§ 56.6 — Rights to Documents and Information after BAPCPA

Revised: July 3, 2007

[1]

The We Don’t Trust Debtors principle1 played out in BAPCPA in several forms, including many new duties of debtors to provide documents and information2 and many new rights of creditors to receive filings, financial information, tax returns and the like. It remains to be seen whether all of the new disclosures and required documents will be helpful in representing creditors in Chapter 13 cases. It seems certain that there will be some new movement of paper and electronic files from debtors to creditors and from the bankruptcy courts to creditors in Chapter 13 cases.

[2]

Before BAPCPA, a creditor that wanted information from a Chapter 13 debtor could attend the meeting of creditors and question the debtor.3 Bankruptcy Rule 2004 was available to creditors for a more private and formal examination of the debtor.4 All of the usual tools for discovery in litigation were available if a disagreement with the debtor became a contested matter or an adversary proceeding.5 All of these avenues for obtaining documents or examining a debtor are still available in Chapter 13 cases. BAPCPA adds access to tax returns and some new financial information. BAPCPA requires debtors to respond to requests for documents and information from creditors and imposes consequences if debtors fail to respond. BAPCPA adds some silly provisions requiring courts to respond to creditors.

[3]

First off, there is the new mandate in § 521(e)(1) that a creditor can file at any time a request for a copy of the petition, schedules and statement of financial affairs filed by a Chapter 13 debtor and the court “shall make such petition, such schedules and such statement available to such creditor.”6 Apparently, there are bankruptcy courts in which creditors did not already have access to these documents in Chapter 13 cases. In ECF districts, any creditor with a PACER number can go online and review the petition, schedules, statement of financial affairs and any other filed document in any Chapter 13 case at any time. Congress apparently felt that electronic access was not enough. Or is the new statutory requirement satisfied if the petition, schedules and statement are “available” (for $.08 per page) through the PACER system? The statute is silent about consequences if a bankruptcy court fails to make these filings available to a requesting creditor.

[4]

Chapter 13 debtors have a new duty to provide to the trustee no later than seven days before the first date set for the meeting of creditors a copy of the federal income tax return (or transcript) for the most recent tax year ending before the commencement of the case for which a federal tax return was filed.7 At the same time that the debtor provides this tax return (or transcript) to the trustee, the debtor must provide a copy to any timely requesting creditor. “Timely” is defined by Interim Bankruptcy Rule 4002(b)(4) as at least 15 days before the first date set for the meeting of creditors.8 The “request” that triggers this new obligation is not defined by the Interim Rules, but the Director of the Administrative Office of the U.S. Courts has suggested that a motion is appropriate, if not required.9

[5]

If the debtor fails to provide the federal income tax return for the year immediately before the petition with respect to which the debtor filed a return, new § 521(e)(2)(B) provides that the court “shall dismiss the case” unless the debtor demonstrates that the failure was “due to circumstances beyond the control of the debtor.”10 It is not clear what “beyond the control of the debtor” means in this context. If no such return was filed, is that a circumstance beyond the control of the debtor? If the debtor does not have a copy of the required tax return, does the debtor have to get one (or a transcript) from the IRS? Mandatory dismissal is a drastic remedy. Chapter 13 debtors can ill afford to litigate whether the failure to comply is beyond the control of the debtor. It will usually be cheaper to get the return if it exists rather than fight about not getting it.

[6]

Section 521(e)(3) contains this curious new right to a copy of the Chapter 13 plan:

If a creditor in a case under chapter 13 files with the court at any time a request to receive a copy of the plan filed by the debtor, then the court shall make available to such creditor a copy of the plan—
(A) at a reasonable cost; and
(B) not later than 5 days after such request is filed.11
[7]

It must be that there is a district somewhere where creditors have trouble getting a copy of the plan in Chapter 13 cases. Once filed by a debtor, the plan is available in any ECF district through PACER. Eight cents per page might even be considered a “reasonable cost.” The not-later-than-five-days requirement is silly in an ECF district unless making the plan “available” means something more than providing instantaneous access through PACER.

