§ 42.3     Payment Advices
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 42.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Unless the court orders otherwise, § 521(a)(1)(B)(iv), as amended by BAPCPA, requires the debtor to file “copies of all payment advices or other evidence of payment received within 60 days before the date of the filing of the petition, by the debtor from any employer of the debtor.”1 “Payment advices” is an undefined term. The disjunctive “or other evidence of payment received . . . from any employer” seems broadly inclusive of anything the debtor received from an employer, such as a pay stub, a direct deposit statement, a wage statement or wage summary. The word “all” signals not just the last payment advice or the most recent evidence of payment, but all such advices or evidence received within 60 days of the petition. Copies are allowed. The advices or other evidence must have come from an “employer” of the debtor.

[2]

It may not be simple to satisfy this new mandatory debtor duty in all Chapter 13 cases. Debtors typically don’t keep check stubs and payroll receipts for the 60 days required by § 521(a)(1)(B)(iv). Reading the section technically, a payment advice or other evidence “received” by the debtor from an employer within 60 days before the petition falls within the filing requirement even if the debtor no longer has the piece of paper. Debtors can expect inconsistent success going back to employers for replacement payment advices.

[3]

Would a written statement such as a payroll summary by an employer covering the 60 days before the petition suffice? A handwritten summary by the debtor would not be received from an employer, but it might contain the same information. What if the debtor has some but not all of the payment advices for the 60-day period before the petition? The wording of the section does not require the debtor to create payment advices or other evidence that was not actually received from an employer, but the statutory requirement does seem to extend to advices or other evidence received by the debtor even if no longer in the possession of the debtor.

[4]

Does a self-employed debtor have to file payment advices or other evidence of payment? It is arguable that a self-employed debtor does not have an “employer of the debtor” for purposes of § 521(a)(1)(B)(iv).

[5]

The teeth behind this new filing requirement are in § 521(i)(1): if the debtor in a Chapter 13 case “fails to file all of the information required under [§ 521(a)(1)] within 45 days after the date of the filing of the petition, the case shall be automatically dismissed effective on the 46th day.”2 The new requirement to file payment advices or other evidence of payment is in a subsection of § 521(a)(1) to which the 45-day automatic dismissal applies.

[6]

What does “all of the information” mean in this context? Section 521(i) could have but doesn’t require the “items” listed in § 521(a)(1). Information is a less specific concept. The mandate that the debtor file copies of “all payment advices” received within 60 days of the petition can be satisfied if the “information” from those payment advices is contained, for example, in a wage summary from the employer. A tax return, Form 1099 or other similar document might satisfy the information requirement in § 521(i)(1) when the actual payment advices or other evidence of payment received by the debtor in the 60 days before the petition are long gone.

[7]

Interim Bankruptcy Rule 1007(b)(1)(E) has this to say about filing payment advices:

[T]he debtor, unless the court orders otherwise, shall file . . .
(E) copies of all payment advices or other evidence of payment, if any, with all but the last four digits of the debtor’s social security number redacted, received by the debtor from an employer within 60 days before the filing of the petition[.]3
[8]

The Interim Rule adds “if any” after the statutory language with respect to payment advices or other evidence of payment. To be consistent with § 521(a)(1)(B)(iv), “if any” in Interim Rule 1007(b)(1)(E) might be interpreted to modify “received”: copies of payment advices or other evidence of payment must be filed only if any were received by the debtor from an employer within 60 days before the petition.

[9]

The provision in the Interim Rule, “last four digits of the debtor’s social security number redacted” is consistent with Judicial Conference policy to protect debtors in bankruptcy from disclosure of taxpayer I.D. numbers.4

[10]

Interim Bankruptcy Rule 1007(c) specifies time limits for filing the payment advices or other evidence of payment that are shorter than the 45-day automatic dismissal in § 521(i)(1): “The . . . documents required by [Interim Rule 1007(b)(1)] . . . shall be filed with the petition [or] within 15 days thereafter.”5 Extensions beyond 15 days after the petition are available “on motion for cause shown.”6

[11]

Because the requirement to file payment advices or other evidence of payment is in a subdivision of § 521(a)(1)(B), the bankruptcy court can “order[ ] otherwise.”7 The debtor who doesn’t have payment advices or other evidence of payment received from an employer during the 60 days before the petition should file a motion with the petition asking for relief from the filing requirement. Filing some but not all payment advices or other evidence of payment without a motion may invite problems when the trustee or a creditor sees that less than 60 days’ worth of information has been provided. For example, filing 30 days of payment advices could create a latent defect that would trigger automatic dismissal under § 521(i)(1), yet the defect and “automatic” dismissal might not be discovered for months or years.8 A prophylactic motion to excuse the missing 30 days of payment advices would avoid a lot of potential grief and litigation later in the Chapter 13 case.

[12]

The early case law interpreting the payment advice requirement in § 521(a)(1)(B)(iv) and its interaction with automatic dismissal in § 521(i)(1) reveals a challenging landscape for debtors. Debtors first have to figure out whether to file the payment advices or other evidence of payment with the court or provide the payment advices to the Chapter 13 trustee. Some courts have “ordered otherwise” that the payment advices should be provided to the Chapter 13 trustee and not filed.9 Other courts have not ordered otherwise and payment advices or other evidence of payment must be filed with the court; providing that information to anyone else does not satisfy either § 521(a)(1)(B)(iv) or § 521(i)(1).

