Source: http://www.ksb.uscourts.gov/index.php/kansas-bankruptcy-court-opinions/judge-karlinopinions/2476-12-40210-church-doc-114?showall=&start=1
Timestamp: 2014-10-22 23:13:15
Document Index: 632447435

Matched Legal Cases: ['§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 1328', '§ 522', '§ 522', '§ 522', '§ 522', '§ 522', '§ 522', '§ 1141', '§ 522', '§ 522', '§ 522', '§ 522', '§ 522', '§ 522']

Judge Karlin	12-40210 Church (Doc. # 114) - Document Text
Category: Judge Karlin	Published on 01 July 2014	Written by Judge Karlin	12-40210 Church (Doc. # 114)
SO ORDERED. SIGNED this 11th day of June, 2014.
In re: Case No. 12-40210 Lisa Marie Church, Chapter 13 Debtor.
Order Continuing Debtor’s Motion for Entry of Discharge
Debtor Lisa Marie Church’s attorney has requested this Court abrogate the requirement in this division that debtors file and serve on creditors a motion for entry of discharge upon completion of plan payments in Chapter 13 bankruptcy cases. Because the Court finds that both the Bankruptcy Code and Federal Rules of Bankruptcy Procedure generally require notice of such a motion to creditors with an opportunity to object, and a hearing if an objection is filed, this request is denied.
I. Background and Procedural Facts Debtor’s Chapter 13 bankruptcy petition was originally filed in the Kansas City division of this court in October 2009, as a joint case with her then-husband, Jeffrey
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Church.1 About two years later, Debtor and her husband divorced, and Debtor’s case was transferred to the Topeka division.2 On March 6, 2014, the Clerk of the Court issued its routine Notice to Chapter 13 Debtor(s) to Verify Filing of Statement of Completion of Personal Financial Management Course (“FMC”).3 This Notice was the Court’s third reminder to Debtor that if she failed to file the statement, she would not receive a discharge, notwithstanding any later completion of plan payments.4
Soon thereafter, on March 10, Debtor did complete the course, but did not contemporaneously file the required Certificate to demonstrate that fact.5 On March 27, she filed a “Certification of Compliance and Motion for Entry of Discharge,”6 certifying that “[all] payments have been completed under the terms of Debtor’s confirmed Chapter 13 Plan;” the motion omitted any reference to her completion of the required course.
The Trustee objected to Debtor’s motion, claiming it was premature as the case
2 Doc. 33; Doc. 37; Doc. 43.
3 Doc. 100.
4 Doc. 7 was the first such notice, dated October 20, 2009. Doc. 18 was the second such notice, dated April 19, 2010. Doc. 100, dated March 6, 2014, is the third notice. Theseredundant notices have been formulated because the Court never wishes to have a debtor complete a plan but be denied a discharge because of failure to complete the myriadprocedural steps required by Congress.
5 Debtor finally filed that Certificate of Debtor Education, whereby HummingbirdCredit Counseling and Education certified Debtor had completed the required course, onMay 20, 2014. See Doc. 112.
6 Doc. 104.
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was “not yet complete.”7 At the hearing that followed, Debtor’s attorney admitted he filed the motion prematurely and “inadvertently,” since payments were not complete and Debtor had failed to file her FMC certificate.8 Notwithstanding the Trustee’s willingness to simply continue the hearing on the Debtor’s Motion until such time as she had completed plan payments and filed her FMC certificate, Debtor’s attorney wished to instead advance the argument that he was either not required to file the Motion for Entry of Discharge that was already on file, and of which he had already provided notice, or that he was not required to give notice of that Motion to Debtors’ creditors.
Although the issue is clearly moot here, because counsel has already done what he claims he is not required to do—send notice to the matrix, the Court asked for the parties to brief the issue so that it could consider this potentially recurring issue. Briefing is complete, and this side issue is ripe to allow the Court to provide guidance to the parties.
II. Analysis There is no dispute that Debtor seeks a discharge under 11 U.S.C. § 1328(a),9 which states in pertinent part:
Doc. 113.
9 All citations are to the Bankruptcy Code, 11 U.S.C. 101 et seq. Due to an apparentmis-cite, both parties initially discussed a discharge under subsection (b) of § 1328, whichdeals with so-called “hardship discharges.” The parties appear to now agree that dischargein this case is sought under § 1328(a).
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. . . as soon as practicable after completion by the debtor of allpayments under the plan, and in the case of a debtor who is required bya judicial or administrative order, or by statute, to pay a domestic supportobligation, after such debtor certifies that all amounts payable undersuch order or such statute that are due on or before the date of the certification (including amounts due before the petition was filed, butonly to the extent provided for by the plan) have been paid, unless thecourt approves a written waiver of discharge executed by the debtor afterthe order for relief under this chapter, the court shall grant the debtor adischarge of all debts provided for by the plan or disallowed under section502 of this title . . .
