. If the McPhersons were in a state where the median family income exceeded their family income, the applicable commitment period for the McPhersons' plan will be 3 years (36 months) unless more time (but no more than 5 years (60 months)) is needed to satisfy the best interests of creditors test. If the McPhersons were in a state where the median family income was below their family income, the applicable commitment period for their plan would be 5 years (60 months). If the best interests of creditors test could not be met in 5 years, the McPhersons would be unable to confirm a for Chapter 13 plan using only their disposable income.

Regardless of whether the McPhersons are in a state with a median family income that exceeds or is less than their own, the attorney considers the best interests of creditors test. Under the best interest of creditors test, the holders of unsecured priority claims and the unsecured nonpriority claims must receive under a Chapter 13 plan as much as they would have received had the case been filed under Chapter 7.

Claims

(1) Unsecured priority claims $________

(2) Secured claims $________

(3) Unsecured, nonpriority claims $________

If the amount of a claim exceeds the value of the collateral, the claim will be treated as two claims -- a secured claim up to the value of the collateral and an unsecured claim for the balance. 11 U.S.C.A. § 506(a). If, however, the claim involves a purchase-money security interest in a motor-vehicle bought within 910 days of the filing of the petition or other purchase-money collateral bought within one year of the filing of the petition, the entire claim is treated as a secured claim. 11 U.S.C.A. § 1325(a). The claims by both Sears and Auto Finance Company are secured by collateral valued at less than their respective claims. Neither claim comes under the "non-strip" exception. The washer and dryer exceeds the one-year exception and the four-year old Chevrolet Blazer exceeds the 910 day exception. If the Chevrolet Blazer were purchased within 910 days of the filing of the bankruptcy petition, the allowed secured claim would be $12,000 rather than $8,000. If the washer and dryer were purchased within a year of the bankruptcy filing, the allowed secured claim would be $850 rather $500, the value of the collateral.

Best Interests of Creditors Test

(1) Total nonexempt assets of the

Chapter 7 estate $________

(2) Secured claims $________

(3) (1) less (2). Assets available for

administration in Chapter 7 to

unsecured priority and unsecured

nonpriority claims $________

Under the best interests of creditors test, the unsecured priority and unsecured nonpriority claims must receive as much under a Chapter 13 plan as they would under a Chapter 7 liquidation.

For the McPhersons, their assets available for administration in Chapter 7 were:

• Bass Boat $16,000

• Savings Bonds 3,000

$19,000

Therefore, under a Chapter 13 plan, the holders of unsecured priority and unsecured nonpriority claims must to be paid at least $19,000.

The attorney then calculated how many months would be required under the Chapter 13 plan to pay unsecured priority and unsecured nonpriority claims $19,000, considering $1,000 a month as disposable income. The attorney used the following formula:

The number of months of the plan equals [(the nonexempt assets available for administration in a Chapter 7 case plus the amount of the secured claims) divided by (1.00 less the Chapter 13 trustee's percentage)] divided by the disposable income per month.

(1) Total nonexemptssets available

for administration in Chapter 7

to unsecured priority and unsecured

nonpriority claims $________

(2) The amount of the secured claims

(secured by nonexempt assets) $________

(3) Total of (1) and (2) $________

(4) The Chapter 13 trustee's fee _________%

(5) 1.00 less (4) ` _________%

(6) convert (5) to a decimal .

(7) divide (3) by (6) $_________

(8) the disposable income per month $_________

(9) (7) divided by (8) $_________

Minimum number of months required

for the Chapter 13 plan to meet the

best interests of creditors test

Applying this formula to the McPhersons facts resulted in 40 months being required to satisfy the best interests of creditors test.

