About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Written by Craig D. Robins, Esq.I was prompted to write this blog post because I just filed a Long Island Chapter 7 bankruptcy case and the court scheduled the meeting of creditors for a date that is only 25 days away. With every other case I’ve filed during the past few years, the hearing was always over a month later.
So what’s the story with when the meeting of creditors is held?
What is a Section 341 Hearing?
First, In every single bankruptcy case, be it Chapter 7, 11 or 13, there is an initial meeting at the bankruptcy court called the Meeting of Creditors. In consumer cases under Chapter 7 or Chapter 13, the purpose of the meeting is for the court-appointed trustee to review the case with the debtor by examining the debtor under oath.
Section 341 of the Bankruptcy Code provides for this hearing, which is why it is often referred to as the “341 Hearing.”
The Bankruptcy Rules Provide the Time Frame For Holding the Meeting of Creditors
Although the 341 hearing is usually held about a month after the petition is filed, it can sometimes be held much earlier than that, and other times, much later.
Bankruptcy Rule 2003(a) sets forth the time parameters for the 341 Hearing:
In a Chapter 7 or Chapter 11 case, the meeting must be held no fewer than 20 days, and no more than 40 days after the date the petition is filed.
However, in a Chapter 13 case, the meeting shall be held no fewer than 20 days, and no more than 50 days after the date of filing.
When the bankruptcy court is operating very efficiently, meetings tend to be sooner. When the court is overburdened, or trustees are taking vacations, the time frame is longer.
When the there was a massive rush of bankruptcy filings in September and October 2005 because consumers were anxious to file their bankruptcy petitions before the bankruptcy laws were about to change, the bankruptcy court could not accommodate the great number of cases, and most debtors in New York had to wait 60 to 100 days for their 341 hearings.
There’s Lots of Information About Preparing for the Meeting of Creditors on this Blog
One of the biggest concerns my clients have is how to prepare for the meeting of creditors and what to do about going to the bankruptcy court for the very first time. As such, I have written extensively about this.
If you have a meeting of creditors coming up, the following posts will be helpful:
If You Have a Meeting of Creditors Coming Up Soon on Long Island and You Want to Find Out Info About Your Trustee
I have a series of posts containing biographies of all of the Long Island Chapter 7 and Chapter 13 trustees: biographies and profiles of Long Island bankruptcy trustees and judges.
You Must Provide Identification at the Meeting of Creditors
Here is a post about what identification you need to provide when you go to bankruptcy court: You Need Certain Identification to File for Bankruptcy.
Will Creditors Show Up At the Meeting of Creditors?
It’s very unlikely that creditors will show up: Will Creditors Show Up For My Hearing In Bankruptcy Court? However, here’s a post I wrote about what kind of questions they can ask if they do show up: If a Creditor Shows Up at the Meeting of Creditors in Bankruptcy Court, What Questions Can They Ask? .
Directions to the Central Islip Bankruptcy Court on Long Island
If your meeting of creditors is in Central Islip, here’s how to get to the court: Directions to Central Islip Bankruptcy Court - Long Island .
Written and photographed by Craig D. Robins, Esq.
This post is part of a series of biographies and profiles of Long Island bankruptcy trustees and judges.
Long Island Chapter 7 bankruptcy trustee R. Kenneth Barnard, Esq. has been on the Chapter 7 trustee panel for the Eastern District of New York since about 1990, where he is assigned cases filed in the Central Islip Bankruptcy Court.
His office is located in Babylon, New York and he is also a sole practitioner handling bankruptcy, litigation and real estate matters.
Ken was admitted to practice in 1985. He graduated from New York University, and he received his law degree from Hofstra Law School in 1984.
One of Ken’s passions is race horses. In addition to owning several of them, he has trained several racing horses, including The Dwight Stuff, which raced in the New York State Thoroughbred Breeding and Racing Program, and Leave it to Betsy, which raced at Aqueduct.
