Position Statements

Debtors In Business

Prior to the §341 Meeting of Creditors:

For all Debtors who are determined to be self-employed or debtors engaged in business, the Trustee requires that the following documentation be uploaded to our office through Bankruptcy Documents no less than one week prior to the §341 Meeting of Creditors:

1. Most recent Federal tax returns filed by the Debtor and/or any of Debtor's business entities;
2. At least six months of business bank statements;
3. At least six months of personal bank statements;
4. Verification of business liability insurance; and
5. A Statement of gross business income along with ordinary and reasonable business expenses and net business income (See Schedule I, Line 8(a)).

Certain Debtors engaged in business will be required to meet with the Trustee’s Office prior to the §341 Meeting of Creditors so that the Trustee will be able to gather additional information related to Debtor's business. Either the Debtor or the record keeper of Debtor's business is required to attend this meeting. Although not required, it is preferred that Debtor's counsel attend this meeting.

A non-exhaustive list of Debtors who are required to attend the pre-341 meeting includes: Debtors with employees; Debtors whose business incurs trade credit in the production of income; or Debtors that maintain an inventory for purposes of resale or manufacturing.

Following the §341 Meeting of Creditors:

Following the §341 Meeting of Creditors, tthe Trustee may require Debtors engaged in business to submit additional documentation. Requests for additional documentation will be made on case-by-case basis.

Following Confirmation:

Following confirmation, Debtors engaged in business will be required to submit quarterly reports so the Trustee can make sure that neither the Debtor nor Debtor's business are experiencing any negative changes to their financial situation. In most cases, the quarterly reports shall substantially comply with the Profit and Loss statements available on the Trustee's website. The quarterly reports are due to the Trustee on or before January 15, April 15, July 15, and October 15 of each year. At the Trustee's discretion, the post-confirmation reporting requirement may be altered such that Debtors need only submit reports on an annual basis.

Mortgage Payments

Arrearage at the Time of Filing:

Pursuant to Local Bankruptcy Rule ("LBR") 3015-1(d)(1) "regular monthly payments on a real estate mortgage pursuant to §1322(b)(5) of the Code shall be disbursed by the Trustee if the obligation is in arrears as of the petition filing date." The Trustee will object to any plan that provides for direct payment to a mortgage creditor if said creditor files a proof of claim evidencing an arrearage at the time of filing.

Payments After Loan Modification:

It is the Trustee's position that a post-petition mortgage loan modification that re-amortizes pre-petition arrears into the loan does not excuse the Debtor from the requirements of LBR 3015-1(d)(1). If a mortgage was being disbursed through the Trustee prior to a loan modification, it is the Trustee's position that the mortgage payment must continue to be disbursed through the Trustee following the loan modification.

Payments After Motions For Relief From Stay:

The Trustee may object to Motions for Relief from Stay filed by mortgage creditors for post-petition arrearage when the Debtor was supposed to make direct payments to the creditor. The underlying reason for the Trustee's objection is to ensure that any resolution between the Debtor and the creditor does not jeopardize the plan. As a result, many Motions for Relief are being resolved via Agreed Orders that require Debtors to modify their Chapter 13 Plan to: (1) provide the mortgage creditor with a post-petition arrearage claim and (2) provide for on-going mortgage payments to be disbursed through the Trustee.

Nonstandard Provision Language for Debtors with Pending Mortgage Modifications

To assist Debtors engaged in negotiations for a mortgage modification reach confirmation, Trustee Bailey has adopted the following Nonstandard Provision language:

Debtor(s) have completed and submitted paperwork to [Name of Creditor] (“Creditor”) for a mortgage loan modification regarding the real property located at [Insert Address or Description of Property]. Notwithstanding any treatment specified in section 5.2.1, the pre-petition arrearage claim of Creditor shall receive no distribution from the Chapter 13 estate pending completion of a mortgage loan modification.

The Chapter 13 Trustee shall make the post-petition monthly mortgage payments to Creditor pursuant to its Proof of Claim or Notice of Payment Change, both of which are subject to objection, or written approval by the Creditor of the trial payment amount. Creditor shall file its Proof of Claim on or before the claims bar date.

Within 180 days of confirmation of the Chapter 13 Plan, the Debtor(s) shall file:

1. the appropriate motion to approve mortgage loan modification; or
2. the appropriate Motion to Modify the Chapter 13 Plan to provide for payment of the pre-petition arrearage listed in Creditor's Proof of Claim, subject to Debtor(s)' objection; or
3. the appropriate Motion to Modify the Chapter 13 Plan to surrender the Property and to allow Creditor 270 days from the date of the entry of the Order on the Motion to Modify to Surrender Real Estate to file any deficiency claim which will be paid as a general unsecured claim. If the deficiency claim is not timely filed, then the claim may be disallowed, after the filing of an Objection to said claim.

If Debtor(s) do not file one of the foregoing motions within 180 days after confirmation, the Trustee may file a Motion to Dismiss. Failure to abide by this Nonstandard Provision constitutes a material default under 11 U.S.C. §1307(c)(6).

Treatment of Student Loans

The Chapter 13 Trustee takes the position that a Chapter 13 Debtor may, pursuant to 11 U.S.C. §1322(b)(5), continue to pay the contractual monthly payments for student loans on which the last payment is due after the date on which the final payment under the plan is due. See In re: Truss, 404 B.R. 329 (Bky. E.D. Wisc. 2009).

The Trustee believes that such a policy reaches an appropriate balance between the expressed language of the Bankruptcy Code, the Congressional intent of having student loans paid, and the concept of a fresh start to successful Chapter 13 Debtors.

Any such payments must be paid as a conduit payment through the Trustee's office. The Trustee will object to any proposed plans that provide for the direct payment of student loan claims by the Debtor.

This policy is only applicable to student loans which are long term debts. If the student loan is not a long term debt, any resulting claim must be treated consistent with general unsecured creditors.

Safe Harbor Amounts

The Trustee's office does not object to particular budget items if the total budget^** falls within the Safe Harbor amounts denoted below:

Household Size	Safe Harbor Amount
1 Person	$3,100.00
2 Person	$3,400.00
3 Person	$3,700.00
4 Person	$4,000.00
5 Person	$4,300.00

For each additional person, add $250.00 to the Safe Harbor amount.

^**The total budget does not include mortgage/rent, child support on Schedule J, daycare, and insurance. If debtor is self-employed, the budget also excludes business expenses.