[13]

For example, in In re Conner,10 the debtor provided income records to the Chapter 13 trustee but did not file those records with the bankruptcy court clerk. The court issued “deficiency notices” warning the debtor that payment advices must be filed within 45 days of the petition. The debtor filed the payment advices after 45 days after the petition. The bankruptcy court found the case was automatically dismissed on the 46th day after the petition and there was no discretion to hold otherwise:

Since the employee income records were not filed in time, the case was dismissed by operation of law . . . . [T]he Court has no discretion in this matter. The Bankruptcy Code provides that if a Debtor does not file the required documents by the 45th day following the filing of the petition, the Debtor’s case is dismissed by operation of law. 11 U.S.C. § 521(i)(1). There is no provision that allows reinstatement of a Debtor’s case upon that Debtor’s tardy compliance with the filing requirements of § 521(a)(1).11
[14]

Some reported decisions strictly enforce the payment advices filing requirement and automatic dismissal notwithstanding substantial compliance with the statute and no visible prejudice. In In re Wilkinson,12 the Chapter 13 petition was filed on February 21, 2006. With the petition, the debtor filed payment advices from her employer (the IRS) for pay periods between July 10, 2005, and February 4, 2006. Upon “[t]he court’s review of the case in preparation for the confirmation hearing,” it was discovered that “one pay advice for the pay period January 8, 2006 through January 21, 2006 was missing . . . . In its place, an apparently erroneous pay advice covering January 9, 2005 through January 22, 2005 had been filed.”13 Immediately before the confirmation hearing, the debtor filed the one missing pay advice. No party moved for dismissal, but the debtor filed a motion to Find Compliance with 11 U.S.C. § 521. The bankruptcy court concluded the case was automatically dismissed and there was no discretion to find otherwise.

[T]he Court finds that it has no discretion to produce an “equitable” result in this case. . . . Debtor’s statutory duty under § 521(a)(1) to file certain documents is both clear and unforgiving. . . . [E]ither all pay advices received by the Debtor were timely filed with the Court or they were not. They were not, and specific consequences follow therefrom. The Court simply cannot do violence to a specific statutory scheme in the name of equity. . . . [A]n automatic statutory dismissal is not the kind of action contemplated by Rule 60(b) and therefore cannot form the basis for any relief requested under Rule 60(b).14
[15]

There is no discussion in Wilkinson whether the “information” required by § 521(a)(1)(B)(iv) was present given that the missing pay advice was bracketed by payment advices that were filed. Without this inquiry, it is not obvious how the Wilkinson court concluded “information” was missing.

[16]

Exactly this inquiry saved the debtor in In re Luders.15 Mr. and Mrs. Luders submitted pay advices to the Chapter 13 trustee consistent with a local standing order in the Western District of Virginia. The payment advices submitted contained all the pay stubs received by the debtors during the 60-day period before the filing except for one weekly pay period for Mr. Luders and two slightly longer periods for Mrs. Luders. The pay stubs submitted by the Luders contained both current net pay information as well as year-to-date total pay information.

[17]

Fearful that the debtors had not satisfied § 521(a)(1)(B)(iv), the Chapter 13 trustee filed a notice that the debtors had failed to file the necessary payment advices and that the case was automatically dismissed pursuant to § 521(i)(1). Noting the absence of any hearing requirement with respect to “automatic” dismissal under § 521(i)(1),16 the bankruptcy court held “equity dictates” that the debtors have an opportunity for a hearing to consider whether there was sufficient information timely provided to the trustee to satisfy the statute.

[18]

Reaching the merits, the court found that Mrs. Luders was not employed for part of the 60-day period before the petition and no payment advices or other evidence of payment existed for that period. With respect to Mr. Luders, the net pay and year-to-date totals filled in the missing information:

The debtors admit that not all payment advices received by the debtors during the 60-day time period prior to the date of the filing of the petition were timely filed with the Trustee. However, the pay stubs which were timely filed by the debtors provide year-to-date totals. In the case of [Mr. Luders], the year-to-date totals from the pay stubs . . . may be utilized to calculate the payment information from the missing pay stub . . . . In the case of [Mrs. Luders], the year-to-date total from the pay stub . . . may be utilized to calculate the combined payment information for the pay periods . . . . The pay stubs submitted to the Trustee, along with the year-to-date totals found on these pay stubs, constitute “other evidence of payment” sufficient to satisfy the requirements of 11 U.S.C. § 521(a)(1)(B)(iv). Therefore, the case is not to be dismissed under 11 U.S.C. § 521(i)(1).17
[19]

Luders seems the more reasoned approach to determine whether the payment advices filing requirement in § 521(a)(1)(B)(iv) has been satisfied. There has to be an accommodation of “automatic dismissal” in § 521(i)(1) and the debtor’s right to prove that “information” required by § 521(a)(1)(B)(iv) has been timely provided. “Information” is surely a broader concept than physically filing pay stubs or other evidence of payment. Dismissal is a drastic consequence. It must be balanced with a reasonable opportunity for debtors to sort through the financial information filed with the court or given to the trustee to determine whether a complete picture of payments from employers has been presented.