[8]

Why does new § 521(e)(3) elaborately require the bankruptcy court to make the plan available at a reasonable cost and not later than five days after a request but § 521(e)(1) states simply that the bankruptcy court must make the petition, schedules and statement of financial affairs “available” to a requesting creditor? Can the bankruptcy court impose an unreasonable charge for the petition, schedules and statement of affairs? Or is it now forbidden for the bankruptcy court to charge any amount for a copy of the petition, schedules and statement of affairs because the statute only authorizes a reasonable charge for a copy of the plan? Try this the next time you get a PACER bill: refuse to pay PACER charges for reviewing petitions, schedules and statements of affairs; instead of a check, send PACER a citation to 11 U.S.C. § 521(e)(1).

[9]

In all seriousness, either Congress was misled or creditors are having trouble getting access to petitions, schedules, statements of affairs and plans in Chapter 13 cases. These documents have to be readily available to everyone involved in a Chapter 13 case if Chapter 13 is to be successful in a district. BAPCPA puts in the Bankruptcy Code that bankruptcy courts must make the key documents filed by debtors in Chapter 13 cases available to creditors upon request.

[10]

Upon request by any party in interest, new § 521(f) requires a Chapter 13 debtor to file with the court federal income tax returns (or transcripts) for each tax year ending while the case is pending and for each tax year ending in the three years before the petition for which no tax return had been filed at the petition.12 This new tax-return-filing requirement is triggered by a request that should be a motion filed with the bankruptcy court,13 though the statute is not explicit. Once filed, the request is effective for the life of the Chapter 13 case.

[11]

There is no consequence specified by BAPCPA if the debtor fails to file tax returns after a request under § 521(f). This is in contrast to mandatory dismissal if the debtor fails to provide the federal income tax return after a timely request under § 521(e)(2). New § 521(f)(3) adds that the debtor must file with the court any amendment to any federal income tax return otherwise required to be filed by § 521(f). Interim Bankruptcy Rule 4002(b)(4) imposes a nonstatutory obligation on debtors that a written statement is required if a timely requested tax return does not exist.14

[12]

Section 521(g)(2) states that the tax returns provided to the trustee or to a timely requesting creditor or filed with the court under § 521(e)(2)(A) and (f) “shall be available to . . . any party in interest for inspection and copying, subject to the requirements of section 315(c) of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.”15 If a creditor timely requests a copy of the federal income tax return for the most recent tax year ending immediately before the petition for which a return was filed and the debtor provides that return under § 521(e)(2)(A), then that return is available to any party in interest for inspection and copying subject to confidentiality requirements under § 315(c) of BAPCPA.16 This new right of inspection and copying would also apply to any tax return provided to the Chapter 13 trustee or filed with the bankruptcy court under § 521(e)(2)(A) or (f). New § 521(g)(2) could be interpreted to allow creditors to inspect and copy tax returns provided to other creditors, provided to the Chapter 13 trustee or filed with the court. Upon the request of any party in interest, these rights of inspection and copying extend to any federal income tax return filed after the petition for a postpetition tax year or for a prepetition tax year within three years before the petition. There are substantial privacy concerns here for debtors and perhaps privacy risks here for creditors that copy or inspect confidential tax information.17

[13]

Creditors can also look forward to the almost incomprehensible right to information in new § 521(f)(4). On proper request, an individual debtor must file:

(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.18
[14]

Section 521(g)(1) then makes this unenlightening addition to the above:

(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.19
[15]

Upon request, new § 521(f)(4) requires Chapter 13 debtors to provide fresh income and expenditure information a year or so after the petition—if a plan is not confirmed—and then annually after confirmation.20 “Monthly income” is not “current monthly income.”21 Because the statement addresses income and expenditures during the tax year most recently concluded before the statement is filed, the information often will be months out of date.22 Creditors may find some useful information somewhere in new § 521(f)(4), but the wording of this section is a substantial obstacle to that information.

