20 Nov How Do I File Bankruptcy? Failure to Follow Local Rules Results in Dismissal
The Southern District of Illinois Bankruptcy Court uses a streamlined process to confirm Chapter 13 Plans once all substantive and procedural requirements have been satisfied. The bankruptcy court reviews the case for objections and compliance with bankruptcy law. Sections 1322 and 1325 of Title 11 United States Code, provide the criteria a court must consider before approving a Plan. When all is well, the court confirms the Plan and issues an Order Confirming Chapter 13 Plan in a judicious and expeditious manner. But that is not all the bankruptcy court does at confirmation and confirmation is not all the confirmation order orders. In fact, confirmation itself, â€œThe debtor’s Chapter 13 plan is confirmed.â€ only takes up 7 words of the 381 word confirmation order.
Pursuant to local rules and procedures, the Southern District of Illinois Bankruptcy Court includes a requirement in the confirmation order that debtor must deliver two things to the trustee each year.
- By June 15 of each year of the Debtorâ€™s Plan, debtor(s) shall provide the Trustee with a true and complete copy of their state and federal income tax return(s) for the preceding year.
- [B]y June 15 of each year, the debtor(s) shall turn over to the Trustee that portion of their income tax refund(s) (received after the filing of the case) that exceeds (i) any amount(s) credited for Earned Income Credit and/or Child Tax Credit plus (ii) Seven Hundred Fifty Dollars ($750.00) per debtor.
The confirmation order goes on to declare â€œThese additional proceeds shall increase the minimum required distribution to the debtor(s)’ allowed general unsecured creditors and the Trustee is authorized to increase the base amount of the debtor(s)’ Plan accordingly.â€
Consequently, the plan, no not the plan, but actually the plan base – the amount of money required to be paid according to the plan – becomes modified, not by the filing of a modified plan, not by notice and hearing, not by 11 United States Code 1329 Modification of plan after confirmation, but by application of math pursuant to local court order.
And the confirmation order creates the ultimate summary penalty, case dismissal, for failure to comply with these additional terms. â€œFailure of the debtor(s) to comply with this provision, upon thirty (30) day’s written notice of such default by the Trustee, will result in the dismissal of the case without further notice or hearing upon the Trustee’s certification of said default.â€
It is important that a chapter 13 debtor understand the obligations imposed by the confirmation order and adapt accordingly. A debtor should schedule time at the beginning of each new year to gather necessary documents and meet with a tax preparer to insure all federal and state income tax returns are accurately prepared and filed on time. If debtor receives a refund, the tax preparer can inform debtor of the amount necessary to pay to the trustee based on the formula specified in the confirmation order. The tax preparer can provide debtor a copy of the returns for delivery to the trustee. Failure to follow these steps will result in dismissal of the case.
For further information about Local Rules and procedures in chapter 13 bankruptcy cases, visit the Southern District Bankruptcy Court of Illinois website.
Andy Miofsky, Esq.
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