§ 160.2 — Timing, Filing and Procedural Considerations

Revised: June 24, 2010

[1]

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)1 did not change the basic rules in § 1328(b) that a Chapter 13 debtor is eligible for a discharge at any time after confirmation of the plan if three conditions are present: (1) the failure to complete payments under the plan is “due to circumstances for which the debtor should not justly be held accountable”;2 (2) the present value of property actually distributed on account of each unsecured claim is not less than the amount that would have been paid on that claim if the estate had been liquidated under Chapter 7 on the effective date of the plan;3 and (3) modification of the plan under § 1329 is not practicable.4

[2]

But BAPCPA did change hardship discharge under § 1328(b) in many ways by amendments elsewhere in § 1328 and by amendments to other sections of the Code that become applicable at hardship discharge. Many of the BAPCPA changes that affect hardship discharge under § 1328(b) also affect discharge at the completion of payments under the plan under § 1328(a).5

[3]

The new restrictions on successive discharges in § 1328(f) are applicable at discharge before the completion of payments under the plan. Detailed above,6 new § 1328(f) prohibits granting a hardship discharge in a Chapter 13 case within four years of a prior Chapter 7, 11 or 12 case in which the debtor received a discharge, or within two years of a prior Chapter 13 case in which the debtor received a discharge. New § 1328(f) is ambiguous with respect to how to count the four-year and two-year periods. There are arguments from statutory construction that the four-year and two-year periods are counted from the time of discharge in the prior case to the time of filing in the current case; there are better arguments that the counting is from the filing of the prior case to the filing of the current case.7 The punctuation and sentence structure in new § 1328(f) have generated much litigation.8 Because new § 1328(f) applies both at the completion of payments under § 1328(a) and at hardship discharge under § 1328(b), any interpretation in a successive filing context will have application in all possible combinations of filings and discharges.

[4]

The new instructional course requirement also applies at hardship discharge under § 1328(b). Under new § 1328(g), the bankruptcy court is instructed not to discharge a Chapter 13 debtor unless, after filing the petition, the debtor has completed an “instructional course concerning personal financial management described in § 111.”9 Bankruptcy Rule 1007(b)(7) requires every Chapter 13 debtor to file a “statement” regarding completion of an instructional course concerning financial management. Bankruptcy Rule 1007(c) adds that the statement must be filed “no later than the date when the last payment was made by the debtor as required by the plan or the filing of a motion for a discharge under . . . § 1328(b) of the Code.”10 Bankruptcy Rule 1007(c) broadly states that the court may, “at any time and in its discretion, enlarge the time to file the statement required by subdivision (b)(7).”11 New Official Form 23 is the “statement” required by Bankruptcy Rule 1007(b)(7). Official Form 23 is styled as a “certification” rather than a statement and the new form requires the debtor to provide substantially more information than necessary to satisfy § 1328(g).

[5]

Under § 1328(g)(2), a Chapter 13 debtor can be excused from the postpetition instructional course requirement if the debtor satisfies one of the grounds for relief from the prepetition briefing requirement described in § 109(h)(4).12 Relief from the briefing requirement that translates to relief from the instructional course requirement includes that the debtor is incapacitated, disabled or on active military duty in a military combat zone.13 Official Form 23 includes boxes to check if the debtor asserts a right to relief from the instructional course requirement.

[6]

Along these same lines, new § 1328(h) is applicable at hardship discharge under § 1328(b). Detailed elsewhere,14 § 1328(h) is an almost incomprehensible condition on the granting of a discharge in a Chapter 13 case. Not more than 10 days before entry of the discharge order, the bankruptcy court must hold a hearing to determine whether there is “reasonable cause to believe” that § 522(q)(1) “may” be applicable to the debtor and whether there is pending any proceeding in which the debtor may be found guilty of a felony described in § 522(q)(1)(A) or liable for a debt of the kind described in § 522(q)(1)(B).15 New § 522(q) limits to an aggregate of $146,45016 the amount that a debtor can elect to exempt under state law if the debtor has been convicted of a felony that demonstrates the filing of the bankruptcy case is an abuse or the debtor owes a debt arising from any violation of the securities laws, fraud, deceit or manipulation in a fiduciary capacity, any civil remedy under 18 U.S.C. § 1964 or any “criminal act, intentional tort, or willful or reckless misconduct” that caused serious physical injury or death in the preceding five years.17 The intricate interrelationship between § 522(q) and § 1328(h) will require flow charts, a legal dictionary and several volumes of the U.S. Code to decipher it.

