Chapter 7 Consumer Bankruptcy

1. Chapter 7 Consumer Bankruptcy Volunteer Lawyers Network Seminar January 26, 2011 and February 02, 2011

2. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) Requirements in Consumer Cases:

3. Debt Relief Agencies11 U.S.C. § 101(12A) • “Bankruptcy assistance” is given a very broad definition under 11 U.S.C.§ 101(4A) • “Assisted person” a) Debt consists primarily of consumer debt, and b) who has nonexempt property of less than $150,000 • Pro bono attorneys as debt relief agencies

4. Disclosures Required by Debt Relief Agencies • Section 342 Notice • Section 527 Notice: • Must be given within 3 days after offering to provide assistance • If charging a fee: • Must provide debtor with a written contract stating fees and services to be provided within 5 days of providing any assistance • Retainer/Representation Agreements • Ramifications of failure to comply

5. Credit Counseling Requirement • Pre-filing Credit Counseling • Post-filing Financial Management Course

6. Pre-Filing Credit Counseling • Must receive approved credit counseling within 180 days prior to filing • Use agency approved by Trustee’s Office or it may not be valid • May be possible to get a 30 day extension in very rare circumstances • Credit counseling certificate is filed with the petition • Joint debtors must both complete counseling

7. Post-Filing Financial Management Course • After filing and prior to the discharge • This can be completed by the same agency as the pre-filing credit counseling • Debtor must file a certificate of completion within 45 days after the first date set for the § 341 meeting of creditors • Certificate must be filed timely to receive a discharge

8. Notice of Responsibilities • Local Rule 1007.3-1 • Local Form available on http://www.mnb.uscourts.gov/ • Scanned copy filed with petition

9. The Initial Client Interview and Information Gathering Session

10. Information Gathering • See list in materials • Ask client for: • Property and value • Purchase price or resale value? • All creditors • Income from last 6 months for all sources • Monthly budget and expenses • Accidents, settlements, litigation, etc…

11. Information Gathering • As you review the information you need to ask specific questions to clarify the information • Don’t rely solely on questionnaire • Be certain to understand the information being provided to you • Take notes during the initial interview

12. Advising the Client • Outline the process • Explain any exemption issues • Get all creditors or potential creditors • Review client responsibilities • Stress that bankruptcy schedules are filed under oath and under penalty of perjury and that all assets and liabilities must be disclosed • What client needs for 341 meeting

13. Documentation • Need all creditors and potential creditors • Real property • Legal description • Deed • Vehicle titles • Asset search

14. Completing the Bankruptcy Worksheets • Have the client complete these worksheets to ensure all relevant information is being included in the filing and you will also have a record of the client’s answers • Make certain to gather all the documents necessary to back up the information • Exhibit D provides a form to request verification or you can create your own

15. Preparing The Bankruptcy Schedules

16. Petition • SSN • Previous Filings • Residency • Consumer vs. Business Debts

17. Schedule A Real Property • All real property • Must have legal description • Verify the debtor’s legal title to the property • Valuations

18. Cash on hand Deposits Household goods Jewelry valuation Firearms Insurance policies IRA/401k Tax refunds Motor Vehicles Schedule B

19. Schedule C Exemptions • State vs. Federal exemptions • Vehicle exemption • Social Security • Homestead • Wild card exemption § 522(d)(5) • Retirement plans • Tax refunds

20. Schedule D Secured Creditors • List all creditors holding rights in collateral • Be sure to list: • full name and address of the creditor, • loan or account number (last 4 digits), • description of the collateral, • value of the collateral • balance due on the obligation

21. Schedule E Priority Creditors • Domestic support obligations: child support, alimony, and unpaid taxes • If your client pays child support or has unpaid support you will need the name, address, and phone number of the recipient • State of Minnesota and the IRS should also be given notice regardless of whether there exists any outstanding obligations. Addresses for both are provided in the CLE packet

22. Schedule F General Unsecured Creditors • List complete names and addresses • Generally, if the creditor does not receive notice the debt is not discharged • Account numbers and the balance due on an account should also be listed

23. Schedule G Executory Contracts and Unexpired Leases • If the creditor listed is owed money, make sure the creditor is added to the appropriate creditor schedule

24. Schedule H Co- Debtors • The schedule should contain the name and address of anyone who is a co-debtor on one or more of the debts • You should also list the specific debts that apply to the co-debtor

25. Schedules I and J Summary of Current Income and Expenses • Closely analyze their monthly budget • Base the client’s income information on pay stubs from the last 60 days • Describe any irregularities in paragraph 17 • Household expenses for joint filers • Schedule I & J vs. Means Test

26. Means Test Statement • Calculating current monthly income • Presumption of abuse • Income > Median Income • In most cases, your clients will be below the median income and therefore you will not have to fill out a bulk of the form

27. Statement of Financial Affairs • Answer all questions • Give complete answers

28. Statement of Intention • With respect to each secured creditor, the debtor must set forth the debtor’s statement of intention concerning the collateral • Options include: • surrendering the collateral, • redeeming the property for cash • reaffirming the original obligation

29. Post Filing Responsibilities

30. Tax Returns • Within 7 days prior to the § 341 Meeting of Creditors, you must provide the trustee with a copy or transcript of the debtor’s federal income tax return for the most recent year • Most trustees want the tax returns emailed to them • Some trustees will refuse to hear your case and it will be continued to a new date if you fail to provide the returns prior to 7 days before the Meeting. • Failure to provide tax returns is grounds for dismissal

31. § 341 Meeting • It is your responsibility to attend the § 341 meeting with your client • Tax returns • Be sure to remind your client to bring the following: • Picture ID • Evidence of the client’s social security number • Copy of the client’s last pay stub prior to the Meeting • Bank statements for any account existing at the time of filing which show the balance(s) as of the date of filing

32. Motions for Relief from the Automatic Stay • Review it to make sure the creditor has shown they do not have adequate protection and discuss with your client what can and should be done about the issue • A response must be filed in a timely fashion if you believe the client has a reasonable basis • If you have any reason to believe the client will attend the hearing, you should appear

33. Reaffirmation Agreements • It may be in your client’s best interest to reaffirm an obligation secured by real estate or a vehicle • By reaffirming your client opens themselves up to personal liability above and beyond surrender of the collateral if the client later defaults • If the client does not reaffirm they lose certain rights and may have to surrender the collateral

34. Reaffirmation Agreements cont. • The debtor must show specific information demonstrating how the payments can be afforded • If you can sign in good faith that the client can afford the debt and it is in the client’s best interest then it will be approved without a hearing • If not, then the debtor must appear and explain why the court should allow the reaffirmation • You may need to appear at the hearing and explain your client’s position

35. Obligation to the Trustee • You and your client have an obligation to cooperate with the Chapter 7 trustee • Also, if you are notified that a creditor did not receive notice of the filing due to an insufficient address, an attempt should be made to locate the correct address and notify the creditor