(1) Total nonexempt assets available for

administration in Chapter 7 to

unsecured priority and unsecured

nonpriority claims $ 19,000.00

(2) The amount of the secured claims

(secured by nonexempt assets) $ 18,575.00

(3) Total of (1) and (2) $ 37,575.00

(4) The Chapter 13 trustee's fee 6.0%

(5) 100% less (4) ` 94%

(6) convert (5) to a decimal .94

(7) divide (3) by (6) $ 39,973.40

(8) the disposable income per month $ 1,000.00

(9) (7) divided by (8) $ 39.97 months

Minimum number of months required

for the Chapter 13 plan to meet the

best interests of creditors test

If the McPhersons' family income was less than the comparable family income in their state, they could not satisfy the best interests of creditors test in 36 months but would require an additional four months. Thus they would propose a 40-month plan. On the other hand, if the McPhersons family income was greater than the comparable family income in their state, they could not reduce their 5-year (60-month) plan. Rather than pay $40,000 in disposable income to unsecured priority and unsecured nonpriority claims over 40 months, they would pay $60,000 in disposable income over 60 months. By having a family income that exceeded their state's comparable family income, the McPhersons unsecured nonpriority claims would receive more then they would had the McPhersons has family income below the state's comparable family income ($20,000 more since the unsecured priority claims would need to be paid in full under either plan).

BAPCAP further limits a debtor’s ability to forum shop for exemptions. Prior to the enactment of BAPCPA on April 20, 2005, an individual debtor could exempt property based upon the law of the state in which the debtor’s domicile had been located for the 180 days immediately preceding the bankruptcy filing or of the state where the domicile had been located for a longer portion of such period than any other place. If that state had opted out of the federal exemptions, those exemptions under 11 U.S.C.A. § 522(d) were not available to the debtor; if the state had not opted out of the federal exemptions, the debtor could choose either the state exemptions or the federal exemptions. Now, under BAPCPA, the state exemptions of the state where the debtor has filed bankruptcy are available if the debtor was domiciled in that state for 730 days prior to the bankruptcy filing. If the debtor was not domiciled in that state for 730 days, then the state exemption laws apply where the debtor’s domicile was located for the 180 days immediately preceding the 730-day period or for a longer portion of such 180-day period than any other place. 11 U.S.C.A. § 522(b)(3).

309 3. A Sample Chapter 13 Plan -- paragraph 4, first line --

after the word "calculated" and before the comma, add the phrase "and the applicable commitment period determined"

¶ 4, line 2 -- after "in full" add Insert 6-14

Insert 6-14

"excluding domestic support obligations payable to a governmental entity."

¶4, lined 4-5 -- after "state tax commission, and the" add "domestic support obligation" and place "arrearages . . . spouse." in parenthetical -- (arrearages . . . spouse).

¶4, line 9 -- change "This plan, for convenience, includes", to "These plans, for convenience, include"

313 1st paragraph, 2nd line -- after "$25 a month" add Insert 6-14.

Insert 6-14

"on the 40-month plan and $16.67 a month on the 60 month plan."

3rd paragraph (¶ beginning "If the amount of a claim"), line 2 -- after "balance" add the phrase "unless the no lien-stripping exception applies."

Same line -- Change § 506(a) to §§ 506(a), 1325(a).

313A Change the number of Exhibit 6-3 to 6-4

Change the heading to conform with the heading of Exhibit 6-3 (p.310)

314 last ¶, 8th line, after § 522(f)(1)(B), -- add the following sentence (Insert 6-15)

Insert 6-15

See 11 U.S.C.A. § 522(f)(4) for a listing of what is and what is not included in the definition of "household goods."

Last ¶, last line -- change 6-3 to 6-4

315 Exhibit 6-3 changes to Exhibit 6-4 and add missing #4 in the motion. Add the following as #4.

Insert 6-16

4. The "household goods" that are the subject of the security interest fall within the definition of "household goods" in 11 U.S.C.A. § 522(f)(4).

316 Text after Exhibit 6-3 (now 6-4) -- 2nd ¶, 6th line -- add after the citation § 1325(a)(4),

"and the plan is for an applicable commitment period,"

same line -- add after "may be confirmed" -- "over the objection of unsecured creditors."

