Cite as: Keith M. Lundin, Lundin On Chapter 13, § 156.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
BAPCPA amended § 1328(a) to condition the full-payment discharge in a Chapter 13 case as follows:
In the case of a debtor who is required by a judicial or administrative order, or by statute, to pay a domestic support obligation, after such debtor certifies that all amounts payable under such order or such statute that are due on or before the date of the certification (including amounts due before the petition was filed, but only to the extent provided for by the plan) have been paid.1
This new condition on the discharge requires the debtor to “certify” that domestic support obligations (DSOs) have been paid. This sounds like a new document, but at this writing, there is neither an official form nor an interim rule addressing this certification. There is no requirement in the statute that this certification be under penalty of perjury or even under oath.
Because the new certification is a condition on discharge and because it relates to the payment of debt through the plan, best guess is that it should be produced at the end of the Chapter 13 case, perhaps just after completion of payments by the debtor. Although not mandated by BAPCPA, the new certificate should probably be filed with the bankruptcy court. For the time being, debtor’s counsel will have to invent a form for this new certificate.
“Domestic support obligation” is a broad new term of art defined in § 101(14A). Oversimplified, a DSO is a debt in the nature of alimony, maintenance or support that arises before or after the Chapter 13 petition, including interest that accrues after the petition under nonbankruptcy law.2 As amended, § 1328(a) requires the debtor who “is required by a judicial or administrative order, or by statute” to pay a DSO to certify that “all amounts payable under such order or such statute that are due on or before the date of the certification” have been paid, including amounts due before the petition “to the extent provided for by the plan.” There are several odd things here.
First of all, the certification must address DSOs required by “statute” in addition to DSOs required by judicial or administrative order. The definition of DSO in § 101(14A) does not include obligations that arise only by statute. Perhaps this is just another example of loose language in BAPCPA, but the result is that the certificate required for discharge in § 1328(a) is broader than the DSO that is defined by the Code and cross-referenced in § 1328(a) itself. An oxymoron results: the debtor is required to certify payment of a DSO that is not a DSO. This is not an unimportant incongruity.
There are, of course, many statutes that impose liability for support obligations. Congress could have but didn’t provide in the expansive new definition of DSO in § 101(14A) that obligations arising by statute that have not been reduced to a decree, an order, an agreement or a determination in accordance with nonbankruptcy law are nonetheless included in the definition of DSO. That § 1328(a) seems to go further than § 101(14A) could be a problem when a governmental agency or other third party shows up at the end of a Chapter 13 case with a DSO that was never reduced to an order, decree or official determination.
The requirement that the debtor certify that all DSOs due before the petition have been paid to the extent provided for by the plan is probably not going to be a problem in most Chapter 13 cases. New § 101(14A) defines DSO to include pre- and postpetition obligations in the nature of alimony, maintenance or support. Section 507(a)(1) defines all DSOs as first priority claims entitled to payment in full (absent consent otherwise) as a condition for confirmation under § 1322(a)(2).3 Section 1328(a), as amended, requires a certification that the debtor has paid all priority DSO claims that became due before or after the petition—a condition that ordinarily would be satisfied if the debtor has completed payments under a plan that complied with the full-payment requirement in § 1322(a)(2).
There may be problems with the new certification when there are DSOs not being paid through the Chapter 13 trustee. In some districts, it is common for plans in Chapter 13 cases to allow debtors to pay DSOs directly to the claim holder. In some districts, a DSO that became due before the petition is paid through the Chapter 13 trustee, but an ongoing or postpetition DSO is paid directly by the debtor. In still other districts, DSOs are paid through the Chapter 13 trustee without regard to whether the debt becomes payable before or after the petition.
The obvious consequence of these local cultures is that in many cases, the Chapter 13 trustee has no way of knowing whether DSOs have been paid in full at any point in time during a Chapter 13 case. In many cases, the new certification required by § 1328(a) will be a statement that the debtor has made all required payments directly to DSO claim holders during the Chapter 13 case. Only the holders of DSO claims will know whether that certification is true. Section 1328(a) is silent and so are the Interim Rules with respect to whether the certificate is served or noticed to anyone. Without some notice requirement, the DSO certification will be a precondition to entry of discharge but will be an event that no party in interest is aware of.
How will anyone know when the new DSO certificate is required as a condition for discharge in a Chapter 13 case? There is no provision of the Bankruptcy Code or Rules that signals that the debtor owes a DSO. Of course, DSOs are listed as priority debts in Schedule E to Official Form 6,4 but heretofore there has been no particular reason for the trustee or parties in interest to keep track of a DSO for purposes of discharge.