[7]

Under Bankruptcy Rule 1007(b)(8), a Chapter 13 debtor claiming an exemption in excess of the $146,450 set out in § 522(q)(1) in property of the kind described in § 522(p)(1) must file a new “statement” whether there is pending a proceeding in which the debtor may be found guilty of a felony described in § 522(q)(1)(A) or found liable for a debt of the kind described in § 522(q)(1)(B). Director’s Procedural Form 283 has been designed to include a certification from each Chapter 13 debtor regarding § 522(q). Once again, the Director’s Form is a “certification” rather than a “statement,” and the Form clearly contemplates that a Chapter 13 debtor will file Director’s Form 283 and check an appropriate box even if the debtor does not claim an exemption that exceeds the dollar amount in § 522(q)(1)—notwithstanding that Bankruptcy Rule 1007(b)(8) contemplates the filing of a § 522(q)(1) “statement” only if the debtor claims an exemption in excess of the specified amount. Under Bankruptcy Rule 1007(c), the debtor is instructed to file the statement required by Bankruptcy Rule 1007(b)(8) “no earlier than the date of the last payment made under the plan or the date of the filing of a motion for a discharge under . . . [§] 1328(b) of the Code.”18 Perhaps because of the odd and very specific timing requirements in § 1328(h), Bankruptcy Rule 1007(c) does not contain the broad grant of discretion with respect to the Bankruptcy Rule 1007(b)(8) statement that it does with respect to the Bankruptcy Rule 1007(b)(7) statement.

[8]

There is a curious lack of parallelism between hardship discharge and discharge at the completion of payments under the plan with respect to domestic support obligations (DSOs).19 Detailed elsewhere,20 BAPCPA amended § 1328(a) to condition entry of discharge at the completion of payments under the plan that the debtor file a certification that all DSO payments due have been paid.21 For no obvious good reason, BAPCPA did not insert this condition into the hardship discharge available under § 1328(b) before the completion of payments under the plan. The Code, as amended by BAPCPA, thus requires Chapter 13 debtors to be current with respect to DSOs before entry of a full-payment discharge under § 1328(a) but does not require Chapter 13 debtors to be current in the payment of DSOs at discharge before the completion of payments under § 1328(b). Director’s Procedural Form 283 contains the debtor’s certification regarding DSOs and appropriately references only § 1328(a).

[9]

Back in the real world, it has always been true that at discharge before the completion of payments under a Chapter 13 plan, all of the debts specified in § 523(a) are nondischargeable.22 BAPCPA does not change this rule, but all of the many BAPCPA changes and additions to the debts that are nondischargeable under § 523(a) apply at hardship discharge under § 1328(b).23

[10]

BAPCPA inspired one tricky change with respect to the timing rules for complaints to determine the dischargeability of debt when a discharge is requested before the completion of payments under a Chapter 13 plan. Prior to BAPCPA, none of the so-called “fraud” exceptions to discharge in § 523(a)(2), (4) or (6) was applicable at the completion of payments under § 1328(a).24 As a result, the special treatment in § 523(c) of debts that might be nondischargeable under § 523(a)(2), (4) or (6)—including the strict filing deadlines in Bankruptcy Rule 4007—did not apply in full-payment-discharge Chapter 13 cases. There was thus no reason in every Chapter 13 case to fix a deadline under Bankruptcy Rule 4007 by which creditors must file a complaint to determine the dischargeability of a debt under § 523(c).

[11]

Prior to BAPCPA, a deadline for objecting to the dischargeability of debts under § 523(a)(2), (4) or (6) was only necessary when a Chapter 13 debtor sought a discharge before the completion of payments under § 1328(b). At hardship discharge, all the exceptions to discharge in § 523(a)—including the fraud grounds in § 523(a)(2), (4) and (6) that are specially addressed in § 523(c)—do apply. Bankruptcy Rule 4007(d) addressed the need for a deadline for the filing of complaints to determine the dischargeability of debt under § 523(a)(2), (4) or (6) at hardship discharge by specifying that “[o]n motion by a debtor for a discharge under § 1328(b), the court shall enter an order fixing the time to file a complaint to determine the dischargeability of any debt under § 523(c) and shall give no less than 30 days’ notice of the time fixed to all creditors.”25

[12]

BAPCPA messed all of this up by adding to the debts that are nondischargeable at the completion of payments under a Chapter 13 plan, debts described in § 523(a)(2) and (a)(4).26 After BAPCPA, two of the three subsections of § 523(a) that are treated specially by § 523(c) are applicable in all Chapter 13 cases without regard to whether the debtor completes payments and receives a discharge under § 1328(a) or requests a discharge before the completion of payments under § 1328(b). After BAPCPA, there is need for a deadline in all Chapter 13 cases for the filing of complaints to determine the dischargeability of debt under § 523(a)(2) and (4). But because § 523(a)(6) is an exception to discharge in a Chapter 13 case only at hardship discharge under § 1328(b), a separate deadline is required at hardship discharge for the filing of complaints under § 523(a)(6).