Same ¶, last line -- add after "full" the following insert in the parenthetical

Insert 6-17

(with the exception of domestic support obligation to be paid to a governmental unit)

317 top line -- after the word "plan" add the insert 6-18

Insert 6-18

"except for a domestic support obligation to be paid to a governmental unit)

3rd line down -- add to the end of the sentence ending "unsecured claims"

Insert 6-18

although post-petition interest on student loans may be paid during the plan if other secured claims are being paid in full.

Omit the paragraphs beginning with "The attorney" though the Example and through the next paragraph ending with "used to fund this plan"

318 Problem 6.4 -- add the following (insert 6-19) after the 1st sentence.

Insert 6-19

Assume that the McPhersons were in a state where their household income was less than the state's comparable family's income so they could file a 40-month plan.

Begin "What if" as a new ¶

318 B. The Debtor's Payments

1st ¶, 1st line -- delete "plan is filed" and add

Insert 6-20

filing of the plan or the order for relief, whichever is earlier,

321 Section A -- 2nd paragraph, -- delete the last sentence of the paragraph and replace it with insert 6-21

Insert 6-21

The debtor, however, cannot lien strip by paying the secured claim under the plan and converting to another chapter if the unsecured claim has not been paid in full.

321 Section B. Operation of the Debtor's Business -- 2nd line -- change citation from § 1304(b) to

§§ 1304(b), 1325(b)(2)(B).

322 Section 5, 2nd ¶, last line -- change citation from § 1326 to § 1326(a)(2).

323 A. Motions -- 2nd paragraph, line 5 -- delete "if a debt for alimony, maintenance, or support is secured by the lien" and replace with "for a domestic support obligation if the obligation is secured by the lien"

323 In re Mulliken -- in the citation delete the period after 70335

325 1st ¶, line 4 -- change (c)-(e) to (c)-(f)

2nd ¶, 1st line -- delete "a motion objecting" and replace with "an objection"

2nd ¶, 3rd line -- change (e) to (f)

327 Section 7, line 1 -- change See Exhibit 6-4 to See Exhibit 6-5.

Section 9, 1st ¶, 1st line -- add the following sentence after 1324.

Insert 6-22

This hearing must be held not earlier than 20 and not later than 45 days after the meeting of creditors. 11 U.S.C.A. § 1324(b).

Section 9, 2nd ¶, 1st line -- -- delete "a motion objecting" and replace with "an objection"

Same line -- change 1324 to 1324(a)

Section 9, 3rd ¶, 2nd line -- change the word "six" to "nine" and change the colon to a period.

327 #1 begin with a capital T and end of the sentence with a period rather than a semicolon.

#2 begin with a capital T and end of the sentence with a period rather than a semicolon. Also add the word "must" between "plan" and "have"

328 Change Exhibit 6-4 to 6-5

328. Change the number of Exhibit 6-5 to 6-6. Substitute the new B9I (10/05) for the old form (12/03) Although wws.rules/interium.html > Interim Bankruptcy Rules and Official Forms > New and Revised Official Forms lists the new B9I, it is not accessible through this site.

329 Change Exhibit 6-4 to 6-5

330 Change Exhibit 6-4 to 6-5

330 #3 begin with a capital T and end of the sentence with a period rather than a semicolon.

#4 begin with a capital T and end of the sentence with a period rather than a semicolon.

delete the four lines of #5 and replace with Insert 6-22A.

Insert 6-22A

5. Secured claims may be dealt with under the plan in the following manner:

a. regardless of the treatment afforded by the plan, the holder of the secured claim accepts the plan;

b. the debtor surrenders the collateral to the holder of the secured claim; or

c. the holder of the claim retains the lien on the collateral securing the claim; the debtor pays in full the allowed secured claim (the value of the debtor's interest in the collateral securing the claim) in equal monthly amounts under the plan with interest; and if the claim is secured by personal property, the amount of the payments must not be less than an amount sufficient to provide adequate protection during the term of the plan (in other words, the collateral must not depreciate faster than the secured claim is being paid under the plan). 11 U.S.C.A. § 325(a)(5).

