§ 142.2 — Deadlines and Filing Requirements at Conversion after BAPCPA

Revised: March 29, 2006

[1]

Before and after BAPCPA, Bankruptcy Rule 1019 provides that when a Chapter 13 case converts to Chapter 7:

(1) Filing of lists, inventories, schedules, statements
(A) Lists, inventories, schedules, and statements of financial affairs theretofore filed shall be deemed to be filed in the chapter 7 case, unless the court directs otherwise. If they have not been previously filed, the debtor shall comply with Rule 1007 as if an order for relief had been entered on an involuntary petition on the date of the entry of the order directing that the case continue under chapter 7.1
[2]

Practice varies from district to district whether Chapter 13 debtors are required to file new statements and schedules at conversion to Chapter 7. BAPCPA makes no statutory change that would mandate consistency in this regard. Because of substantive changes by BAPCPA, the forms for use in Chapter 7 and Chapter 13 cases have drifted apart, and these differences will become important at conversion.

[3]

After BAPCPA, debtors must run the § 707(b) “abuse” gauntlet to maintain a Chapter 7 case.2 There is a complicated new presumption of abuse in § 707(b)(2) that arises only after a detailed analysis of an individual Chapter 7 debtor’s current monthly income (CMI) as reduced by many expense items—including amounts specified under standards issued by the Internal Revenue Service.3

[4]

To capture the information necessary to perform the abuse analysis required by new § 707(b), the rules drafters amended Bankruptcy Rule 1007 to require an individual debtor in a Chapter 7 case with primarily consumer debts to file “a statement of current monthly income prepared as prescribed by the appropriate Official Form, and, if the debtor has current monthly income greater than the applicable median family income for the applicable state and household size, the calculations in accordance with section 707(b), prepared as prescribed by the appropriate Official Form.”4

[5]

Under Interim Rule 1007(b)(6), a debtor in a Chapter 13 case is also required to file a statement of current monthly income on the prescribed Official Form. But a Chapter 13 debtor does not file the calculations required by § 707(b). Instead, if a Chapter 13 debtor has CMI greater than applicable median family income, Bankruptcy Rule 1007(b)(6) instructs the debtor to file a “calculation of disposable income in accordance with section 1325(b)(3), prepared as prescribed by the appropriate Official Form.”5

[6]

Although the calculation of disposable income for a Chapter 13 debtor with CMI greater than applicable median family income proceeds in accordance with § 707(b)(2)(A) and (B),6 the Official Form filed by a Chapter 13 debtor—Official Form B22C—is not the same as the Official Form filed by a Chapter 7 debtor—Official Form B22A. The Chapter 13 form (Official Form B22C) attempts (unsuccessfully) to combine a statement of current monthly income with the calculation of commitment period under § 1325(b)(4) and with a calculation of disposable income for debtors with CMI over median family income in accordance with § 707(b)(2)(A) and (B).7 This combination of difficult calculations with somewhat inconsistent criteria renders Official Form B22C significantly different for a Chapter 13 debtor than the related Official Form B22A required of a Chapter 7 debtor.

[7]

At conversion from Chapter 13 to Chapter 7, the debtor will not have previously filed an Official Form B22A. Even if the debtor completed Official Form B22C, that earlier filing will not contain the same information in the same form as is required of Chapter 7 debtors. In particular, Chapter 13 debtors with CMI less than applicable median family income—most Chapter 13 debtors—will be instructed by Official Form B22C not to complete the extended calculation of disposable income in accordance with § 707(b)(2)(A) and (B).8 As a result, most Chapter 13 debtors will not have already supplied material information required by Official Form B22A.

[8]

There is controversy and there will undoubtedly be much litigation whether the abuse test in § 707(b) applies at conversion from Chapter 13 to Chapter 7.9 As that litigation develops, it can be anticipated that some bankruptcy courts will require Chapter 13 debtors to file an Official Form B22A at conversion from Chapter 13 to Chapter 7. It is interesting in this regard that the requirement in Bankruptcy Rule 1019(1)(A) that the debtor comply with Rule 1007 at conversion with respect to any schedule or statement that has not been previously filed is conditioned that the debtor should comply with Rule 1007 “as if an order for relief had been entered on an involuntary petition.” On an involuntary petition, a compelling argument can be made that § 707(b) does not apply.

