§ 42.10     Annual Income and Expense Statement—On Request
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 42.10, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

In a section of S. 256 entitled “Giving Creditors Fair Notice in Chapters 7 and 13 Cases,”1 BAPCPA added the following new duty to § 521(f)(4):

At the request of the court, the United States trustee, or any party in interest in a case under chapter . . . 13, a debtor who is an individual shall file with the court—

 
. . . .
 

 

 
(4) in a case under chapter 13—
 

 

 
(A) on the date that is either 90 days after the end of such tax year or 1 year after the date of the commencement of the case, whichever is later, if a plan is not confirmed before such later date; and
 

 

 
(B) annually after the plan is confirmed and until the case is closed, not later than the date that is 45 days before the anniversary of the confirmation of the plan;
 

 

 
a statement, under penalty of perjury, of the income and expenditures of the debtor during the tax year of the debtor most recently concluded before such statement is filed under this paragraph, and of the monthly income of the debtor, that shows how income, expenditures, and monthly income are calculated.2
 

 

[2]

The first thing to notice about this new section is that it is upside down. Reading the section sensibly is impossible until the reader realizes that what the debtor is instructed to file is in the hanging sentence fragment after subsection (B). If you move the hanging sentence fragment to the beginning of the subsection (before subparagraph (A)), you can begin to make sense of this new duty. Almost.

[3]

Without the luxury of rewriting, on the request of the court, the U.S. trustee or any party in interest, a Chapter 13 debtor is required to file two new statements: (1) a statement under penalty of perjury of the income and expenditures of the debtor; and (2) a statement under penalty of perjury of the monthly income of the debtor.3 The statement of income and expenditures must cover “the tax year of the debtor most recently concluded before such statement is filed under this paragraph.”4 The statement of monthly income dangles at the end of a sentence that does not reveal what month the statement should cover.

[4]

“Monthly income” is not a defined term of art under BAPCPA. It is certainly not the same as current monthly income defined in § 101(10A).5

[5]

The last phrase of the hanging sentence fragment requires that the statement “show[] how income, expenditures, and monthly income are calculated.” This mandate could be interpreted to leave it to debtor’s counsel to define monthly income. It could be an average of the months during the tax year most recently concluded before the statement is filed. Or it could be monthly income for the month or some months before the statement is filed. These are not trivial issues because the statements must be filed by the debtor under penalty of perjury.

[6]

To figure out what tax year the first statement covers, the debtor must first figure out when the statement must be filed “under this paragraph.” If we take this paragraph to mean § 521(f)(4), then there are two different directives in subparagraphs (A) and (B).

[7]

Section 521(f)(4)(A) describes a date that is either 90 days after the end of “such tax year” or one year after the petition, whichever is later, if a plan is not confirmed before the later date.6 Which “tax year” does “such” refer to? If it is the “tax year of the debtor most recently concluded before such statement is filed” for purposes of the hanging sentence fragment, then we still have an undefined cross-reference.

[8]

If such tax year in (A) means the “current tax year”—that is, the tax year in which the petition is filed—then it is possible to make a strange sort of sense out of § 521(f)(4)(A). If the current tax year ends more than 275 days (365 minus 90) after the petition, and if no plan is confirmed within the year after the petition, then 90 days after the end of the current tax year will be “later than” one year after the petition and, on the proper request, the debtor must file the statement of income and expenditures and the statement of monthly income described in the hanging sentence fragment on that 90th day. If the current tax year ends in less than 275 days after the petition and if no plan is confirmed within the year after the petition, then one year after the date of the petition will be the later date and the debtor, on request, must file the statement of income and expenditures and the statement of monthly income on the date that is one year after the date of the petition.

[9]

The precision of this interpretation is nonsensical, but at least all the words mean something. If “such tax year” in § 521(f)(4)(A) does not mean the current tax year, then it is not obvious how to give meaning to all the words in § 521(f)(4)(A). On the other hand, if they meant current tax year, you have to wonder why they didn’t just say so somewhere in this upside- down section.

[10]

Perhaps an example will help. Imagine a Chapter 13 petition filed on February 1, 2006. The “current tax year” for most individual debtors would end on December 31, 2006. One year from the petition would be February 1, 2007. Ninety days after the end of the current tax year would be March 31, 2007. If no plan has been confirmed, the statement(s) required by the hanging sentence fragment in § 521(f)(4) would be due on the later date—March 31, 2007. The information would relate to the most recently concluded tax year—2006.

[11]

If the hypothetical petition was filed on July 1, 2006, the current tax year for most individual debtors would still end on December 31, 2006. Ninety days after the current tax year would be March 31, 2007, and the “later date” would be one year after the petition—July 1, 2007. The most recently concluded tax year would again be 2006.