This treatment is commonly referred to as secured creditor cramdown because it is done over the objection of the secured creditor. The two primary issues presented by a secured creditor cramdown are the value of the collateral securing the claim (which determines the amount of the allowed secured claim under 11 U.S.C.A. § 506(a)) and the interest rate required to pay the secured claim in full (i.e., contract rate, market rate or some other rate). If the value of the collateral securing the claim is less than the amount owed to the creditor, the claim is bifurcated -- the secured claim is written down to the value of the collateral and the difference is treated as an unsecured claim. This process is referred to as lien stripping (stripping the lien from the unsecured portion of the claim). BAPCPA limits the circumstances under which lien stripping is permitted under a Chapter 13 plan. Lien stripping is not permitted if the claim is secured by a purchase-money security interest in a motor vehicle acquired for the personal use of the debtor, securing a debt that was incurred within 910 days of the bankruptcy filing, or personal property other than a motor vehicle, securing a debt that was incurred within one year of the bankruptcy filing.

330 since the requirements have been changed from 6 to 9, the list on p.330 is incomplete. Therefore, at the end of the 5th entry delete "and" and add a semicolon at the end of #6 and Insert 6-23 at the end of the 6th entry:

Insert 6-23

7. the action of the debtor in filing the petition was in good faith (11 U.S.C.A. § 1325(a)(7);

8. the debtor has paid all amounts that are required to be paid under a domestic support obligation and that first become payable after the date of the filing of the petition if the debtor is required by a judicial or administrative order, or by statute, to pay such domestic support obligations (11 U.S.C.A. § 1325(a)(8)); and

9. the debtor has filed all applicable Federal, State, and local tax returns (11 U.S.C.A. § 1325(a)(7).

330 Problem 6.5 -- At the end of the Problem (p.332) add insert 6-24

Insert 6-24

What about good faith under the new 11 U.S.C.A. § 1325(a)(7)?

332 1st full ¶, 5th line -- delete "the years" and replace with "the applicable commitment period"

332 After the Flood case add the following problem (insert 6-25)

Insert 6.25

PROBLEM 6.6 Consider the 910 day provision for purchase money security interests in motor vehicles purchased for personal use. What is the impact, if any, of the 2005 revisions to the Bankruptcy Code on Flood?

334 1st ¶ after the case, 1st sentence -- delete "The final provision of section 1325(a) is that" and substitute "The sixth provision requires " then after the word "debtor" add the word "to"

334 After the case and after the 1st paragraph, add the following three paragraphs (insert 6-26)

Insert 6-26

The seventh provision requires the debtor to file the Chapter 13 petition in good faith, otherwise the debtor's Chapter 13 plan cannot be confirmed. (11 U.S.C.A. § 1325(a)(7). This provision, added in 2005, presents a dilemma for the debtor when the debtor's original Chapter 7 case is dismissed due to presumed abuse under 11 U.S.C.A. § 707(b)(2) and the debtor seeks to convert to a Chapter 13.

The eighth provision, also new in 2005, requires the debtor to have "paid all amounts that are required to be paid under a domestic support obligation and that first become payable after the date of the filing of the petition if the debtor is required by a judicial or administrative order, or by statute, to pay such domestic support obligation." 11 U.S.C.A. § 1325(a)(8).

The ninth provision, also new in 2005, requires the debtor to have filed all applicable tax returns (federal, state, and local) that are required for the four years preceeding the bankruptcy filing. 11 U.S.C.A. §§1325(a)(9), 1308.

334 the last word -- change 6-5 to 6-6

334 4th ¶, line 3 -- delete (5) so citation reads § 1307(c).

