§ 139.2     BAPCPA: More Grounds; Changed Consequences
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 139.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Complementary to the many new duties and filing responsibilities imposed on debtors by BAPCPA,1 many new grounds for conversion and dismissal were added to the Code when a Chapter 13 debtor fails to comply with a new duty or filing responsibility.2

[2]

By direct amendments to § 348 and by many indirect changes elsewhere in the Code, BAPCPA altered the effects of conversion or dismissal of a Chapter 13 case in important ways. As always, there will be new schedules, new statements and new documents to file at conversion. But it is not clear from the Code or Interim Rules exactly what new filings are required and how those requirements change depending on the chapter to which the Chapter 13 case is converted.3

[3]

At conversion from Chapter 13 to Chapter 7, there is a fascinating question whether the abuse test in § 707(b) applies.4 The important new notice provisions added to § 342 of the Code5 are impacted at conversion because of a vestigial cross-reference to § 342 in § 348(c).6

[4]

Long-standing uncertainty about entitlement to money held by the Chapter 13 trustee at conversion was not clarified and perhaps is further confused by BAPCPA amendments to § 1326(a)(2).7 The reordering of priorities in § 507(a)8 will impact the rights of creditors and trustees when there is money or other assets to be distributed after conversion of a Chapter 13 case to Chapter 7.9

[5]

Perhaps the most important changes by BAPCPA at conversion of a Chapter 13 case concern the rights of lienholders under § 348(f). In 1994, Congress amended § 348(f) to apply valuations of property and of allowed secured claims during a Chapter 13 case in the converted case, including that allowed secured claims were reduced by amounts paid during the Chapter 13 case before conversion.10 BAPCPA amended § 348(f) again to apply valuations of property and of allowed secured claims during the Chapter 13 case only in a case converted to Chapter 11 or Chapter 12.11 Somewhat redundant of new confirmation requirements in § 1325(a)(5),12 BAPCPA added new protections for security interests at conversion from Chapter 13 including that liens continue through conversion unless the full amount of the lienholder’s allowed claim was paid prior to conversion.13 These amendments will erase many of the effects of the Chapter 13 case on secured claims at conversion to Chapter 7 and, perhaps, will make conversion from Chapter 13 to Chapter 11 (or 12) more attractive than before BAPCPA.14

[6]

Especially with respect to the filing and providing of tax returns,15 BAPCPA prescribes dismissal but not conversion as the consequence when a Chapter 13 debtor fails to perform a new duty or filing responsibility.16 There is even a new “automatic dismissal” when a debtor fails to file required information within 45 days of the Chapter 13 petition.17

[7]

There will be more and more heated conversion and dismissal litigation in Chapter 13 cases after BAPCPA. The new limitations on the automatic stay when a second or more case is filed within a year18 raises the stakes for debtors when BAPCPA provides a new ground for conversion or dismissal and the debtor needs Chapter 13 relief.


 

1  See § 387.1 [ New Filing Requirements and Other Duties: A List ] § 42.1  Filing Requirements and Other Duties: A List.

 

2  See § 388.1 [ Consequences of Failure to File Required Information, Including “Automatic Dismissal” ] § 42.2  Consequences of Failure to File Required Information, Including “Automatic Dismissal”.

 

3  See § 530.1 [ New Deadlines and Filing Requirements after Conversion ] § 142.2  Deadlines and Filing Requirements at Conversion after BAPCPA.

 

4  See § 531.1 [ Application of § 707(b) Abuse Test at Conversion ] § 142.3  Application of § 707(b) Abuse Test at Conversion.

 

5  See 11 U.S.C. § 342, discussed in § 365.1 [ Section 342: Notice in Chapter 13 Cases after BAPCPA ] § 4.3  Section 342: Notice What Didn’t Happen.

 

6  See 11 U.S.C. § 348(c), discussed in § 532.1 [ Notice Issues under § 342 at Conversion ] § 142.4  Notice Issues under § 342 at Conversion.

 

7  See § 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA.

 

8  See § 440.1 [ New and Changed Priority Claims ] § 73.3  Priority Claims Added or Changed by BAPCPA.

 

9  See § 535.1 [ Priorities after Conversion: Two Trustees and a DSO ] § 143.4  Priorities after Conversion: Two Trustees and a DSO.

 

10  See 11 U.S.C. § 348(f) before amendment by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, discussed in § 320.1 [ In Cases Filed after October 22, 1994 ] § 145.2  In Cases Filed after October 22, 1994.

 

11  See 11 U.S.C. § 348(f)(1)(B), discussed in §§ 533.1 [ Lienholders’ Rights at Conversion under § 348(f) ] § 145.3  Lienholders’ Rights at Conversion under § 348(f) after BAPCPA, 536.1 [ New Incentives to Convert to Chapter 11 ] § 146.3  Incentives to Convert to Chapter 11 after BAPCPA and 537.1 [ New Incentives to Convert to Chapter 12 ] § 147.2  Incentives to Convert to Chapter 12 after BAPCPA.

 

12  See 11 U.S.C. § 1325(a)(5)(B)(i)(II), discussed in § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

13  See 11 U.S.C. § 348(f)(1)(C), discussed in § 533.1 [ Lienholders’ Rights at Conversion under § 348(f) ] § 145.3  Lienholders’ Rights at Conversion under § 348(f) after BAPCPA.

 

14  See § 536.1 [ New Incentives to Convert to Chapter 11 ] § 146.3  Incentives to Convert to Chapter 11 after BAPCPA.

 

15  See § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors§ 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors and § 42.7  Tax Return Duties—On Request.

 

16  See § 540.1 [ New and Changed Grounds for Dismissal ] § 152.3  Cause for Dismissal Added or Changed by BAPCPA.

 

17  See 11 U.S.C. § 521(i), discussed in §§ 388.1 [ Consequences of Failure to File Required Information, Including “Automatic Dismissal” ] § 42.2  Consequences of Failure to File Required Information, Including “Automatic Dismissal” and 540.1 [ New and Changed Grounds for Dismissal ] § 152.3  Cause for Dismissal Added or Changed by BAPCPA.

 

18  See 11 U.S.C. § 362(c), discussed in § 432.1 [ When Does § 362(c)(3) Apply? ] § 60.1  When Does § 362(c)(3) Apply?.