COMMENTS OF THE NACBA violation of 28 U. S. C. § 2075 and FRBP 9029. These excessive notices are not, by any means, required by the Supreme Court’ s ruling in United Student Aid Funds v. Espinosa, 130 S. Ct. 1367( 2010), but that decision appears to be the basis for many of the lengthier portions of these model plans. We believe these notices are not only unnecessary, but are actually harmful to debtors, enlarge creditors’ rights, and obscure the operative content of the plan.
NACBA urges that if the proposed rules are adopted, the comments include a reminder to avoid notices that duplicate parts of the 341 notice, explanations of the law, and restatements of data that are included in the petition or schedules. 3. Adding to or deviating from model plan provisions The mandatory model plans have several different methods of accommodating( or not) the debtors’ right to propose their own plans pursuant to 11 U. S. C. § 1321. The most glaring violation of § 1321 appears in four jurisdictions, where debtors are strongly admonished against adding or changing any provisions in the model plan without first moving for and obtaining a court order permitting them. Thirteen model plans allowed editing the text throughout the plan, indicating the changes with boldface, underlines, or strike-outs. Four model plans did not seem to have any place to add provisions. The vast majority of the plans used language similar to the proposed National Plan, which limits the changes or additions to a specific section and voids any other changes in the plan. The treatment of additional provisions was unclear in seven plans. The ability of debtors to propose specific provisions and strikeout or change provisions within model plans is crucial. To effectively prevent debtors from so doing is an egregious violation of their basic bankruptcy rights.
Quite a few of the local rules mandating their model plans state that the debtor’ s plan must“ substantially conform” to the model plan – which gives the impression that the debtor is still allowed some leeway to propose his / her own plan, as provided in § 1321. In practice many debtors’ attorneys find that this rule provision is of no effect and the judges and trustees are not amenable to any deviation at all from the model plan.
As generally indicated in the Summary above, NACBA urges that if the proposed rules are adopted, local model plans be required to permit the debtor to edit, add, delete, and change the text of the plan, with clear notations of those changes; and to prohibit the court and trustee from delaying plan confirmation or otherwise procedurally disadvantaging debtors who do this.
4. Re-vesting provisions Re-vesting provisions are, to some, among the least“ interesting” of the types of plan provisions; however, they are extremely important to the outcome of many debtors’ cases. The Code provides that unless otherwise provided in the plan, property of the estate revests in the debtor upon plan confirmation, but it permits the debtor a whole range of possibilities that are completely ignored by most mandatory model plans. 11 U. S. C. § 1322( b)( 9) permits the debtor to provide for vesting“ on confirmation of the plan or at a later time, in the debtor or in any other entity.” 77 % of the model plans either provided only one revesting provision or provided none, which would default to revesting on plan confirmation. 17 % offered two revesting options. Only 6 % of the model plans allowed the debtor to specify a revesting provision, like the National Model Plan does. The current group of mandatory model plans seriously abridge debtors’ rights in this regard as well.
NACBA urges that if the proposed rules are adopted, local model plans be required to offer re-vesting options which include the ability for the debtor to describe his / her own provision.
5. Specification of Projected
Disposable Income( PDI) and Best Interest of Creditors( BIOC) Test Calculations Many mandatory model plans require the debtor to state the results of the PDI and BIOC tests within the plan. However, some model plans go beyond that to specifying a formula and form to use to calculate those tests. Of the mandatory model plans, 17 % specify BIOC calculations that are arguably incorrect and 14 % of the mandatory model plans prescribe calculations for PDI or designate the use of PDI arguably incorrectly. Because the debtor is theoretically the proponent of the filed plan, s / he could well be bound by these calculations and results – even if they do not comply with the Code( See Espinosa).
NACBA urges that if the proposed rules are adopted, comments encourage the avoidance of mandatory worksheets specifying PDI and BIOC calculations.
6. Methods of Determining Dividends on General Unsecured Claims Nationwide, the great variation in methods of specifying the dividends to be paid on general unsecured claims provided in mandatory model plans is almost beyond imagination. The following options – including combinations of them – are included in the mandatory model plans. Because some plans offer several options, the sum of the identified plan provisions exceeds the number of model plans. a. 26 plans specified or allowed specifying this option:“ funds left over after secured, priority, and administrative claims are paid” [ on general unsecured claims ] b 26 other plans allowed specifying this option:“ funds left over after secured, priority, and administrative claims are paid,” combined with one or more other option c. 24 plans specified:“ no less than __” d. 36 plans specified or allowed specifying:“$____”, a dollar dividend combined with one or more other option e. 2 plans allowed specifying:“$____”, a dollar dividend f. 33 plans specified or allowed specifying:“____%”, a percent
National Association of Consumer Bankruptcy Attorneys Winter 2016 CONSUMER BANKRUPTCY JOURNAL 7