Chapter 13 Bankruptcy Court – What Goes On?

26 Jan Chapter 13 Bankruptcy Court – What Goes On?

Much gets done on Chapter 13 day in Bankruptcy Court. Other courts around the country may operate differently, but in the Syracuse and Utica divisions of the Northern District of New York Bankruptcy Court, Chapter 13 day is held only once or twice each month. So what happens and who goes to these court days?

Sitting in the front of the court elevated above everybody else is the bankruptcy court judge. She runs the show. Sitting slightly below her is the courtroom deputy and clerk. Several feet further towards the back of the courtroom are tables for the attorneys to stand and argue their motions or oppositions when their cases are called. Behind these tables are the “pews” where other attorneys wait until their cases are called.

Occasionally actual bankruptcy debtors or creditors appear. In some districts the debtors must appear at their Chapter 13 confirmation hearings. That is not the case in the Northern District of New York.

On a typical Chapter 13 court day, the court schedules upwards of one hundred different cases. Some of these cases are resolved or adjourned prior to the court date, but most are called by the judge and argued by the attorneys. A little less than half of the Chapter 13 cases on the calendar are usually for confirmation. In this district the only cases scheduled for confirmation hearings are those that have received an objection, either by the Chapter 13 trustee or by a creditor. Cases without objections to confirmation are generally confirmed without appearing on the court calendar. Objections to confirmation can include:

The debtor hasn’t made payments to the trustee.

The case is infeasible (the amount scheduled to be paid to the trustee does not equal the minimum amount needed to be paid to the creditors).

The debtor has not appeared at their meeting of creditors, or hasn’t sent the trustee all required documents, or hasn’t met the ‘good faith’ requirement.

The debtor hasn’t yet overcome a creditor’s objection regarding how they are being treated in the Chapter 13 Plan.

These objections to confirmation are resolved when the judge grants confirmation over the objections, or the parties come to a compromise solution which becomes part of the confirmation order, or the confirmation hearing gets adjourned, or the confirmation gets denied.

Close to one quarter of the motions made on Chapter 13 day are motions made by the Chapter 13 trustee to dismiss an ongoing, confirmed case. These motions are made because the Debtor has not made required monthly or lump sum payments to the trustee, or the case has become infeasible, or the debtor has not fulfilled some other requirement. These motions are often adjourned to give the debtor some time to comply with their requirement, or withdrawn if the debtor has already complied, or the case is dismissed.

About one-tenth of the motions made are motions by the debtor (or sometimes the trustee) to modify the terms of the confirmed Chapter 13 plan due to a change of circumstances. This can be from a significant change of the debtor’s income, to the need for more time to sell property.

Other motions often heard on Chapter 13 day include:

Motion for Relief from the Automatic Stay: This is when a creditor has not been paid as required (often the debtor has gotten behind on the mortgage payments or property taxes due after the bankruptcy was filed). The motion to lift the automatic stay is needed for the creditor to begin or continue with a foreclosure or repossession of property. Sometimes this motion is coupled with a motion for adequate protection.

Motion to Compel: This can be to force the debtor to turn over a tax refund, or file their tax return, or otherwise fulfill a requirement.

Motion to Sell Property: In order to sell real property or significant personal property, the debtor must get a motion to approve the sale granted by the bankruptcy court.

Motion for Willful Violation of the Automatic Stay: If a creditor attempts to collect a debt from the debtor in violation of the automatic stay, they can be found liable for damages to the debtor, including legal fees.

Motion to Incur Non-emergency Debt: If a debtor needs to incur debt for a car, for example.

Motion to Avoid Judgment Liens: If a debtor’s equity in their home is less than the exemption they are allowed, they can remove judgment liens against their residence when this motion gets granted.

Objection to Claims: If a debtor believes a proof of claim filed by a creditor is incorrect, they can object to the claim.

Motion for Loss Mitigation: The Northern District of New York Bankruptcy Court is one of several courts that has a loss mitigation program. This is where the court oversees the mortgage modification process between a debtor and their mortgage holder.

Often the Chapter 13 debtor has little understanding of what goes on in bankruptcy court. Although debtor’s attendance at court is not usually required, it is free and quite an educational experience.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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