Post Petition Request

CHAPTER 13 TRUSTEE’S OFFICE
CIRCULAR NO. 99-03

TO : THE P.R. BANKRUPTCY BAR AND INTERESTED PARTIES
FROM : José R. Carrión, Esq.
Chapter 13 Standing Trustee
DATE : May 28, 1999
(Last Revision / July 7, 1999)
MATTER :
CHAPTER 13 TRUSTEE OFFICE POLICY REGARDING

POST PETITION CONSUMER CREDIT

This is to inform the newly implemented procedures for the handling of requests for authorization of post petition consumer credit. The provisions of the following Bankruptcy Code Sections: §363(c)(1), §364, §1304, §1303, §1305, §1306, §1325(b) and §1328, in pertinent part, guide this policy.

INTRODUCTION:

New debt should be avoided if possible, but when absolutely necessary, the debtor is best protected by seeking prior permission from the trustee and by modifying the plan to pay the new debt. Keith M. Lundin, Chapter 13 Bankruptcy, 2nd Ed. The PURPOSE of the post petition credit (the loan) is the first element in the Chapter 13 Trustee consideration of any request for authorization.

Commercial Purpose: The debtor, when authorized to operate a business (§1304), may obtain unsecured credit and incur unsecured debt in the ordinary course of business without court or Trustee approval. If it is out of the ordinary course of business, it may obtain credit ONLY if authorized by the Court after notice and a hearing. (See 11 USC §363(c)(1) and §364) Therefore, the Chapter 13 Trustee is not authorized to, nor will, entertain any request for authorization in these cases, with no exceptions.

Consumer Purpose: There is no direct provision in the Bankruptcy Code granting the Chapter 13 Trustee the power to authorize post petition consumer credit. Nevertheless, §1305 and §1328 implicitly provide that the trustee’s authorization is required to ensure the discharge of post petition unsecured consumer debts contemplated by §1305(a)(2). Moreover, in order to reconcile the provisions of §§ 1305, 1306 and 1325(b) the Chapter 13 Trustee must evaluate any post petition credit transaction that takes place within the tendency of a plan, particularly during its first 36 months. The Trustee must determine the urgency and need for the post petition credit transaction and its effect on debtor’s performance under the plan and must ensure that debtor’s plan provides for the surrender of all projected disposable income during said period.

Circular No. 99-03: Chapter 13 Trustee’s Office Policy Regarding
POST PETITION CONSUMER CREDIT
2

Chapter 13 Trustee’s Guidelines for Consumer Post Petition Credit:

(A.) Every request for authorization by the Debtor must be made by filing with the Chapter 13 Trustee’s Office the Official Form called Application for Trustee Authorization of Post Petition Consumer Credit, along with the following documents:

(a) Copy of the credit application with the credit provider
(b) Letter from the credit provider stating their intention to grant the credit
(c) Evidence of income – i.e. salary check voucher
(d) In mortgage loans, copy of the appraisal used for the loan evaluation.

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