What will happen (or not) if the debtor doesn’t certify payment of all DSOs? If the trustee or a party in interest happens to know that there is a DSO in the case, perhaps someone will intervene to stop entry of the discharge. Will this intervention be by “objection” to entry of discharge? Would such an “objection” require the filing of a complaint under Bankruptcy Rule 7001(4)? More likely, if the clerk’s office is aware that a DSO certificate is required in a Chapter 13 case, the case will be “flagged” within the electronic case filing (ECF) system until a § 1328(a) certificate is filed. At some point after the completion of payments, the clerk’s office may close the Chapter 13 case without entry of discharge when a DSO certificate is required but not filed in the case. The mechanics of how this will happen and when it will happen are not clear.
Debtors’ attorneys face the prospect of having to find their clients at the end of a three- to five-year Chapter 13 case to get a certificate from the debtor whenever there is a DSO in the case. Awkwardly, there will be Chapter 13 cases in which the DSO arises after the petition based on a postpetition domestic event. The broad new definition of DSO in § 101(14A) includes domestic obligations that arise after the petition. There will be Chapter 13 cases in which the debtor’s counsel will not be aware of a DSO that arose after the petition. How will counsel know to get a certificate for purposes of § 1328(a)? How would a party in interest know that a DSO certificate is required for § 1328(a) purposes when the claim arises after the petition?
What does “provided for by the plan” mean in the context of new § 1328(a)? The debtor need not certify payment of a prepetition DSO that is not provided for by the plan. This suggests the odd prospect that a Chapter 13 debtor would be entitled to a full-payment discharge under § 1328(a) if the plan was silent about a prepetition DSO without regard to whether that DSO was paid.
The rules drafters should fill some of the gaps in this picture. An official form for the § 1328(a) DSO certificate would be useful. A requirement that it be filed with the bankruptcy court and a schedule for that filing—preferably immediate to the completion of payments under the plan—would offer some needed certainty.
This is a good time to remember that under § 1302(d), as enacted by BAPCPA, the Chapter 13 trustee “at such time as the debtor is granted a discharge under § 1328” must provide written notice to every holder of a DSO and to the appropriate state child support enforcement agency that the debtor is going to be granted a discharge, the last recent known address of the debtor, the last recent known name and address of the debtor’s employer and the name of each creditor that holds a claim that was not discharged under § 523(a)(2) or (a)(4).5 If an official form is conceived for the certificate required by § 1328(a), perhaps that certificate could contain or confirm the information necessary for the Chapter 13 trustee to give the notice required by new § 1302(d).
Failure to file the new certification in § 1328(a) may interfere with the entry of discharge, but it is not listed anywhere as a ground for conversion or dismissal or any other adverse action in the Chapter 13 case. Closing Chapter 13 cases without entry of discharge when a DSO certificate is missing will be confusing to creditors and will cost the debtor a reopening fee when the debtor wakes up and wants a discharge. Creditors are likely to receive an ambiguous notice that the case has been closed without entry of a discharge. The automatic stay will expire,6 but there will be no discharge injunction. There may be a period of indefinite length in which the rights of creditors are uncertain, or at least subject to the possibility that upon any collection action, the debtor will run back to the bankruptcy court, reopen the Chapter 13 case, file the DSO certificate and receive a discharge. There is potential trouble and expense here for debtors and creditors.
To the extent possible, debtors’ attorneys should save their clients from a paid-in-full Chapter 13 case closed without entry of discharge for lack of a DSO certificate under § 1328(a). How to do that probably includes flagging every file that has a DSO and instructing the debtor from the beginning of the Chapter 13 case that there has to be contact when payments are completed, else all the hard work along the way may be for naught.
1 11 U.S.C. § 1328(a).
2 11 U.S.C. § 101(14A), discussed in §§ 440.1 [ New and Changed Priority Claims ] § 73.3 Priority Claims Added or Changed by BAPCPA and 519.1 [ Domestic Support Obligations ] § 136.21 Domestic Support Obligations after BAPCPA.
3 See §§ 440.1 [ New and Changed Priority Claims ] § 73.3 Priority Claims Added or Changed by BAPCPA and 519.1 [ Domestic Support Obligations ] § 136.21 Domestic Support Obligations after BAPCPA
4 See § 35.6 [ Schedule E—Priority Claims ] § 36.12 Schedule E—Priority Claims.
5 11 U.S.C. § 1302(d), discussed in § 417.1 [ New Noticing Responsibilities ] § 53.16 Noticing Responsibilities.
6 See 11 U.S.C. § 362(c)(2)(A), discussed in § 74.1 [ Expiration of Stay ] § 58.14 Expiration of Stay.