Cite as: Keith M. Lundin, Lundin On Chapter 13, § 36.31, at ¶ ____, LundinOnChapter13.com (last visited __________).
Bankruptcy Rule 1007(b)(1) requires a debtor engaged in business1 to complete all of Official Bankruptcy Form 7, including questions 19 through 25. If the Chapter 13 debtor has been engaged in business within the six years preceding the petition, the debtor must describe the nature and location of that business and provide special information concerning books and records, financial statements that may have been given by the debtor and inventories of business property. Because only individuals are eligible for Chapter 13 relief,2 Chapter 13 debtors are not required to answer questions 21 through 25. Care must be taken to avoid inconsistencies between answers to questions in the Statement of Financial Affairs and answers in the schedules attached to Official Bankruptcy Form 6. For example, if the debtor lists inventory in answer to question 20 of Official Bankruptcy Form 7, then the debtor must list that same inventory and its current market value in answer to item 28 on Schedule B to Official Bankruptcy Form 6.3
Books and records for a Chapter 13 debtor engaged in business are often sketchy or nonexistent. The honest answer to question 19 of Official Bankruptcy Form 7 concerning books and records is often the simple explanation that the debtor either had no separate books and records or that the debtor’s personal checking account was also the business account. Sometimes Chapter 13 debtors engaged in business feel obligated to find records that they have not regularly maintained. It is better to have failed to keep records than to have lost nonexistent records. Given that 11 U.S.C. § 727(a)(3) does not apply in Chapter 13 cases, the debtor need not fear loss of discharge in a Chapter 13 case for failure to keep books and records, though the failure may reflect on the debtor’s business acumen and thus the feasibility of the plan at confirmation under 11 U.S.C. § 1325(a)(6).4
If, in answer to question 19 of the Statement of Financial Affairs, it is revealed that the debtor has given written financial statements within the two years preceding the petition, counsel will want to review those financial statements before completing Official Bankruptcy Forms 6 and 7. A review of the financial statements may permit more accurate completion of the official forms and avoid inconsistencies in the identification of assets and debts.
1 See §§ 7.2 [ Sole Proprietorships Are Eligible ] § 10.2 Sole Proprietorships Are Eligible, 9.1 [ Self-Employment ] § 12.1 Self-Employment, 31.1 [ Special Information Needs ] § 33.1 Special Information Needs In Business Cases, 57.1 [ Operating a Chapter 13 Debtor Engaged in Business ] § 52.1 Operating a Chapter 13 Debtor Engaged in Business and 57.2 [ Additional Filing and Reporting Requirements ] § 52.2 Additional Filing and Reporting Requirements.
2 See § 7.1 [ Debtor Must Be an Individual ] § 10.1 Debtor Must Be an Individual; Spouses Allowed.
3 See § 35.3 [ Schedule B—Personal Property ] § 36.9 Schedule B—Personal Property.
4 See § 198.1 [ Able to Make Payments and Comply with Plan ] § 111.1 Able to Make Payments and Comply with Plan.