Wednesday, January 14, 2009

Judge Brown Affirms Chapter 13 Trustee's Ability and Obligation to File Modified Plan After Increase in Debtors' Income

By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys,

In re Midgley
Bankruptcy Court for the District of Oregon Case No. 05-30162
January 6, 2009
Unpublished opinion of Judge Trish Brown

Although unpublished, this opinion provides an excellent overview of the trustee's and debtor's duties regarding plan modifications in the context of debtors' income increases. Perhaps one of the reasons this opinion was not published is that it applies the pre-BAPCPA Bankruptcy Code and so will not be relevant for long, but there are still many pre-BAPCPA Chapter 13 cases pending. Indeed since they are all at least three years old, there is more likelihood that there have been changes in income in the interim, making this opinion still highly worthwhile. Also, although the case involved an increase in debtor income, some aspects of Judge Brown's opinion also apply to reductions in income.

The Eye-Catching Facts

In this Chapter 13 case filed in January 2005, debtors' gross annual income was disclosed to be $114,408, and the plan was confirmed with payments of $455 per month for 36 months. In fact the debtors' gross income for 2005 was $150,781 and for 2006 was $154,301, so as Judge Brown pointed out, "in the first two years of the plan the Debtors' income was $76,366 more than shown on Schedule I." The Order Confirming Plan contained the standard language requiring debtors "to report immediately" gross income changes of more than 10%, and to "provide copies of all tax returns to the trustee each year immediately upon filing." The debtors did not timely provide the trustee with tax returns for those two years or inform the trustee by any other means that their income had increased. Instead only after the trustee made multiple requests for copies of the tax returns, he received both the 2005 and 2006 returns in March 2008 (close to the time the case was originally scheduled to be completed). The trustee filed a modified plan in June 2008 not changing the monthly plan payment but stating that "debtors shall pay not less than $19,500.00 to the Trustee for distribution through the plan after all obligations under the first 36 months have been satisfied.”

[Remainder of this Bulletin is being edited.]

by Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
PLEASE NOTE that this Bulletin and the entire contents of this website are NOT designed for the general public but rather only for attorneys. The writer is not licensed to practice law in any state. This means that he is not legally permitted to give any legal advice or perform any legal services. Any non-attorney reading this must consult an attorney about ANYTHING contained here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.

© 2009 Bankruptcy Litigation Support for Attorneys