[13]

Bankruptcy Rule 4007 was amended to address this new arrangement. Bankruptcy Rule 4007(c) now requires that, except as provided in Bankruptcy Rule 4007(d), a complaint to determine the dischargeability of a debt under § 523(c) must be filed no later than 60 days after the first date set for the meeting of creditors. On motion by a Chapter 13 debtor for hardship discharge under § 1328(b), Bankruptcy Rule 4007(d) requires the court to enter an order fixing a time to file a complaint to determine the dischargeability of any debt under § 523(a)(6) (only) with 30 days’ notice of the deadline to all creditors.27

[14]

The net result for creditors is that in all Chapter 13 cases, the deadline for filing a complaint to determine the dischargeability of debt for fraud or misrepresentation under § 523(a)(2) or for fraud, defalcation in a fiduciary capacity, embezzlement or larceny under § 523(a)(4) is 60 days after the first date set for the meeting of creditors. If the debtor completes payments under the plan and receives a discharge under § 1328(a), there is no deadline for filing a complaint to determine dischargeability of debt for willful and malicious injury under § 523(a)(6) because § 523(a)(6) is not applicable at full-payment discharge under § 1328(a). Instead, as detailed elsewhere,28 new § 1328(a)(4) contains a modified version of § 523(a)(6) which is applicable at full-payment discharge under § 1328(a) (only) and which, at this writing, is not subject to any deadline for the filing of a complaint under the Bankruptcy Code or Rules. If the Chapter 13 debtor files a motion for hardship discharge before completion of payments under the plan, the bankruptcy court must give at least 30 days’ notice of a deadline for the filing of a complaint to determine the dischargeability of debt for willful and malicious injury under § 523(a)(6).

[15]

Confusion with respect to applicability of the exception to discharge in § 523(a)(6) and the deadline for filing a complaint addressing the dischargeability of debt under § 523(a)(6) has cropped up in reported decisions. Some creditors seem not to be clear that there is a difference between the exception to discharge in § 523(a)(6)—applicable only at hardship discharge in a Chapter 13 case—and the exception to discharge added by BAPCPA in § 1328(a)(4)—which is applicable only at completion of payments under § 1328(a). Because § 523(a)(6) is only an exception to discharge before completion of payments, several courts have concluded that a complaint to determine dischargeability under § 523(a)(6) is not ripe before the debtor seeks a hardship discharge under § 1328(b).29 When an exception to discharge is applicable both before and at the completion of payments under the plan, courts have reached the different conclusion that a complaint to determine dischargeability is ripe from the beginning of the Chapter 13 case.30


 

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

 

2  11 U.S.C. § 1328(b)(1), discussed in § 353.1 [ Circumstances for Which the Debtor Should Not Justly Be Held Accountable ] § 160.3  Circumstances for Which the Debtor Should Not Justly Be Held Accountable.

 

3  11 U.S.C. § 1328(b)(2), discussed in § 353.2 [ Best-Interests-of-Creditors Test ] § 160.4  Best-Interests-of-Creditors Test.

 

4  11 U.S.C. § 1328(b)(3), discussed in § 353.3 [ Modification Is Not Practicable ] § 160.5  Modification Is Not Practicable.

 

5  See § 159.1  Taxes, § 159.2  False Representations and Fraud: § 523(a)(2), § 159.3  Fraud and Defalcation: § 523(a)(4), § 159.4  Unscheduled Creditors: § 523(a)(3), § 159.5  Domestic Support Obligations: § 523(a)(5), § 159.6  Student Loans: § 523(a)(8), § 159.7  Willful or Malicious Injury: § 1328(a)(4), § 159.8  Boating or Flying while Intoxicated: § 523(a)(9) and § 159.9  Chapter 7 Trustee Compensation: § 1326(d).

 

6  See § 543.1 [ New Limitations on Successive Discharges ] § 156.2  Limitations on Successive Discharges.

 

7  See 11 U.S.C. § 1328(f)(1) and (2), discussed in § 543.1 [ New Limitations on Successive Discharges ] § 156.2  Limitations on Successive Discharges.

 

8  See § 543.1 [ New Limitations on Successive Discharges ] § 156.2  Limitations on Successive Discharges.

 

9  11 U.S.C. § 1328(g)(1), discussed in § 546.1 [ Instructional Course Requirement ] § 156.5  Instructional Course Requirement.

 

10  Fed. R. Bankr. P. 1007(c).

 

11  Fed. R. Bankr. P. 1007(c).

 

12  11 U.S. C. § 109(h) is discussed in § 18.1  In General, § 21.1  In General and § 21.4  11 U.S.C. § 109(h)(4): Incapacity, Disability or Active Military Duty.