In order to receive a discharge under § 1328(a), debtors must complete all payments
due under their Chapter 13 plans and file the appropriate certification concerning
domestic support obligations. Additional prerequisites to receiving a discharge are
found in § 1328(f), which sets limits on the time periods for receiving a discharge,10 and
in § 1328(g), which requires that a debtor complete an instructional course in personal
financial management.11
As noted, Debtor admits she did not qualify for discharge under § 1328(a) when
she filed her motion because she had not yet completed all payments required by her
chapter 13 plan. Once Debtor completes her plan payments, however, the Trustee
apparently has no opposition to Debtor’s motion for discharge.
10 § 1328(f) (“[T]he court shall not grant a discharge . . . if the debtor has received adischarge– – (1) in a case filed under chapter 7, 11, or 12 of this title during the 4-yearperiod preceding the date of the order for relief under this chapter; (2) in a case filed underchapter 13 of this title during the 2-year period preceding the date of such order.”). TheTrustee does not argue this subsection controls here.
11 § 1328(g)(1) (“The court shall not grant a discharge under this section to a debtorunless after filing a petition the debtor has completed an instructional course concerningpersonal financial management described in section 111.”). Because Debtor has finally filedthe required certification, the Trustee no longer contends this subsection controls here.
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Debtor’s attorney, however, raises a larger issue—he believes that no debtor should have to ever file a motion for discharge, or that the Trustee should not be allowed to object to the motion—contending that the motion “is a nuisance and a waste of time and resources.” Counsel argues, as a practical matter, that many of the notices sent to the mailing matrix at the end of a case are returned as undeliverable, as creditors are sold, merge, or change their addresses over the course of a chapter 13 plan. Debtor’s attorney contends, as a legal matter, that neither the Bankruptcy Code nor the Federal Rules of Bankruptcy Procedure require a debtor to file such a motion, or notify creditors, and that this Court should so decree to save time and money for future debtors.
The Trustee responds by citing to § 1328(h), which contains additional restrictions to granting a discharge. It states that
The Court may not grant a discharge under this chapter unless the court
after notice and a hearing held not more than 10 days before the date
of the entry of the order granting the discharge finds that there is no
reasonable cause to believe that – –
(1) section 522(q)(1) may be applicable to the debtor; and(2) there is pending any proceeding in which the debtor may befound guilty of a felony of the kind described in section522(q)(1)(B).12 Under this subsection, a discharge cannot be granted until the Court determines the applicability of § 522(q)(1). Section 522(q)(1), added to the Code with the broad BAPCPA revisions in 2005, places a monetary cap on a residence, burial exemptions
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and homestead exemptions when certain qualifying factors are met.13 Subsection (h),
therefore, requires the Court to make a determination regarding the applicability of
§ 522(q) before it can enter a discharge. But no Court can make this determination
without assistance from debtors, trustees, and creditors. The Court simply does not
have the facts necessary to support such a determination without input from these
parties. And, more pertinent to the discussion at hand, the way these parties receive
notice that the Court needs to make such a determination is by providing those
interested parties with notice and an opportunity to object, which is provided when a
13 The text of § 522(q) reads:(q)(1) As a result of electing under subsection (b)(3)(A) to exempt property underState or local law, a debtor may not exempt any amount of an interest inproperty described in subparagraphs (A), (B), (C), and (D) of subsection (p)(1)which exceeds in the aggregate $155,675 if-
(A) the court determines, after notice and a hearing, that the debtor hasbeen convicted of a felony (as defined in section 3156 of title 18), whichunder the circumstances, demonstrates that the filing of the case was anabuse of the provisions of this title; or(B) the debtor owes a debt arising from-(I) any violation of the Federal securities laws (as defined insection 3(a)(47) of the Securities Exchange Act of 1934), any Statesecurities laws, or any regulation or order issued under Federalsecurities laws or State securities laws; (ii) fraud, deceit, or manipulation in a fiduciary capacity or inconnection with the purchase or sale of any security registeredunder section 12 or 15(d) of the Securities Exchange Act of 1934or under section 6 of the Securities Act of 1933; (iii) any civil remedy under section 1964 of title 18; or(iv) any criminal act, intentional tort, or willful or recklessmisconduct that caused serious physical injury or death toanother individual in the preceding 5 years.(2) Paragraph (1) shall not apply to the extent the amount of an interest inproperty described in subparagraphs (A), (B), (C), and (D) of subsection (p)(1) isreasonably necessary for the support of the debtor and any dependent of thedebtor. (internal footnote omitted).
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debtor schedules a hearing on a motion for entry of discharge, if anyone objects.