Unlike many of the other Chapter 7 trustees, Ken does not actively participate as a panelist in bankruptcy seminars. He also tends to use other lawfirms to handle all of his trustee litigation matters.
Ken is known for meticulously reviewing the petitions of each and every debtor who appears before him.
I took the photo of Ken at a recent Bar Association bankruptcy seminar.
Here’s Ken’s contact info:
R. Kenneth Barnard, Esq.
384 W. Main Street
Babylon, NY 11702
Phone: (631) 661-0906
384 W. Main Street
Babylon, NY 11702
Phone: (631) 661-0906
Written by Craig D. Robins, Esq.Some debtors like bankruptcy so much, they come back for more, and more, and even more. . . sometimes using multiple bankruptcy filings to delay foreclosure proceedings for years. But when is enough, enough?
What Can Mortgagees and the Bankruptcy Court Do in Situations Involving Extreme Serial Filings?
In the past three months, Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court on Long Island, addressed this issue in several cases. The most recent one caught my eye based on the incredible number of related bankruptcy filings, as well as the unbelievable amount of time the debtors were able to thwart the system and delay foreclosure.
Serial Filings in Bankruptcy Cases
Some debtors file successive Chapter 13 petitions because each time they file, they get the benefit of the stay, which stops a foreclosure proceeding dead in its tracks.
Technically, Bankruptcy Code section 109(e) prohibits a debtor from refiling another case for 180 days, if the prior case was dismissed because the debtor neglected to make necessary payments or maintain other debtor responsibilities.
However the bankruptcy court has become rather liberal in permitting debtors to engage in repeated filings and will typically give the debtor the benefit of the doubt as long as the debtor can demonstrate a change of circumstances.
Nevertheless, some debtors clearly take advantage of the system, and by their sheer audacity (and desperation), give bankruptcy a bad name for those who file in good faith. The vast majority of bad faith serial filings are done by pro se debtors.
Any experienced bankruptcy attorney knows that judges will not hesitate to sanction counsel for filing a case in bad faith. The law is very clear that a case cannot be filed for the sole purpose of delay, without any good faith intent to follow through with a Chapter 13 plan.
Bankruptcy Amendment Act Made Serial Filings More Difficult
When Congress overhauled the bankruptcy laws in 2005 (BAPCPA), it imposed several new provisions designed to stop the problem of bad faith serial filers. I wrote about some of these changes in my Suffolk Lawyer column in November 2005: Consumer Bankruptcy Debtors Face New Limitations for Repeat Filings .
In particular, there are new exceptions to the automatic stay. For example, if a debtor had one pending bankruptcy case in the preceding year, then the automatic stay only lasts 30 days, effectively shifting the burden to the debtor to make an application to extend the stay. If there was more than one filing in the prior year, then the debtor is not entitled to any automatic stay at the time of filing.
Even with these provisions, debtors soon learned to game the system. After one spouse’s bankruptcy was dismissed, the other spouse would then file, and then this “tag team” filing approach would go on for years. Although this conduct was nothing new, Congress addressed this problem too, with an “in rem” provision in BAPCPA.
Debtors Filed 10 Cases to Delay Foreclosure
Debtors Filed 10 Cases to Delay Foreclosure
On December 21, 2009, Judge Trust issued companion decisions in two separate, but related cases, outlining the excessive measures taken by two Long Island debtors who filed a total of ten bankruptcy petitions over a 12-year period to stop foreclosure on their jointly-owned home. In re Janet Blair (Case No. 09-76150-ast) and In re Allen Gary Smith (Case No. 09-77562-ast).
The decision was precipitated by a motion brought by the mortgagee, seeking “in rem” relief against the premises. Most of these filings were Chapter 13 cases filed over a four-year period between 2005 and 2009. Almost all of them were filed on the eve of a scheduled foreclosure sale.
