Cite as: Keith M. Lundin, Lundin On Chapter 13, § 41.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
The accuracy of documents filed by the debtor in a Chapter 13 case is especially important because everything that happens in a Chapter 13 case is founded on those documents.1 Eligibility, the extent of the stay, relief from the stay, entitlement to adequate protection, the design and confirmation of a plan—all the basic calculations, strategies and evidence in a Chapter 13 case start with the papers filed by the debtor. It is common for Chapter 13 debtors to make mistakes in the information they give to counsel by failing to list creditors, by misstating the amounts of claims, by undervaluing or overvaluing assets and the like. Debtor’s counsel should never hesitate to file amendments to make additions or corrections.2
Bankruptcy Rule 1009 applies in Chapter 13 cases and permits the debtor to voluntarily amend any petition, list, schedule or statement, “as a matter of course at any time before the case is closed.”3 No court order or permission is required—the debtor simply files and serves a notice of amendment together with the corrected papers. It is always better to call a mistake to the attention of the trustee and creditors through an amendment rather than risk that the mistake will be used against the debtor at a hearing on confirmation, on relief from the stay or on a motion to dismiss or convert. Failure to correct known mistakes can be fraud,4 can be criminal misconduct and can result in sanctions for debtors and debtors’ counsel. If a creditor or trustee becomes aware that amendment of the petition, a list, schedule or statement is needed, on motion the court can order the debtor to amend.5
One word of caution here: amendments to the schedules or statement do not automatically resolve problems created by earlier versions. For example, in In re Bohrer,6 the original schedules understated the debtor’s income. When the understatement was uncovered by the trustee, the debtor twice amended the schedules to increase expenses to exhaust the unscheduled income. The bankruptcy court explained that merely amending the schedules did not resolve objections to confirmation:
Bohrer appears to suffer from a substantial misapprehension as to the nature of schedules. Statements in bankruptcy schedules are executed under penalty of perjury and when offered against a debtor are eligible for treatment as judicial admissions. . . . When schedules are amended the old schedules do not, as Bohrer seems to argue, become nullities. The only effect of amendment of a schedule is that the original schedule no longer has the binding, preclusive effect it might otherwise have. It [is] still fully subject to consideration by the court as an evidentiary admission.7
Too many amendments to the schedules or statement can create new problems for the debtor. For example, in Suggitt v. French (In re French),8 the debtor amended the schedules four times during the 14 months before conversion from Chapter 7 to Chapter 13. The amendments corrected the debtor’s income, added creditors and adjusted living expenses. The bankruptcy court acknowledged the debtor had an “absolute right to amend” the schedules, but too much of a good thing revealed that the debtor was acting in bad faith.
There are some deficiencies in the original documents that can’t be corrected by amendment. For example, a Chapter 13 debtor cannot amend the petition to add a nonfiling spouse as a joint debtor.9 Instead, the nonfiling spouse must file a separate voluntary case and then seek joint administration under Bankruptcy Rule 1015(b)(1).
Bankruptcy Rule 1007(h) requires a supplemental schedule within 10 days after the debtor becomes aware of property of the kind described in § 541(a)(5). If the debtor becomes entitled to property by bequest, devise, inheritance, property settlement or divorce decree or as the beneficiary of a life insurance policy, the debtor must file a supplemental schedule revealing the newly acquired property.