[20]

Notice also that in Wilkinson, the payment advice issue was raised by the court. When no party in interest asserts that payment advices are missing, the debtor is forced to litigate with the bankruptcy judge or perhaps with the clerk’s office in a context that lacks usual procedural safeguards or evidentiary opportunities. As the Luders court recognized, the potential for adverse consequences demands a reasonable opportunity for the debtor to present evidence with respect to payments from employers. This is especially complicated in the already surreal world of automatic dismissal and § 521(i) when the issue arises without an ordinary adversary.

[21]

Discussed in detail below,18 Interim Bankruptcy Rule 4002(b)(2)(A) imposes a new nonstatutory duty on Chapter 13 debtors to bring to the meeting of creditors “evidence of current income such as the most recent payment advice.”19 Chances are that the most recent payment advice at the time of the § 341 meeting will not be one of the payment advices received by the debtor from an employer within 60 days before the petition. The new statutory filing requirement with respect to payment advices and two new interim rules with respect to payment advices certainly signal that debtors’ counsel have a lot of work ahead to educate debtors to retrieve prepetition payment advices and to keep track of new ones received after the filing of a Chapter 13 case.

[22]

The Committee Note to Interim Bankruptcy Rule 4002 indicates that the new requirement to bring the most recent payment advice to the meeting of creditors “does not require that the debtor create documents or obtain documents from third parties.”20 There is no similar Committee Note with respect to Interim Bankruptcy Rule 1007(b)(1)(E), which implements the filing requirement in § 521(a)(1)(B)(iv).

[23]

Filing payment advices or other evidence of payment with the Chapter 13 petition could present technical problems in ECF districts. The petition, statement and schedules in ECF districts typically are filed over the Internet by debtors’ counsel using vendor-supplied software. Local rules in some courts and the internal mechanics of vendor-supplied software often do not permit (or severely complicate) the attachment of scanned documents to the initial filing that commences a Chapter 13 case. Payment advices or other evidence of payment is likely to be crumpled-up pay stubs and other documents that must be (redacted and) scanned before they could be filed electronically. Some local bankruptcy rules will have to be adjusted to permit the filing of these scanned documents as attachments to the petition. Otherwise, debtors’ counsel may have to creatively file the payment advices as a separate offering—an enterprise that it is hoped will be supported by local ECF docket dictionaries. This is all to say that debtors’ counsel will have to adjust their internal office procedures both to capture payment advices or other evidence of payment and to convert those documents to a form that can be managed through the local ECF system.


 

1  11 U.S.C. § 521(a)(1)(B)(iv).

 

2  11 U.S.C. § 521(i)(1). 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” for further discussion.

 

3  Interim Bankr. R. 1007(b)(1)(E).

 

4  See § 34.4 [ Statement of Social Security Number ] § 36.6  Statement of Social Security Number.

 

5  Interim Bankr. R. 1007(c).

 

6  Interim Bankr. R. 1007(c).

 

7  11 U.S.C. § 521(a)(1)(B).

 

8  This and other problems with the automatic dismissal of Chapter 13 cases under § 521(i)(1) are discussed further 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”.

 

9  See, e.g., In re Luders, 356 B.R. 671 (Bankr. W.D. Va. 2006) (Pursuant to standing order, debtors are required to file with the trustee copies of payment advices or other evidence of payment received from an employer within 60 days before the petition.); In re Barajas, No. 06-10598-B-13, 2006 WL 3254483, at *7 (Bankr. E.D. Cal. Nov. 8, 2006) (Failure to file payment advices is not a ground for automatic dismissal because general order in Eastern District of California provides that payroll information “shall not be filed with the court, but rather provided to the trustee not later than seven days before the first date set for the meeting of creditors.”).

 

10  No. 06-40061-LMK, 2006 WL 1548620 (Bankr. N.D. Fla. May 31, 2006).

 

11  2006 WL 1548620, at *1. Accord In re Rubio, No. 06-50065, 2006 WL 2792213 (Bankr. S.D. Tex. Sept. 25, 2006) (Chapter 13 case was automatically dismissed on 46th day when debtor failed to file payment advices with bankruptcy court; that debtor may have filed payment advices with former case trustee does not satisfy § 521(i).).

 

12  346 B.R. 539 (Bankr. D. Utah 2006).

 

13  346 B.R. at 540.

 

14  346 B.R. at 545–46.

 

15  356 B.R. 671 (Bankr. W.D. Va. 2006).

 

16  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” for further discussion of “automatic” dismissal.

 

17  356 B.R. at 673–74.

 

18  See § 400.1 [ New Debtor Duties at the Meeting of Creditors ] § 43.2  Debtor Duties at Meeting of Creditors after BAPCPA.

 

19  Interim Bankr. R. 4002(b)(2)(A).

 

20  Interim Bankr. R. 4002(b) Committee Note.