[9]

Interim Bankruptcy Rule 1019(2) acts as if § 707(b) applies at conversion from Chapter 13 to Chapter 7 by providing a new time period for filing a § 707(b) motion:

A new time period for filing a motion under § 707(b) or (c) . . . shall commence under Rule[ ] 1017 . . . provided that a new time period shall not commence if a chapter 7 case had been converted to a chapter 11, 12, or 13 case and thereafter reconverted to a chapter 7 case and the time for filing a motion under § 707(b) or (c) . . . expired in the original chapter 7 case.10
[10]

In a case originally filed under Chapter 13 and converted to Chapter 7, there will not have been any previous time period for the filing of a motion to dismiss for abuse under § 707(b); accordingly, Interim Rule 1019(2) will commence a new period at conversion under Rule 1017. Under Interim Rule 1017, a motion to dismiss or convert an individual Chapter 7 case for abuse under § 707(b) may be filed “only within 60 days after the first date set for the meeting of creditors under section 341(a), unless, on request filed before the time has expired, the court for cause extends the time for filing the motion to dismiss.”11 At conversion from Chapter 13 to Chapter 7 if the case was originally filed as a Chapter 13 case, Interim Rules 1017 and 1019 will trigger a 60-day period within which an appropriate party can file a timely motion to dismiss for abuse under § 707(b).

[11]

If the case was originally filed under Chapter 7 and previously converted to Chapter 13, at reconversion to Chapter 7, a new 60-day period for timely filing a motion to dismiss for abuse under § 707(b) commences only if the applicable 60-day period under Interim Rule 1017 did not expire during the original Chapter 7 case.12

[12]

Don’t forget that BAPCPA did not change the obligation of the debtor to file a statement of intention consistent with § 521(a)(2) at conversion to Chapter 7. Under Bankruptcy Rule 1019(1)(B), if a statement of intention is required, “it shall be filed within 30 days after entry of the order of conversion or before the first date set for the meeting of creditors, whichever is earlier.”13

[13]

At conversion from Chapter 13 to Chapter 7, there is nothing in § 348 or elsewhere in the Code that shifts or changes the time periods for the information contained in the statements, schedules and official forms filed by the debtor. In other words, notwithstanding that the conversion from Chapter 13 to Chapter 7 takes place months or years after the original Chapter 13 petition, the Statement of Current Monthly Income still relates to the six-month period before the month in which the original Chapter 13 petition was filed.14 Although § 348 does time-shift some other calculations and does change the petition date and the date of the order for relief for other purposes,15 § 348 does not redefine CMI or require any time-shifting of the abuse calculation in § 707(b) at conversion. Notwithstanding whatever new statements, schedules and other documents may be required by local rules or practice at conversion from Chapter 13 to Chapter 7, the Bankruptcy Code does not change the timing for the calculation of abuse for § 707(b) purposes: that calculation is bound by the debtor’s circumstances at the filing of the original Chapter 13 petition.

[14]

At conversion from Chapter 13 to Chapter 7, Interim Rule 1019(2) provides that a new time period for filing a complaint objecting to the dischargeability of a debt commences under Bankruptcy Rule 4007.16 Prior to BAPCPA, Bankruptcy Rule 4007 was of little moment in Chapter 13 practice at the completion of payments under § 1328(a). Bankruptcy Rule 4007 deals with the determination of dischargeability of debt and the deadline for filing a complaint under § 523(c) of the Bankruptcy Code. Section 523(c) deals with the so-called “fraud” exceptions to discharge in § 523(a)(2), (4) and (6). Prior to BAPCPA, none of these exceptions to dischargeability applied at the completion of payments in a Chapter 13 plan under § 1328(a).17

[15]

BAPCPA amended § 1328(a) to provide that § 523(a)(2) and (a)(4) are exceptions to discharge at the completion of payments under a Chapter 13 plan.18 Interim Rule 4007(c) provides that, in a Chapter 13 case, a complaint to determine the dischargeability of a debt under § 523(a)(2) or (a)(4) shall be filed “no later than 60 days after the first date set for the meeting of creditors under section 341(a).”19

[16]

Notwithstanding that there now is a deadline for objecting to the dischargeability of a debt in a Chapter 13 case under § 523(a)(2) or (a)(4) in Interim Rule 4007(c), under Interim Rule 1019(2), a new time period for objecting to the dischargeability of debt under Rule 4007 commences at conversion from Chapter 13 to Chapter 7. A creditor with a claim that might be nondischargeable under § 523(a)(2) or (a)(4) gets two bites at the nondischargeability apple when the debtor begins in a Chapter 13 case and converts to Chapter 7.