A common omission that should always be corrected by amendment is the failure to schedule a cause of action arising before or after the Chapter 13 petition. Failure to correct that omission may result in application of judicial estoppel to preclude the debtor’s pursuit of the cause of action during or after the bankruptcy case.10
In support of the disposable income test for confirmation in § 1325(b),11 some courts require Chapter 13 debtors to file periodic reports of income. This permits the trustee to determine whether the debtor is committing all disposable income to the plan. Statutory authority for this practice was added to the Bankruptcy Code at § 521(f)(4) by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).12
No Bankruptcy Rule specifically requires the debtor to amend the schedules to reflect changes in income or expenses. Section 521(a)(1)(B)(vi) as amended by BAPCPA requires “a statement disclosing any reasonably anticipated increase in income or expenditures over the 12-month period following the date of the filing of the petition.”13 Schedule I to Official Bankruptcy Form 6 requires the debtor to describe any “increase or decrease . . . reasonably expected” in any category of income that the debtor anticipates within the year following the filing of the schedules.14 Similarly, Schedule J to Official Form 6 requires the debtor to describe “any increase or decrease in expenditures reasonably anticipated to occur within the year following the filing of this document.”15 No provision of the Code or Bankruptcy Rules requires the debtor to amend Schedules I and J if the debtor’s “anticipation” at the time of filing turns out to be inaccurate.16 However, the accuracy of the debtor’s statement of income and expenses in Schedules I and J will become a good-faith issue at confirmation under § 1325(a)(3) if the debtor’s income changes before confirmation and no amendment of Schedule I is offered by the debtor. After BAPCPA, there are many difficult timing issues with respect to the calculation of projected disposable income that put a premium on the accuracy of the statements of income and expenses in Schedules I and J.17
One of the most common amendments to the schedules in Chapter 13 cases is to “add” creditors. All of a debtor’s creditors are supposed to be listed by categories in Schedules D, E and F to Official Bankruptcy Form 6.18 Debtors rarely get it all right the first time, and when a debtor becomes aware of an omitted creditor after filing the original schedules, the debtor should amend the appropriate schedule to add the missing creditor. As with any amendment to the schedules, the debtor does not need to file a motion but can simply file an amended schedule together with a notice to “any entity affected” by the amendment.19
Amending a schedule to add an omitted creditor is easier than assessing the consequences of the amendment. The omitted creditor is certainly an affected entity that should get immediate notice of the amendment. If that notice comes early in the Chapter 13 case, the added creditor probably will have an opportunity to fully participate in the Chapter 13 case by filing a timely proof of claim, by objecting to confirmation and the like. But timing of the amendment becomes very important. What if the schedules are amended to add a creditor after the deadline for filing objections to confirmation? This was often true even before BAPCPA in districts that reached confirmation substantially before the claims bar date.20 The BAPCPA amendments to § 1324(b) now require that most confirmation hearings will occur before the claims bar date.21
There is controversy whether and to what extent confirmation of a plan binds a creditor that was without notice of the Chapter 13 case.22 What if the amendment comes after the claims bar date? Adding a creditor to the schedules and giving the creditor notice of the filing of the Chapter 13 case has little meaning if the creditor cannot file an allowable proof of claim because of § 502(b)(9).23 What if the amendment to add an omitted creditor comes before the bar date for filing proofs of claim, but the time remaining is short? How much time for an added creditor to file a timely proof of claim is enough time that the consequences of failing to timely file should be suffered by the creditor?
And then there are discharge questions raised by adding creditors. Does adding an omitted creditor to the schedules always entitle the debtor to discharge the added debt?24 Does discharge depend on whether the added creditor had an opportunity to object to confirmation or was able to timely file a proof of claim? After BAPCPA, there is a statutory exception to discharge at the completion of payments for unscheduled “fraud” claims of the sort described in § 523(a)(8).25 But this amendment does not answer the question whether a creditor added to the schedules after confirmation and/or after the claims bar date can be discharged in the absence of fraud.26 The simple act of amending the schedules does not answer these questions. The best the debtor can do is to immediately amend the schedules to add any omitted creditor as soon as the debtor learns of the omission. The addition of omitted creditors may also require modification of the plan.27
In some jurisdictions, by local rule or practice, the debtor is responsible for giving notice of the Chapter 13 case and plan to creditors that are added by amendment after the filing of the original documents. Also, in jurisdictions that require a mailing matrix with each Chapter 13 petition, upon amendment of the list of creditors, the debtor must supply a new matrix.
2 Amending exemptions may be an exception to this rule. See § 49.2 [ Timing and Procedure ] § 48.4 Timing and Procedure. See also §§ 313.1 [ New Schedules, Statement, Meeting of Creditors and Deadlines ] § 142.1 New Schedules, Statement, Meeting of Creditors and Deadlines and 317.1 [ Exemptions at Conversion ] § 144.1 Exemptions at Conversion.
3 See, e.g., In re Raggie, 389 B.R. 309 (Bankr. E.D.N.Y. 2008) (Craig) (After dismissal but before closing of case, motion to vacate dismissal to amend schedules to include prepetition personal injury action is unnecessary because debtor can freely amend schedules pursuant to Bankruptcy Rule 1009 at any time before closing. Court has discretion to deny amendment for bad faith.).