335 Exhibit 6-5 changes to 6-6

335. Change Exhibit 6-6 to Exhibit 6-7

Change the heading to conform with the heading of Exhibit 6-3 (p.310)

336 Exhibit 6-5 changes to 6-6

337 Exhibit 6-5 changes to 6-6

337 Exhibit 6-5, #13, line 4 -- insert (a) between 704 and (8) so it reads 704(a)(8)

338 Section 10, paragraph 2, second line -- typo -- delete the "7" in the citation so it reads 1326(a)(2).

Section 11, paragraph 1, second to last line -- add Insert 6-27 to the end of the sentence and before the citation

Insert 6-27

and to provide for the payment of health insurance.

341 Section 13 -- Discharge -- delete the paragraph that begins "Therefore" and replace with Insert 6-28

Insert 6-28

Some but not all of the debt excepted from discharge in a Chapter 7 case is likewise excepted from discharge in chapter 13. Therefore, the full-compliance discharge available to debtors under Chapter 13—referred to as a superdischarge—will discharge some debt that could not be discharged in a case under Chapter 7. Those debts that may be discharged in chapter 13 that may not be discharged in Chapter 7 include: fine, penalty or forfeiture owed to a governmental entity; debts for willful and malicious injury by the debtor to the property of another entity; and debt incurred by a debtor arising out of a divorce decree or separation agreement other than domestic support obligations. 11 U.S.C.A. § 1328(a). Although the full-compliance discharge available under Chapter 13 is not as broad as it was before the enactment of BAPCPA, it is still generous enough to entice some debtors to file under Chapter 13 instead of Chapter 7.

341 Change Problem 6.6 to 6.7

Change 6.7 to 6.8

342 paragraph after Problem 6.7 (now 6.8) -- line 2 -- change "six" years to "eight" years

same paragraph -- delete the last sentence and citation ("A debtor who has received . . . . 1328." And replace with the following insert 6-29. The first paragraph of the insert is not a new paragraph but replaces the deleted sentence.

Insert 6-29

A debtor who has received a discharge in a case filed under Chapters 7, 11 or 12 during the 4 year period prior to the entry of the order for relief in a subsequent Chapter 13 case is not eligible for a discharge in the Chapter 13 case. Moreover, a debtor who has received a discharge in a case filed under Chapter 13 within 2 years prior to the entry of the order for relief in a subsequent Chapter 13 case is not eligible for a discharge in the chapter 13 case. 11 U.S.C.A. § 1328(f).

The court may not grant a discharge to a Chapter 13 debtor unless the debtor has completed an instructional course on personal financial management. 11 U.S.C.A. § 1328(g)(1). A debtor is excused from attending such course if the court determines the debtor is unable to because of incapacity, disability or active duty in a military combat zone, or if the United States Trustee determines that there is not an adequate instructional course available to the debtor. 11 U.S.C.A. § 1328(g)(2).

There is an additional impediment to the granting of a chapter 13 discharge. A court may not grant a discharge unless the court finds that: (a) there is no reasonable cause to believe that the debtor has either been convicted of a felony or there is pending a proceeding in which the debtor may be found guilty of a felony which demonstrates that the filing of the petition was an abuse of the bankruptcy process, or (b) the debtor either owes a debt or there is a proceeding pending in which the debtor may be found to owe a debt: arising from a violation of state or federal securities laws, arising from fraud, deceit or manipulation in a fiduciary capacity, arising from a civil remedy under 18 U.S.C.A. § 1964 [civil rights violation], or arising from a criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years. 11 U.S.C.A. §§ 1328(h), 522(q).

Finally, a discharge will not be granted unless the debtor certifies that all domestic support obligations have been paid, including amounts due before the petition was filed but only to the extent they are provided for by the plan. 11 U.S.C.A. § 1328(a).

342 Change Problem 6.8 to 6.9

343 Add the following to Key Terms --

applicable commitment period

best interests of creditors

domestic support obligations

lien stripping

315. Change the number of Exhibit 6-4 to 6-5

Change the heading to conform with the heading of Exhibit 6-3 (p.310)

Delete the term "cramdown" and replace it with "secured creditor cramdown"

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