[17]

Although policy arguments can be made that a creditor that fails to timely object to the dischargeability of its debt in a Chapter 13 case should not get a second opportunity to do so after conversion to Chapter 7, perhaps the incentives to object to the dischargeability of a debt under § 523(a)(2) or (a)(4) are different in the Chapter 13 context when the offer of payment through a confirmed plan might persuade the creditor to give the debtor a chance to pay the debt without litigation under § 523(c).20 The logic of these competing policies changes when a Chapter 7 case converts to Chapter 13 and then reconverts to Chapter 7: if the period for objecting to the dischargeability of debt expired without a timely filed complaint during the original Chapter 7 case, a new time period under Bankruptcy Rule 4007 does not commence.21


 

1  Fed. R. Bankr. P. 1019(1)(A), discussed in § 313.1 [ New Schedules, Statement, Meeting of Creditors and Deadlines ] § 142.1  New Schedules, Statement, Meeting of Creditors and Deadlines.

 

2  See 11 U.S.C. § 707(b)(1).

 

3  See 11 U.S.C. § 707(b)(2).

 

4  Interim Bankr. R. 1007(b)(4).

 

5  Interim Bankr. R. 1007(b)(6), discussed in § 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

6  See 11 U.S.C. § 1325(b)(3), discussed in § 471.1 [ Big Picture: Too Many Issues ] § 94.1  Big Picture: Too Many Issues.

 

7  See discussion of these problems in §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income, 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

8  See § 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income.

 

9  See § 531.1 [ Application of § 707(b) Abuse Test at Conversion ] § 142.3  Application of § 707(b) Abuse Test at Conversion.

 

10  Interim Bankr. R. 1019(2).

 

11  Interim Bankr. R. 1017(e)(1).

 

12  See § 539.1 [ Reconversion to or from Chapter 13 ] § 150.2  Reconversion to Chapter 13 after BAPCPA for further discussion of reconversion.

 

13  Fed. R. Bankr. P. 1019(1)(B).

 

14  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.

 

15  See § 313.1 [ New Schedules, Statement, Meeting of Creditors and Deadlines ] § 142.1  New Schedules, Statement, Meeting of Creditors and Deadlines.

 

16  See Interim Bankr. R. 1019(2), discussed further in § 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3  Time for Determining Dischargeability of Debt. There is an exception to the commencement of a new time period under Bankruptcy Rule 4007 at reconversion. See § 539.1 [ Reconversion to or from Chapter 13 ] § 150.2  Reconversion to Chapter 13 after BAPCPA.

 

17  See § 344.1 [ Broadest Discharge Available ] § 157.1  Broadest Discharge Available. The “fraud” exceptions to discharge did apply at hardship discharge before the completion of payments under a Chapter 13 plan. See 11 U.S.C. § 1325(b), discussed in § 354.1 [ Exceptions to Hardship Discharge ] § 160.6  Exceptions to Hardship Discharge before BAPCPA.

 

18  See 11 U.S.C. § 1328(a)(2), discussed in §§ 549.1 [ False Representations and Fraud: § 523(a)(2) ] § 159.2  False Representations and Fraud: § 523(a)(2) and 550.1 [ Fraud and Defalcation: § 523(a)(4) ] § 159.3  Fraud and Defalcation: § 523(a)(4).

 

19  Interim Bankr. R. 4007(c), discussed in § 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3  Time for Determining Dischargeability of Debt.

 

20  These policy issues are discussed further in connection with conversion from Chapter 7 to Chapter 13. See § 538.1 [ Conversion to Chapter 13 after BAPCPA ] § 148.4  Conversion to Chapter 13 after BAPCPA.

 

21  See Interim Bankr. R. 1019(2), discussed at reconversion in § 539.1 [ Reconversion to or from Chapter 13 ] § 150.2  Reconversion to Chapter 13 after BAPCPA.