BANKRUPTCY
CS 890P-5 Bankruptcy – Chapter 13
Procedures
09/86 Revised 06/18/24 Training Completed 07/01/24 Last Reviewed
11/04/24
11 U.S.C. §
101; 11 U.S.C. §
362; 11 U.S.C. § 501(a), 11 U.S.C. § 502(a), 11 U.S.C. § 507; U.C.A. 78B-2-112; Bankruptcy Court Local Rule
General Information – Chapter 13 Wage Earners Plan
A Chapter 13 bankruptcy may be filed when the individual has too much disposable income to qualify for a Chapter 7 bankruptcy or when there is property that the individual wants to keep (e.g., house mortgage). A Chapter 13 is a reorganization of an individual consumer’s debt(s) where the debtor reaffirms to pay all or a part of their debt(s) usually within three to five years.
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (refer to CS 890P Bankruptcy – Overview, Definitions, Forms, and Alerts/Events), it is more difficult to file for Chapter 7 bankruptcy, which means there will be more bankruptcies filed under Chapter 13. Under a confirmed Chapter 13 plan, the debtor has three to five years to pay his/her pre-petition domestic support obligation arrears in full. If the debtor fails to meet his/her post-petition domestic support obligations (child-support obligations) under this plan, it is cause for the bankruptcy plan to either be converted to a Chapter 7 or dismissal of the individual’s bankruptcy claim. A discharge of the bankruptcy will only be granted after the debtor is able to show that all of his/her post-petition child support debts are paid-in-full.
Chapter 13 Procedures
Notification of a Chapter 13 bankruptcy may occur through one of the following ways:
·
Attorney;
·
Bankruptcy Filed alert;
·
Custodial Parent (CP);
·
Noncustodial Parent (NCP);
·
ORS Administrative Staff (see CS 890P); or,
·
Copy of Notice of Bankruptcy.
If you are notified of a bankruptcy in any of the above ways or in any other way, it is important to follow-up on the information as the stay on enforcement and/or other restrictions are effective, even if you do not receive a copy of the Notice of Bankruptcy document.
NOTE: Chapter 11 and Chapter 13 bankruptcies require that a payment plan must
be approved by the trustee and creditors. This plan will provide for the
payment of certain debts, including all support arrears that have accrued prior
to the filing for bankruptcy. The trustees will receive payments for those
pre-petition support arrears, and then disburse the arrears to ORS, as long as
a proof of claim has been filed. To avoid collecting more towards the arrears
than the plan allows, and to simplify accounting, upon verification of a filing
of a Chapter 11 or Chapter 13, ORS should suspend tax intercepts and limit
income withholding to ongoing support only. Consult with the Attorney
General’s Office (AGO) regarding Chapter 11 and Chapter 13 collections when a
plan has already been confirmed and appears to restrict ORS collection
activities.
After you receive notification of a Chapter 13 bankruptcy, take the steps listed below:
1. Verify that the NCP has filed a Chapter 13 bankruptcy.
2. Update ORSIS. Once you confirm the bankruptcy type, update the information on ORSIS.
ORSIS must be completed even if the case is suspended or pending so that ORSIS is able to send an alert to all workers in ORS who may have a case with the NCP. Therefore, if the assigned agent receives the bankruptcy notice first, it is his/her responsibility to update ORSIS, even if the case is suspended, pending, or closed. This allows ORSIS to send an alert to all workers within ORS who may have a case with this particular NCP.
In the following situations, workers should consult with the appropriate attorney in the Salt Lake City (SLC), Ogden, or St. George office based on where the bankruptcy was filed and the regional Attorney General’s Office (AGO) alpha split to determine if the money may be kept and applied to the arrears:
· If a tax refund is intercepted during the pendency of a Chapter 11 or Chapter 13; or,
· When a tax intercept is received before a Chapter 11 or Chapter 13 bankruptcy is filed, but has not yet been disbursed when ORS receives notice that a Chapter 11 or Chapter 13 petition has been filed.
If the case must be referred to the AGO, refer to CS 890P-7 Bankruptcy – AGO Referrals, Duration of Judgment, and Bankruptcy Completed/Dismissed.
3. Ensure that the Notice of Bankruptcy has been imaged into Content Manager.
4. Complete the Proof of Claim. CSS must file the Proof of Claim with the Bankruptcy Court within a timely manner. A Proof of Claim may be amended at a later date, if necessary.
5. Stop enforcement actions if necessary. Pursuant to 11 U.S.C. § 101(14A)(A)(i) and (ii) and 11 U.S.C. § 362 (b), ORS may continue to collect all current support obligations, including monthly medical support premiums for the child(ren).
NOTE: If the NCP is paying through Automatic Payment Withdrawal (APW), terminate the APW and issue an NTW.
If you are
collecting current support from more than one source/employer, make sure the
total amount collected on all the income withholding orders does not exceed the
total monthly amount of current support amount.
