Production of tax returns and other documents; dismissal on nonproduction

• S. 256 § 315(b)
Section 521 has been amended to impose a number of new production requirements on debtors. First, a new subparagraph (a)(1)(B) provides that unless the court orders otherwise individual debtors must file, together with their schedules:

• a certificate of an attorney or petition preparer indicating that the debtor was given an informational notice required by amended § 342(b), or, in the case of a pro se debtor, a certificate of the debtor that the debtor has received and read the notice;

• “copies of all payment advices or other evidence of payment received within 60 days before the filing of the petition, by the debtor from any employer of the debtor”;

• “a statement of the amount of monthly net income, itemized to show how the amount is calculated”; and

• “a statement disclosing any reasonably anticipated increase in income or expenditures over the 12-month period following the date of the filing of the petition.”

“Monthly net income” is not a term defined in the Code as amended by S. 256. The use of this term in § 521(a)(1)(B) could have at least three different meanings: (1) it could mean simply the debtor’s take home pay (that is, gross income less payroll deductions); (2) it could mean the amount remaining after allowed deductions under the means test (discussed below in connection with changes to Chapter 7); or (3) it could mean the difference between the debtor’s income reported on Schedule I and the expenses reported on Schedule J. Since this last “monthly net income” would be relevant to the feasibility of a Chapter 11 or Chapter 13 plan, as well as to the ability of the debtor to perform under a reaffirmation agreement, this may be the most reasonable interpretation.

Second, new subparagraph (e)(2)(A) requires that each debtor, at least seven days prior to the 341 meeting, provide both to the trustee and to any creditor making a timely request a copy of the federal income tax return or transcript of the return (at the debtor’s option) for the period for which the return was most recently due and for which the debtor filed a return.

This requirement may apply only to individual debtors in Chapter 7 and 13 cases, since § 521(e)(1) (requiring the court to give copies of certain filings to creditors) is limited in this way. A failure by the debtor to produce the return or transcript
requires dismissal of the case (presumably on motion of the trustee or requesting creditor) unless the debtor demonstrates that the failure to produce the return or transcript was beyond the debtor’s control.

Third, new paragraphs (f)(1)-(3) provide that each individual debtor in a case under Chapter 7, 11, or 13, must also, on request of a party in interest or the court, file with the court, at the same time filed with the IRS, copies of any federal
income tax return (or at the debtor’s option, a transcript of the return) for a tax year ending while the case is pending and for a tax year that ended during the three years before the case was filed, as well as copies (or transcripts) of any amendments filed to these returns. New paragraph (g)(2) provides that the filed returns or transcripts are to be available to any party in interest, with the debtor’s privacy protected by regulations to be adopted by the Director of the Administrative Office.

• S. 256 § 316
A new § 521(i) provides that if an individual debtor in voluntary Chapter 7 or a Chapter 13 case fails to file all of the information required under § 521(a)(1) (including the new
§ 521(a)(1)(B) discussed above) within 45 days after filing the petition, the case must be dismissed on the 46th day, and that any party in interest may request a court order to that effect, which must be entered within five days of the request. The
automatic dismissal may be delayed for up to 45 additional days on motion of the debtor made within the original 45-day period, and on motion of the trustee, filed prior to automatic dismissal, showing that the debtor attempted in good faith to file the debtor’s payment advices and that the best interests of creditors would be served by administering the case. (It is unclear whether this exception would apply only when the debtor has satisfied the other filing requirements of § 521(a)(1).)