 

13  See 11 U.S.C. § 109(h)(4) (incorporated into 11 U.S.C. § 1328(g)(2)), discussed in §§ 373.1 [ Briefing Requirement and Certificate ] § 36.25  Briefing Requirement and Certificate and 546.1 [ Instructional Course Requirement ] § 156.5  Instructional Course Requirement.

 

14  See § 547.1 [ Delay of Discharge: § 522(q)(1) and Pending Proceedings ] § 156.6  Delay of Discharge: § 522(q)(1) and Pending Proceedings.

 

15  11 U.S.C. § 1328(h).

 

16  Dollar amount is adjusted by the Judicial Conference of the United States, consistent with 11 U.S.C. § 104, every three years, starting with 1998. The dollar amounts were most recently reset effective April 1, 2016. The current amount is $160,375.

 

17  11 U.S.C. § 522(q), discussed in § 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3  Exemptions and Exemption Limitations Added by BAPCPA.

 

18  Fed. R. Bankr. P. 1007(c).

 

19  See 11 U.S.C. § 101(14A), discussed in §§ 440.1 [ New and Changed Priority Claims ] § 73.3  Priority Claims Added or Changed by BAPCPA, 519.1 [ Domestic Support Obligations ] § 136.21  Domestic Support Obligations after BAPCPA and 552.1 [ Domestic Support Obligations: § 523(a)(5) ] § 159.5  Domestic Support Obligations: § 523(a)(5).

 

20  See §§ 545.1 [ New Domestic Support Obligation Certification ] § 156.4  Domestic Support Obligation Certification and 552.1 [ Domestic Support Obligations: § 523(a)(5) ] § 159.5  Domestic Support Obligations: § 523(a)(5).

 

21  See § 545.1 [ New Domestic Support Obligation Certification ] § 156.4  Domestic Support Obligation Certification.

 

22  See 11 U.S.C. § 1328(c)(2), discussed in § 354.1 [ Exceptions to Hardship Discharge ] § 160.6  Exceptions to Hardship Discharge before BAPCPA.

 

23  See § 558.1 [ New and Changed Exceptions to Hardship Discharge ] § 160.7  Exceptions to Hardship Discharge Added or Changed by BAPCPA for discussion of new and changed exceptions to hardship discharge under 11 U.S.C. § 523(a), as amended by BAPCPA.

 

24  See § 344.1 [ Broadest Discharge Available ] § 157.1  Broadest Discharge Available.

 

25  Fed. R. Bankr. P. 4007(d) prior to amendment in 2005.

 

26  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).

 

27  Fed. R. Bankr. P. 4007(c), (d).

 

28  See 11 U.S.C. § 1328(a)(4), discussed in § 554.1 [ Willful or Malicious Injury: § 1328(a)(4) ] § 159.7  Willful or Malicious Injury: § 1328(a)(4).

 

29  See, e.g., Eric D. Fein, P.C. & Assoc. v. Young (In re Young), 425 B.R. 811 (Bankr. E.D. Tex. Feb. 16, 2010) (Rhoades) (Section 523(a)(6) claim was not ripe, since debtor had not sought hardship discharge under § 1328(a)(2).); Ambassadors Travel Servs., Inc. v. Liescheidt (In re Liescheidt), 404 B.R. 499, 504–05 (Bankr. C.D. Ill. Apr. 22, 2009) (Perkins) (Adversary proceeding to determine dischargeability under § 523(a)(6) is constitutionally not ripe unless and until the debtor moves for a hardship discharge. “Where a debtor is proceeding toward a full compliance discharge, that would by definition discharge a Section 523(a)(6) debt, there is no reason to litigate the issue of whether the debt is, in fact, one for a willful and malicious injury. Whether it is or isn’t doesn’t matter, since it will be discharged either way if the debtor receives a full compliance discharge. Only if the debtor subsequently moves for a hardship discharge, which would not discharge a debt for a willful and malicious injury, would it matter. . . . Whether a Section 523(a)(6) claim in a Chapter 13 case is ripe for decision is a question of constitutional ripeness since resolution of the issue has no meaningful effect until and unless the debtor moves for a hardship discharge . . . . The DEBTOR has not moved and may never move for a hardship discharge. Whether her debt to AMBASSADORS is within the ambit of Section 523(a)(6)[] is a nonissue if she completes her plan and receives a full compliance discharge. It will only become material if she moves for a hardship discharge. Until then, the issue is not ripe. Accordingly, the claim asserted under Section 523(a)(6) must be dismissed for lack of subject matter jurisdiction.”).

 

30  See, e.g., cases allowing student loan dischargeability litigation under 11 U.S.C. § 523(a)(8) at the early stages of a Chapter 13 case, discussed in §§ 343.1 [ Timing and Procedure for Discharge and Objecting to Discharge ] § 156.1  Timing and Procedure for Discharge and Objecting to Discharge and 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3  Time for Determining Dischargeability of Debt.