“In Rem” Relief in Bankruptcy Proceedings Stops Foreclosure Delaying Tactics
“In Rem” Relief in Bankruptcy Proceedings Stops Foreclosure Delaying Tactics
“In rem” relief is when the bankruptcy court grants an order indicating that a particular piece of property will not be affected by any future bankruptcy stays, effectively eliminating any benefit of the “tag-team” filing approach. “In rem” originates from the Latin phrase for a lawsuit directed against property, rather than a person.
In the Blair / Smith cases, the judge immediately lifted the stay and subsequently granted in rem relief, stating that the serial filings were evidence of the debtors’ bad faith, and also evidence of the fact that the debtors were abusing the bankruptcy process for several years.
Statutory Authority for In Rem Relief. In his decision, Judge Trust, delivered a well-written and detailed analysis behind the statutory authority providing for in rem relief. In doing so, the judge essentially reiterated his holding in a two-month-old similar decision, which has since been published. In re Montalvo (416 B.R. 381).
Statutory Authority for In Rem Relief. In his decision, Judge Trust, delivered a well-written and detailed analysis behind the statutory authority providing for in rem relief. In doing so, the judge essentially reiterated his holding in a two-month-old similar decision, which has since been published. In re Montalvo (416 B.R. 381).
One of BAPCPA’s amendments was the addition of Section 362(d)(4) which provides the statutory authority to grant in rem relief. Pursuant to Section 362(d)(4), the Court can grant in rem relief from the stay as to a mortagee’s interest in the property, such that any and all future filings by any person or entity with an interest in the property will not operate as an automatic stay against the owner and its successors and/or assigns for a period of two years after the date of the entry of such an order.
To obtain this relief, the mortgagee bears the burden of showing that the various petitions filed by debtors are part of a scheme to hinder, delay and defraud the mortgagee.
A key issue in such cases is whether the court can infer an intent to hinder, delay and defraud creditors when it appears that there have been multiple, strategically timed bankruptcy filings. Judge Trust took the established view that holds that the mere timing and filing of several bankruptcy cases is an adequate basis from which a court can draw a permissible inference.
However, Judge Trust also observed that the debtors demonstrated no intent to make the bankruptcy work. They did not make plan payments, show up in court, or provide the trustee with required documents.
Standard of Proof in In Rem Litigation
Judge Robert E. Grossman also addressed this issue just over a year ago, and wrote about the standard of proof necessary to obtain in rem relief. In re Lemma (394 B.B. 315 (Bank.E.D.N.Y. 2008).
In that case, which involved a third Chapter 13 filing (with debtor representation by my friend, Babylon bankruptcy attorney Michael A. Kinzer), the judge concluded that the mortgagee was not entitled to in rem relief (and not even entitled to dismiss the case).
The reason why Judge Grossman denied the mortgagee’s application was because the mortgagee, as the party seeking in rem relief, had the burden of proving that the current filing was part of a scheme; that the scheme involved the transfer of real property, or multiple bankruptcy filings; and that the object of the scheme was to hinder, delay and defraud the mortgagee.
The mortgagee in that case was unable to provide the court with any evidence other than the fact that the debtors filed three petitions.
Thus, multiple filings, alone, are not adequate to find intent to hinder, delay and defraud.
About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the January 2010 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Patchogue, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Written by Craig D. Robins, Esq.
Bankruptcy Questions I’ve Received About Tax Refunds During “Tax Week”
This is the final post of my of “tax week” series of articles this past week in which I addressed every aspect you’ll need to know about filing bankruptcy and protecting tax refunds, together with info on related issues. Links to all posts in this series are at the bottom of the page.
I’ve gotten some very positive feedback on the tax week. Here are some interesting comments and questions that I’ve received:
QUESTION: I’m about to file a Chapter 7 case; I haven’t filed my tax return yet; and I expect a large tax refund which is not totally exempt. Why don’t I just delay filing my tax return until my bankruptcy case is over?
If a trustee thinks that there may be a substantial tax refund, then he will hold the case open until you file the tax return and provide him with a copy. Thus, delaying the filing will only delay the conclusion for your bankruptcy case.