4 See § 224.1 [ Revocation of Confirmation ] § 117.3 Revocation of Confirmation for discussion of revocation of confirmation based on fraudulent misrepresentation in the petition, schedules or statements; see § 356.1 [ Revocation of Discharge and Relief from Discharge Order ] § 161.2 Revocation of Discharge and Relief from Discharge Order for discussion of revocation of discharge for fraud.
5 Fed. R. Bankr. P. 1009(a). See also In re Weems, 359 B.R. 919 (Bankr. N.D. Ind. 2007) (Although it is debtor’s duty under Rules 2002 and 4002(a)(5) to notify court of change of address, when debtor does not, due process requires party in interest moving for dismissal to also move to change address if movant knows correct address.).
6 266 B.R. 200 (Bankr. N.D. Cal. 2001).
7 266 B.R. at 201.
8 Nos. 01-10603, 01-1058, 2003 WL 21288644 (Bankr. D. Vt. May 30, 2003) (unpublished).
9 See § 7.1 [ Debtor Must Be an Individual ] § 10.1 Debtor Must Be an Individual; Spouses Allowed. See, e.g., In re Buerman, 295 B.R. 876 (Bankr. W.D. Ark. 2003).
10 See § 47.7 [ Causes of Action ] § 46.11 Causes of Action—Including Judicial Estoppel Issues.
12 Pub. L. No. 109-8, 119 Stat. 23 (2005). See 11 U.S.C. § 521(f)(4), discussed in § 395.1 [ Annual Income and Expense Statement—On Request ] § 42.10 Annual Income and Expense Statement—On Request.
13 11 U.S.C. § 521(a)(1)(B)(vi), discussed in § 378.1 [ Statement of Anticipated Increase in Income or Expenditures ] § 36.18 Statement of Anticipated Increase in Income or Expenditures.
14 See §§ 35.10 [ Schedules I and J—Income and Expenditures ] § 36.16 Schedules I and J—Income and Expenditures and 378.1 [ Statement of Anticipated Increase in Income or Expenditures ] § 36.18 Statement of Anticipated Increase in Income or Expenditures.
15 See §§ 35.10 [ Schedules I and J—Income and Expenditures ] § 36.16 Schedules I and J—Income and Expenditures and 378.1 [ Statement of Anticipated Increase in Income or Expenditures ] § 36.18 Statement of Anticipated Increase in Income or Expenditures.
16 Compare Fed. R. Bankr. P. 1009(c), which requires a debtor to “promptly submit an amended verified statement” if the debtor becomes aware that the statement of social security number submitted under Rule 1007(f) is incorrect.
17 See § 467.1 [ Projected Disposable Income: All Debtors ] § 92.2 Projected Disposable Income: All Debtors.
18 See §§ 35.5 [ Schedule D—Secured Claims ] § 36.11 Schedule D—Secured Claims, 35.6 [ Schedule E—Priority Claims ] § 36.12 Schedule E—Priority Claims and 35.7 [ Schedule F—Unsecured Claims ] § 36.13 Schedule F—Unsecured Claims.
19 Fed. R. Bankr. P. 1009(a).
20 See § 216.1 [ Timing of Hearing on Confirmation ] § 115.1 Timing of Hearing on Confirmation before BAPCPA.
21 See 11 U.S.C. § 1324(b), discussed in § 502.1 [ Timing of Hearing on Confirmation ] § 115.2 Timing of Hearing on Confirmation after BAPCPA.
22 See §§ 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2 Notice and Due Process Considerations, Including Claims Allowance and Valuation and 234.1 [ Failure to Provide For ] § 121.3 Failure to Provide For.
24 See § 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5 Claims Not Provided for by the Plan or Disallowed under § 502.
25 See 11 U.S.C. § 1328(a)(2), discussed in § 551.1 [ Unscheduled Creditors: § 523(a)(3) ] § 159.4 Unscheduled Creditors: § 523(a)(3).
26 See § 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5 Claims Not Provided for by the Plan or Disallowed under § 502.
27 See § 260.1 [ To “Add” Prepetition Creditors ] § 127.3 To “Add” Prepetition Creditors.