[12]

Section 521(f)(4)(B) requires Chapter 13 debtors—again only at the request of the court, the U.S. trustee or a party in interest—to file the statement of income and expenditures and of monthly income annually after the plan is confirmed not later than 45 days before the anniversary of confirmation. Thankfully, there are fewer hooks here.

[13]

The § 521(f)(4)(B) statement(s) can be filed at any time during the year after confirmation so long as before 45 days before the anniversary date of confirmation. The tax year “most recently concluded” may be quite remote in time. For example, if the plan is confirmed on February 1, 2006, the statement(s), if requested, must be filed no later than 45 days before February 1, 2007, or no later than December 18, 2006. For most debtors the most recently concluded tax year will be 2005. Why would anyone want income and expenses and monthly income information for 2005 at the end of 2006 in a Chapter 13 case confirmed in February 2006?

[14]

There is more to this new duty to file statements in unconfirmed Chapter 13 cases and annually in cases with a confirmed plan. New § 521(g) enlarges the content of the statement(s) required by § 521(f)(4)(A) and (B):

(g)(1) A statement referred to in subsection (f)(4) shall disclose—
(A) the amount and sources of the income of the debtor;
(B) the identity of any person responsible with the debtor for the support of any dependent of the debtor; and
(C) the identity of any person who contributed, and the amount contributed, to the household in which the debtor resides.7
[15]

Reading § 521(f)(4)(A) and (g)(1) together—if “such tax year” means the tax year in which the Chapter 13 petition is filed—in unconfirmed cases, on request, on the date that is the later of one year after the petition or 90 days after the end of the tax year in which the petition was filed, the debtor must file, under penalty of perjury, a statement of income and expenditures during the tax year just concluded and a statement of monthly income that (1) shows how income, expenditures and monthly income were calculated, (2) that discloses the amount and sources of the income of the debtor, (3) that identifies any person in addition to the debtor who is responsible for the support of any dependent of the debtor, and (4) that discloses the identity of any person who contributed and the amount contributed to the household in which the debtor resides. Similar disclosure requirements would apply to the “annual” statement, if requested, for each year after confirmation under § 521(f)(4)(B).

[16]

Once again, the baffling redundancy and inconsistent use of words in BAPCPA puts Chapter 13 debtors at risk of penalties for perjury. Is the mandate that the debtor show how income and monthly income are calculated for purposes of the hanging sentence fragment at the end of § 521(f)(4) the same as or different from the requirement in § 521(g)(1)(A) that the statement must show the amount and sources of the income of the debtor? If these two requirements are different, what is the content of the showing required by the sentence fragment that is different from the disclosure required by § 521(g)(1)(A)?

[17]

And what is the disclosure in § 521(g)(1)(C) about? Is this supposed to be the same contribution of a nonfiling entity to the “current monthly income” of a debtor under § 101(10A)(B)?8 The words are fundamentally different. Section 521(g)(1)(C) requires the identity of any “person” who “contributed” and the amount contributed to the household in which the debtor resides. Section 101(10A)(B) includes in current monthly income any “amount paid” by any “entity” on a “regular basis” and then only for “household expenses of the debtor or the debtor’s dependent.”9 Is this just bad drafting or did the drafters intend to capture different information? And if they meant something different here, for what purpose?

[18]

It is scary when Congress mandates that Chapter 13 debtors file statements under penalty of perjury, but the requirements, timing and content are so completely convoluted that no one can say with certainty what is to be filed or when. Debtors’ attorneys will see in these new duties the possibility that someone will mine the annual statements for additional income to fund modification of the plan.10 If the Chapter 13 trustee or the U.S. trustee in a district requests the § 521(f)(4) statement(s) in every Chapter 13 case, the cost of maintaining every Chapter 13 case in the district goes through the roof to cover the attorneys’ fees to prepare, review and file these new statements every year in every case.


 

1  See Pub. L. No. 109-8, § 315, 119 Stat. 23 (2005).

 

2  11 U.S.C. § 521(f)(4).

 

3  11 U.S.C. § 521(f)(4).

 

4  11 U.S.C. § 521(f)(4).

 

5  See 11 U.S.C. § 101(10A), discussed in §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income and 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

6  11 U.S.C. § 521(f)(4)(A).

 

7  11 U.S.C. § 521(g)(1).

 

8  11 U.S.C. § 101(10A)(B) is discussed in §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income and 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

9  11 U.S.C. § 101(10A)(B).

 

10  Modification before confirmation is discussed in §§ 209.1 [ Timing, Procedure and Form ] § 114.1  Timing, Procedure and Form–215.1; modification after confirmation is discussed in §§ 253.1 [ Standing, Timing and Procedure ] § 126.1  Standing, Timing and Procedure268.1 [ To Extend or Reduce the Time for Payments ] § 127.11  To Extend or Reduce the Time for Payments and 506.1 [ Modification after Confirmation after BAPCPA ] § 126.6  Modification after Confirmation after BAPCPA.