QUESTION: If I anticipate a large tax refund, why don’t I just submit a tax return that contains incorrect information that shows that I owe lots of tax (meaning that I will not get a refund); and then just amend the return after the bankruptcy case is closed and get the tax refund then?
Well this person certainly thought creatively. Very few people artificially fudge the figures on their tax return to pay more tax then they owe.
However, this approach is probably illegal under the federal tax law, as a taxpayer is obligated to provide correct information on a tax return. In addition, should the trustee learn that a debtor intentionally manipulated the figures on the tax return to “beat the system” and deceive the trustee, the debtor would likely be looking at a proceeding seeking to revoke the debtor’s discharge.
Bottom line: be honest and accurate when filing your tax return, just as you should be accurate and candid when providing info on your bankruptcy petition.
QUESTION: I recently filed a Chapter 7 bankruptcy and the trustee insists on seeing my tax return before closing my case. However, it will take foreever before I can do my tax return. Is there anything I can do to expedite having the trustee close my case.
Unfortunately, the answer is “no.” If the trustee thinks there may be a significant non-exempt tax refund, he will keep the case open until he can review the tax return. Your best bet is to file the return as soon as possible.
Quick Links to All Tax Week Blog Posts About Tax Refunds and Bankruptcy:
Informative Article About Eliminating Taxes in Bankruptcy:
Article About Tax Consequences and Bankruptcy:
Written by Craig D. Robins, Esq.
This post is part of a series of articles that I’ve written this week addressing every aspect you will need to know about filing bankruptcy, protecting tax refunds, and related issues. Links to all posts in this series are at the bottom of the page.
Tax Refunds in Chapter 13 Bankruptcy Cases Filed in New York
Generally, if you file for Chapter 13 bankruptcy in New York, you will be able to keep your tax refund if your Chapter 13 plan provides for a 100% payment to all creditors. If it does not, then you will have to remit any tax refund to the Chapter 13 trustee, who will include it in the distribution to creditors.
If you have a Chapter 13 plan that provides for a payment of less than 100% to unsecured creditors, then you will also have to remit all future tax refunds to the trustee for the period of the plan, which would probably be five years. Here’s why:
A debtor in a Chapter 13 case is required to pay all projected disposable income into the Chapter 13 plan. Tax refunds are considered additional income that the debtor has over-withheld. Thus, when this income comes in, it has to be paid into the Chapter 13 plan.
In those Chapter 13 cases where you have to submit your tax refund to the Chapter 13 trustee, there will be clear and explicit language in the Chapter 13 plan about this, which will also indicate that you are responsible for sending a copy of your tax return to the trustee at the same time that you file it.
TIP: The higher the number of exemptions that you provide to your employer on an IRS W-9 tax form, the less the witholding will be, and the smaller the tax refund. In sub-100% Chapter 13 plans, you will want to have as small a refund as possible, because any refund that you do end up receiving just goes to your creditors, and does not benefit you in any way.
Effect of Receiving Tax Refund Before Filing Bankruptcy: Possible Whammy on the Means Test
Yesterday I wrote about How a Tax Refund Can Mess Up Your Bankruptcy Means Test . Well, the same means test that is used in Chapter 7 cases to determine eligibility to file for Chapter 7 relief, is also used in Chapter 13 cases to determine the minimum amount that you have to pay into the Chapter 13 payment plan.
If you file a Chapter 13 petition in the six-month period after receiving a tax refund, then you must include the tax refund in the means test as income. This is because all income received during the six-month means test period must be listed, and income tax refunds constitute income for this purpsoe.
Even though the income tax refund can be pro-rated to reflect receiving it over a twelve-month period, it will nevertheless increase the amount you will have to pay in the means test. However, if you file your bankruptcy petition more than six full calendar months after receiving the tax refund, you do not have to include the tax refund, based on a strict interpretation of the law.
This means that most people who file for Chapter 13 during the second half of the year who have plans that pay less than 100% can expect to pay less into their Chapter 13 plans each month. This is not exactly a logical result, but it’s the result of a very poorly and ambiguously worded means test statute.