Debtor’s attorney argues that no debtor should be burdened with providing this notice, and further argues that it is unlikely creditors would have access to § 522(q) information. From those arguments, Debtor’s attorney concludes that providing notice to all creditors is therefore wasteful in these circumstances. But the Code requires that the Court make this determination. Although it is true that generally the motion for discharge, and the § 522(q) certifications made therein, go unchallenged, the Court has no ready access to this kind of information, and cannot easily determine on its own whether a debtor’s certification should be challenged. The only way to potentially discover whether, for example, a debtor has been convicted of an intentional tort that caused physical injury, is to notify all creditors and see if any creditor steps up to say the debt owed them arose from those circumstances. The same applies to each of the categories contained in § 522(q). And who would be better than the creditors a debtor presumably listed in her schedules, hoping to discharge those debts, to provide the value of debtor’s homestead, or information about a debtor’s conviction history, securities violations, etc.?
In addition, as the Trustee notes, Federal Rule of Bankruptcy Procedure 2002(f)(11), which was added in 2008, also requires notice by mail of “the time to request a delay in the entry of discharge under §§ 1141(d)(5)(C), 1228(f), and 1328(h).” Rule 2002(f)(11) requires that this notice be given to “the debtor, all creditors, and
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indenture trustees.”14 And the notice that is required can either be given by “the clerk, or some other person as the court may direct.” In this district, the debtor has been directed to give this notice by filing, and serving notice of, the motion for entry of discharge.
Debtor’s attorney does not seriously dispute that Rule 2002(f)(11) requires notice to creditors; he merely argues that such rule is not fair. This argument is not well taken.
First, Debtor is the party seeking a discharge. It is wholly logical that Debtor be the one required to take the necessary steps (and incur the expense, unfortunately) to obtain that discharge. Second, Debtor is the party required to create a creditor matrix at the beginning of the case. It again is logical for Debtor to use the matrix she created (and updated throughout the case if she is advised that her own creditor addresses are defective or no longer valid) to send notice of her motion for entry of discharge, as she has easy access to the addresses. Burdening the Court, and by extension, the taxpayers, with the cost of such a notice to creditors is untenable.
Both the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure require notice prior to entry of discharge. Although oftentimes that notice to creditors will not yield an objection, the Code and Rules mandate that opportunity to object be provided.15 While the attorney’s desire to keep costs low for his future clients is both
15 As the commentary to Federal Rule of Bankruptcy Procedure1007(b)(8)—another Rule dealing with the § 522(q) proscriptions—states, creditors must begiven the opportunity to challenge a debtor’s § 522(q) certification. See Fed. R. Bankr. P.
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admirable and understandable, reduction of expenses cannot be achieved through a degradation of the requirements Congress has imposed.16
III. Conclusion The Trustee requests that the Court overrule Debtor’s Motion for Entry of Discharge because even Debtor admits it was prematurely filed since she had not finished her plan payments or filed her FMC certificate when she filed the motion. Alternatively, the Trustee requests continuance of Debtor’s Motion for Entry of Discharge until such time as the Trustee dockets a Notice of Completion of Plan Payments. The Court elects to continue Debtor’s Motion to a hearing on July 1, 2014, at 9:00 a.m., at which time the issue will be whether the Motion is still premature. If the Trustee, the only objecting party in interest, believes Debtor has completed all steps to obtain a discharge by that date, he may elect to place the matter on the “nocall” list, with Debtor submitting the agreed order.
Although Debtor has already filed and served on her creditors the motion for entry of discharge upon completion of plan payments, her request for a declaration that she need not similarly notify her creditors in any future cases she may file is denied.17
1007, 2008 Amendments, cmt. to subdivisions (b)(3) to (b)(8) (“Creditors receive noticeunder Rule 2002(f)(11) of the time to request postponement of the entry of the discharge topermit an opportunity to challenge the debtor’s assertions in the Rule 1007(b)(8) statementin appropriate cases.”).
16 The Trustee cites examples from other districts where a motion for entry ofdischarge is required, and calls the practice “prevalent nationwide.”
17 Before ultimately praying for a complete bar, Debtor’s attorney seemed to suggesta lesser remedy—that when a debtor is not exempting the kinds (and amounts) of propertylisted in § 522(q), that a debtor should not have to mail notice to the entire matrix because §
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1328(h) does not come into play. An analogous situation is found in Fed. R. Bankr. P.3015(g), when a debtor can file a motion to obtain permission to limit notice of a modifiedplan only to those creditors impacted by the modified plan. Although nothing similar isprovided in the Rules related to motions for entry of discharge, if a debtor was claimingnone of the exemptions contained in § 522(p)(1), such that a contest about property valuesor the debtor’s criminal or other history would never come into play, the Court may considerentertaining a motion to limit notice of the motion for entry of discharge, if accompanied bya sworn declaration or affidavit signed by the debtor, swearing that he does not seek toexempt any of the property listed in § 522(p)(1). This is not the case to decide if such anexception is appropriate, both because the notice has already been provided and becausethis Debtor has claimed one of the exemptions listed in § 522(p)(1).
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