Tag Archives: Chapter 7

Can I or Should I File a Motion to Reopen My Bankruptcy Case?

By Ryan C. Wood

Bankruptcy cases normally close for two reasons: 1) all of the requirements have been fulfilled and the allowable debts have been discharged or 2) one or more of the requirements have not been completed as requested and the bankruptcy case has been dismissed. The debts in cases that have not met all the requirements that are closed have not been discharged. If you need anything further from the bankruptcy court after the closure of your case you need to file a motion to reopen your bankruptcy case. Pursuant to 11 U.S. §350(b), “A case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.” Federal Rules of Bankruptcy Procedure Rule 9024 indicates a motion to reopen a bankruptcy case is not subject to the one year limitation prescribed in the Federal Rules of Bankruptcy Procedure Rule 60. This means that you may bring your motion to reopen a case years after your case was closed. The court charges a filing fee to reopen your case. So why would you want to reopen your bankruptcy case? Here are several more common reasons why you may want to do so:

1. You did not File a Financial Management Certificate with the Court

One of the requirements in receiving a discharge pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is that you take a mandatory financial management course. This class provides information about managing your finances and attempts to teach you how to budget. Once you complete the course you receive a certificate of completion. This certificate is also referred to as the financial management certificate. You need to file this certificate with the court in order to receive a discharge of your debts. If you do not file this certificate with the court your bankruptcy case is closed without a discharge. This means that all your hard work leading up to and including the bankruptcy filing is for naught as the creditors can still try to collect their debt from you after the bankruptcy case is closed. This is true even if you were in a Chapter 13 bankruptcy case and you made all the required payments to the Chapter 13 trustee according to your Chapter 13 plan. If your case is closed without a discharge because of the non-filing of the financial management certificate, the fix is simple: contact your bankruptcy attorney to reopen your bankruptcy case (and pay the court filing fee) to file the certificate. Once you file the certificate you will receive a discharge of your debts and the case will be closed again.

2. You did not Pay the Filing Fee Installment as Required by Court Order

Some people choose to pay the court’s filing fee in installments due to financial issues. The court issues an order with deadlines to make each filing fee installment payment. If you miss one installment even by one day the court may dismiss your case for not following their order. If this is the case you need to file a motion to reopen the bankruptcy case (and pay the court filing fee to reopen) to pay the remainder of the filing fee. Note there are two fees discussed here: the court filing fee to file your bankruptcy case and the court filing fee to reopen your case.

3. You did not Pay the Chapter 13 Plan Payment as Required

If you filed a Chapter 13 Bankruptcy you must make each and every monthly payment to the Chapter 13 Trustee to obtain the relief you seek. If you do not abide by the terms of the approved Chapter 13 plan, and miss a payment the trustee, the trustee will file a motion to dismiss your case with the court. If you are unable to pay the entire amount of arrears you can consult with your bankruptcy lawyer to see what alternatives are available to you. If your case is dismissed you may choose to reopen your bankruptcy case to pay the missed payments and continue on with your Chapter 13 Plan.

4. You Want to File a Motion to Avoid a Judgment Lien

You can file a motion to avoid a judgment lien from your personal or real property in a Chapter 7 or Chapter 13 bankruptcy case if the lien impairs your exemptions. Many people who file Chapter 7 bankruptcy cases pro se or with a bankruptcy petition preparer (meaning they did not have a bankruptcy attorney and they represent themselves in the case) do not know the law, that judgment liens can be avoided or know how to file a motion to avoid a judgment lien. This is one of the many reasons you should always consult with bankruptcy lawyers before filing bankruptcy. Even if your case is closed and your debts are discharged you may file a motion to reopen your bankruptcy case to file the motion to avoid a judgment lien that impairs your exemptions.

5. You Want to Add Creditors to Your Bankruptcy Case

If you forgot to list a creditor in your bankruptcy case, your debts have already been discharged and your case closed, you can reopen your bankruptcy case to include your forgotten creditors depending on the jurisdiction in which you live. In the 9th Circuit if you have a no-asset Chapter 7 bankruptcy case (meaning all your assets are exempt and therefore no assets were administered by the Chapter 7 Trustee) this is not necessary given the creditors would not have received anything even if they were notified of your bankruptcy filing.

The above list is not an exhaustive list of why a motion to reopen a bankruptcy case may be filed. There are numerous other reasons why other parties like the trustee assigned to the case might want to reopen a bankruptcy case. The closure of your bankruptcy case does not necessarily mean your case is over.

Will There be Lien Stripping in Chapter 7 Cases in the Future

By Ryan C. Wood

In most jurisdictions today, the bankruptcy courts will not allow consumers to strip their junior mortgages in Chapter 7 cases. This lien stripping process is only available in Chapter 13 and Chapter 11 bankruptcy cases in most jurisdictions. Lien stripping is available in Chapter 13 bankruptcy cases when junior mortgages are wholly unsecured. This means that the value of the home must be worth less than the senior mortgages. For example if your house is worth $250,000 but your first mortgage is $300,000 and your second mortgage is $60,000 then you can file a Chapter 13 bankruptcy case to strip off the second mortgage or equity line of credit of $60,000. Once your Chapter 13 plan is successfully completed your junior mortgage is stripped off and the underlying debt is discharged in your bankruptcy case (depending upon circumstances) and you will no longer be liable for that debt.

The process above is assuming that your bankruptcy attorney filed the correct motions or adversary proceedings with the court to strip off the junior mortgages or equity line of credit. It is not advisable that you try to take this on if you are representing yourself in a Chapter 13 case as it is very complicated and you have a lot to lose if you file the motions or adversary proceedings incorrectly. As indicated previously the process above is also only available in Chapter 13 bankruptcy cases in most jurisdictions. That may be about to change. A petition for certiorari has been filed with the Supreme Court of the United States to address the question of whether lien stripping will be allowed in a Chapter 7 bankruptcy case.

Bank of America filed the petition for certiorari to review the judgment in the Eleventh Circuit U.S. Court of Appeals in Bank of America, N.A. v. Sinkfield. In this case, Mr. Sinkfield filed a Chapter 7 bankruptcy case. Mr. Sinkfield had two mortgages on his home. Mr. Sinkfield’s first mortgage was under water and therefore his second mortgage was completely unsecured. The court in this case allowed the junior mortgage to be stripped in his Chapter 7 case using the Folendore v. Small Bus. Admin., 862 F.2d 1537 (11th Cir. 1989) case. This case allowed the junior mortgage to be stripped from the property. Bank of America alleges that this runs afowl of the Dewsnup v. Timm case, 502 U.S. 410 (1992). The Sinkfield court indicated that the Folendore case was on point in this case and not Dewsnup.

Unfortunately, just because Bank of America petitioned the Supreme Court to review the case does not necessarily mean that the Supreme Court will agree to hear it. Hopefully the Supreme Court will decide to tackle this issue and provide an answer as to whether a junior lien can be stripped off in a Chapter 7 bankruptcy case. This will give bankruptcy lawyers another tool to help people with overwhelming debts.