Quick Links to All Tax Week Blog Posts About Tax Refunds and Bankruptcy:
Informative Article About Eliminating Taxes in Bankruptcy:
Article About Tax Consequences and Bankruptcy:
Written by Craig D. Robins, Esq.
This post is part of a series of articles this week addressing every aspect you will need to know about filing bankruptcy, protecting tax refunds and related issues. To see all posts in this series to date, click this link: Tax Refunds and Filing Bankruptcy .
Effect of a Tax Refund on the Means Test
For purposes of the means test, a tax refund that is received during the six-month means test period, must be included as income for purposes of the means test.
Technically, the means test requires that you allocate the full tax year refund into a six-month period, which as the effect of doubling the amount of the refund, which can provide for a very unfair result, and can result in you failing the means test for this reason alone.
Fortunately, it seems to be the accepted practice to pro-rate the refund over a twelve-month period.
However, strictly construing the means test can sometimes help a debtor. If the tax refund is received outside of the six-month means test period, then technically it does not have to be included in the means test at all.
I’ve learned over the years from representing our Long Island bankruptcy clients, that including the tax refund in the means test or not can sometimes make the difference between passing the means test or failing it.
This underscores the importance of getting competent advice from an experienced bankruptcy lawyer before filing for bankruptcy.
Written by Craig D. Robins, Esq.
This post is the fourth in a series of articles that I’ve writtten this week addressing every aspect you will need to know about filing bankruptcy, protecting tax refunds, and related issues. Links to all posts in this series are at the bottom of the page.
What Should You Do If You Expect a Large Tax Refund, But Haven’t Filed the Bankruptcy Petition Yet?
TIP: Here’s where pre-bankruptcy planning becomes very important. If you expect a large refund, you may want to delay the filing of your bankruptcy petition until you receive the refund and spend it down in an appropriate manner.
Using a large tax refund to pay your rent or mortgage, buy food, make a car payment, or even pay your bankruptcy attorney, are all types of payments that are consistent with filing for bankruptcy in good faith. Sometimes the refund can also be used to buy necessary clothing or furniture, fix your house, repair your car, or get necessary dental work done.
However, you cannot pay existing debts to friends or relatives, give the money away, gamble it away, or buy luxury goods. In general, using it to pay any reasonable and necessary expenses is O.K.
Since pre-bankruptcy planning can be tricky in order to do it in a way that complies with the bankruptcy law, it is always best to seek the advice of a competent bankruptcy attorney before doing so.
Exempting the Tax Refund in the Bankruptcy Petition
If you need to file your bankruptcy petition before you recieve the refund, you must list it in the petition.
To protect your tax refund, you must exempt it by including it as an asset in the Schedule B, which is the Schedule of Personal Property, by stating the anticipated amounts of both the Federal and State refunds, and by listing the exemption and the correct exemption statute (New York C.P.L.R. section 5206) in Schedule C to the petition, which is the Schedule of Exemptions.
If you have to file your bankruptcy petition before preparing your tax return, then you will not know the amount of your refund (which is fairly common because most people don’t do prepare their tax returns until April). In such situations, you should nevertheless list it as “possible income tax refund for the 2009 tax year. . . . Amount $ - unknown -”
You May Be Able to Keep a Non-Exempt Tax Refund If It Is Small
Generally, trustees will only administer non-exempt assets if it is reasonable to do so. If the tax return is relatively small, it will probably be administratively inconvenient for the trustee to be burdened with all of the work necessary to distribute a very small amount.
I previously wrote a post about the issues a Chapter 7 trustee considers in deciding whether to take a debtor’s money or assets to distribute to creditors: Sometimes Debtors Can Keep Non-Exempt Assets in Chapter 7 Bankruptcy Cases .
Quick Links to All Tax Week Blog Posts About Tax Refunds and Bankruptcy:
Informative Article About Eliminating Taxes in Bankruptcy:
Article About Tax Consequences and Bankruptcy:
50 pages