[16]

The annual filing of statements of income and expenditures not later than 45 days after the anniversary of confirmation is an obligation that can be more confidently understood. The detailed information required by § 521(g)(1) in these new annual statements seems calculated to assist creditors to determine whether modification of the plan is indicated based on changes in income or expenditures. The references to “monthly income” could be “actual” income during the reporting period. But keep in mind there is uncertainty whether a motion to modify the confirmed plan will be measured against “current monthly income”—a static, historical amount based on the six months before the month in which the petition was filed23—or against actual income and expenses at the time of modification.24

[17]

Detailed elsewhere,25 Interim Bankruptcy Rule 4002(b) indirectly offers creditors a treasure trove (or garbage can) of new financial information at the meeting of creditors. Every debtor is now required to bring to the meeting of creditors in Chapter 13 cases evidence of current income, statements for bank accounts, investment accounts, checking accounts, money market accounts and brokerage accounts, and documentation for unusual monthly expenses claimed by the debtor.26 Although this information is provided to the trustee, not to creditors at the § 341(a) meeting, it could probably be discovered from the trustee in the event of litigation between a creditor and the debtor. Also, the trustee can be expected to use this new financial information to frame questions at the meeting of creditors and creditors can be present for that examination.


 

1  See Ten Principles of BAPCPA in § 363.3 [ Two: Don’t Trust Debtors ] § 3.3  Two: Don’t Trust Debtors.

 

2  See § 42.1  Filing Requirements and Other Duties: A List.

 

3  See § 66.3 [ Attending Meeting of Creditors ] § 56.3  Attending Meeting of Creditors.

 

4  See § 66.4 [ Preconfirmation Discovery Rights of Creditors ] § 56.5  Preconfirmation Discovery Rights of Creditors.

 

5  See Fed. R. Bankr. P. 9013 and 9014, and see Part 7.

 

6  11 U.S.C. § 521(e)(1).

 

7  11 U.S.C. § 521(e)(2)(A)(i), discussed in § 390.1 [ Tax Return Duties Seven Days before First Scheduled Meeting of Creditors ] § 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors.

 

8  Interim Bankr. R. 4002(b)(4), discussed in §§ 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request and 400.1 [ New Debtor Duties at the Meeting of Creditors ] § 43.2  Debtor Duties at Meeting of Creditors after BAPCPA.

 

9  See § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues and App. HH.

 

10  See 11 U.S.C. § 521(e)(2)(B) and, redundantly, (C), discussed in § 393.1 [ Consequences of Failure to File or Provide Tax Returns ] § 42.8  Consequences of Failure to File or Provide Tax Returns.

 

11  11 U.S.C. § 521(e)(3).

 

12  See 11 U.S.C. § 521(f), discussed in § 392.1 [ Tax Return Duties—On Request ] § 42.7  Tax Return Duties—On Request.

 

13  See Director of the Administrative Office of the U.S. Courts, Director’s Interim Guidance Regarding Tax Information Under 11 U.S.C. § 521 in App. HH, discussed in § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

14  See Interim Bankr. P. 4002(b)(4).

 

15  11 U.S.C. § 521(g)(2), discussed in § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

16  See § 315(c) of BAPCPA (Pub. L. No. 109-8, § 315(c), 119 Stat. 23 (2005)) and the “Director’s Interim Guidance,” discussed in § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

17  See § 394.1 [ Tax Return Confidentiality Issues ] § 42.9  Tax Return Confidentiality Issues.

 

18  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.

 

19  11 U.S.C. § 521(g)(1).

 

20  The problematic timing of these new disclosures is dissected in § 395.1 [ Annual Income and Expense Statement—On Request ] § 42.10  Annual Income and Expense Statement—On Request.

 

21  See §§ 377.1 [ Statement of Monthly Net Income ] § 36.17  Statement of Monthly Net Income and 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income.

 

22  See § 395.1 [ Annual Income and Expense Statement—On Request ] § 42.10  Annual Income and Expense Statement—On Request.

 

23  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.

 

24  See 11 U.S.C. § 1329, discussed in § 506.1 [ Modification after Confirmation after BAPCPA ] § 126.6  Modification after Confirmation after BAPCPA.

 

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

 

26  Interim Bankr. R. 4002(b)(2), discussed in § 400.1 [ New Debtor Duties at the Meeting of Creditors ] § 43.2  Debtor Duties at Meeting of Creditors after BAPCPA.