This means that you cannot issue
separate income withholding orders for the full amount of current support, as
this may result in over-collection of the case and cause a violation of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or the
automatic stay.
NOTE: If there is a confirmed Chapter 13 plan that limits how much ORS may collect for ongoing support and arrears, consult with the assigned AAG on how to proceed.
6. Determine if a referral should be made to the AGO. All AGO referrals for bankruptcy are worked by the appropriate attorney in the Salt Lake City, Ogden or St. George office based on where the bankruptcy was filed and the regional AGO alpha split. Therefore, if it appears that something should be filed with the Bankruptcy Courts or if there are questions surrounding the bankruptcy, contact the appropriate attorney immediately.
NOTE: Because all AGO referrals are monitored by the assigned Assistant Attorney General (AAG) for bankruptcies, an email may be sent by the assigned AAG to the agent asking if the agent wants the AGO to take an action on a case if it appears that an AGO action is appropriate on the case and a referral to the AGO has not previously been completed by the agent. Because of the time frames associated with bankruptcy, it is critical that agents respond back to the assigned AAG immediately.
7. Monitor current support payments. Monitor the case using the delinquency alerts to determine if/when the NCP misses his/her monthly current support payment. The NCP/debtor must continue to meet his/her monthly current support obligation or it is cause for the bankruptcy to be converted to a Chapter 7 or dismissed. If the NCP/debtor fails to meet his/her domestic support obligations (child support obligations), immediately contact the appropriate attorney in the SLC, Ogden or St. George office based on where the bankruptcy was filed and the regional AGO alpha split.
NOTE: The AGO will check with the Bankruptcy Court first to see if the NCP has changed employers and reported this information to the court (a Chapter 13 bankruptcy requires the debtor to have a steady income). If the NCP has not reported a new employer, the AGO will file an objection to the proposed Chapter 13 plan.
Agents may be required to attend confirmation hearings with the AGO.
8. Monitor bankruptcy proceedings. Update ORSIS as you receive updates from the Bankruptcy Court.
NOTE: It is possible to receive a new bankruptcy case number before you receive notification of the original bankruptcy dismissal. Sometimes the Notice of Dismissal is sent two or three weeks behind. Should this happen, contact the appropriate attorney in the SLC, Ogden or St. George office based on where the bankruptcy was filed and the regional AGO alpha split and confirm the dismissal of the original bankruptcy before adding the new case number to ORSIS. If the NCP re-files for bankruptcy, it will require a new Proof of Claim (see CS 890P-6 Bankruptcy – Proof of Claim Procedures).
Objections to Chapter 13 Bankruptcy
The Bankruptcy Court will only send a Notice of Confirmation if a creditor objects to the plan. If an objection to the bankruptcy plan needs to be filed, refer the case to the AGO. All objections to the bankruptcy plan must be raised no later than 10 days prior to the confirmation hearing date; i.e., the deadline date established by the court. That means the case/information must be sent to the appropriate attorney in the SLC, Ogden, or St. George office based on where the bankruptcy was filed and the regional AGO alpha split seven to ten days prior to that date (20 days prior to the confirmation hearing) so that the objection may be prepared. The deadline date can be found on the back of the original bankruptcy notice, toward the bottom; it is the same date as the deadline date for filing a Proof of Claim. If an objection to the bankruptcy is received, update ORSIS appropriately.
If no creditors object to the plan, check with the court after the deadline date to determine when/if the plan has been confirmed.
Chapter 13 information may be accessed on the internet. The website address for cases assigned to:
· Utah Trustees
w Trustee Lon Jenkins – Follow the link to: https://www.13network.com and click on the link for Utah, Lon Jenkins.
· Outside Utah Trustees – Follow the link to: https://www.13network.com and then click the link for the appropriate state and trustee.
Payments on a Chapter 13 Case
If money is received on a case (after the NCP has filed for bankruptcy) from a source other than the Bankruptcy Court, discuss the case with the appropriate attorney in the SLC, Ogden or St. George office based on where the bankruptcy was filed and the regional AGO alpha split to determine if the money should be refunded. If the money is to be refunded, it must be sent to the bankruptcy trustee.
If money is received from the Bankruptcy Court as a result of CSS filing a Proof of Claim and there is a Notice to Withhold for current support only, either payment (the withholding payment or the bankruptcy payment) may post to the current support debt, whichever one is received and posted first. The money received in excess of the current support amount, should post to the arrears. It is important in these situations to make sure that the employer is not sending more than just the current support amount unless there are arrears owed. If later you need to prove that the employer only sent current support payments, it is easy to track the payments by payment type.
Chapter 13 Bankruptcy Completed/Dismissed
After the trustee has closed the case (e.g., it has been discharged or dismissed), you may proceed with any and all appropriate enforcement actions against the NCP. For more information on bankruptcy dismissal and/or discharge, refer to CS 890P-6 Bankruptcy – Proof of Claim Procedures.