Bankruptcy Case Law

In re Booker, Case No. 08-42466

2009-03-02T01:00:00.000-08:00

Court grants motion to dismiss pursuant to § 707(b)(3) based on totality of the circumstances of Debtors’ financial situation and bad faith. Court discusses standards applicable and the factors to consider under each of the two subparagraphs of § 707(b)(3). Court may consider Debtors’ ability to pay which can be determinative and is principal if not exclusive factor for determining dismissal under totality of circumstances. Court may consider Social Security income in determining ability to pay under § 707(b)(3) even though excluded from definition of current monthly income. Court will consider propriety of allowing deductions for contributions to retirement plans on case-by-case basis. Court concludes Debtors have ability to pay substantial percentage of their unsecured debt and that case was not filed in good faith based on inaccuracies in schedules.

Date of the decision: January 23, 2009

Full opinion click here.

Kansas City, Missouri Bankruptcy Attorney, Rachel Lynn Foley.

In re Duvall, Case No. 08-20466

2009-03-02T00:57:00.000-08:00

Court found that the state court judgment, which was a default judgment rendered as a sanction for debtor’s failure to comply with discovery orders, was a judgment on the merits and, therefore, the doctrine of collateral estoppel was appropriate to prevent debtor from challenging the findings made in the state court judgment, and summary judgment was granted on this point. Court found that the findings made in the state court judgment did not determine the question of whether debtor’s conduct was “willful and malicious” under § 523(a)(6), and, therefore, declined to apply collateral estoppel to this issue and denied summary judgment on this point.

Date of decisions: February 18, 2009

Full opinion click here.

Bankruptcy Case Law

CO General Insurance Company, et al. v. Ajene Edo No. 06-100

2009-02-21T20:32:00.000-08:00

Two questions are presented:

1. Whether the Ninth Circuit's construction of "willfully" under section 1681n of FCRA impermissibly permits a finding of willfulness to be based upon nothing more than negligence, gross negligence, or a completely good-faith but incorrect interpretation of the law, and upon conduct that is objectively reasonable as a matter of law, rather than requiring proof of a defendant's knowledge that its conduct violated FCRA or, at a minimum, recklessness in its subjective form?

2. Whether the Ninth Circuit improperly expanded section 1681m of FCRA by holding that an "adverse action" has occurred and notice is required thereunder, even when a consumer's credit information has had either no impact or a favorable impact on the rates and terms of the insurance that would otherwise have been offered or provided?

Full opinion click here.

Fonash 2008 WL 5248175 (Bankr.M.D.Pa.), Bankr. L. Rep. P 81,380

2009-02-16T05:20:00.000-08:00

Chapter 7 debtor failed to sufficiently document student loan expenses raised as "special circumstance."

Regardless of whether a Chapter 7 debtor's student loan expenses might constitute a "special circumstance," of a kind sufficient to rebut the "means test" presumption of abuse and to prevent the case from being dismissed, a debtor who failed to provide any documentation of these expenses, with the exception of the "means test" form itself, did not satisfy the procedural burden of the "special circumstances" provision. A debtor seeking to show "special circumstances," of a kind sufficient to rebut the "means test" presumption that his Chapter 7 filing is an abuse of the provisions of that chapter, bears both a procedural and substantive burden.

Van Ness 2009 WL 210712 (Bankr.E.D.Cal.)

2009-02-09T05:07:00.000-08:00

Creditor seeking injunctive and extraordinary "in rem" relief had to file adversary complaint, not motion for stay relief.

Where a creditor, whose efforts to obtain possession of the Chapter 7 debtor's residence through unlawful detainer proceedings attendant to foreclosure were stayed upon the debtor's bankruptcy filing, sought injunctive and extraordinary "in rem" relief, including a ban on filing future bankruptcy petitions by other persons to whom the subject property may be transferred, a ban on automatic stays in future cases, and an order providing for the sheriff to evict the debtor and any other occupants from the subject property notwithstanding a future bankruptcy case, the relief requested by the creditor was only available, if at all, through an adversary proceeding, a California bankruptcy court has ruled. The requested relief could not be obtained by way of a motion for relief from stay. The relief sought by the creditor was not grounded on any specific provisions of the Bankruptcy Code, but was based upon the court's general equity jurisdiction. Furthermore, to the extent the relief affected third parties, due process concerns virtually compelled the more formal process of an adversary proceeding.

Posted by Kansas City Missouri Bankruptcy Attorney, Rachel Lynn Foley.

Crandall 2008 WL 5459850 (Bankr.S.D.Tex.)

2009-02-09T05:05:00.000-08:00

Circumstantial evidence supported default judgment on credit card issuer's nondischargeability claim.

A combination of facts found in a Chapter 7 debtor's schedules and statement of financial affairs provided adequate circumstantial evidence to support the conclusion, for the purposes of a default judgment on the credit card issuer's claim that the credit card debt fell within the fraud discharge exception, that, at the time he incurred the credit card charge, the debtor intended not to pay the charge but to file a bankruptcy petition instead. These facts included the debtor's divorce, the timing of the debtor's prepetition $8,007 charge to credit card, the identity of the party to whom the charge was made, the debtor's payments in the 90 days preceding his bankruptcy, the proximity of the payment and the filing of bankruptcy, and the debtor's hopeless financial circumstances. Although the evidence might not be sufficient in other circumstances, the court emphasized, it was enough for a default judgment.

Schwinn 2009 WL 161622 (Bankr.D.Kan.)

2009-02-09T05:04:00.000-08:00

Economic stimulus payment that Chapter 7 debtors received postpetition was included, in its entirety, in estate.

Regardless of whether an economic stimulus payment that debtors received following the commencement of their Chapter 7 case was treated as a refund of taxes paid in the immediately preceding year or as an advance refund of taxes that the debtors had paid and were still in the process of paying for the tax year in which the petition was filed, the entire stimulus payment was included in the "property of the estate," without any need to prorate the payment between pre- and postpetition periods. The refund bore no relationship to the debtors' postpetition income or wage withholdings, but was in the nature of a payment to which the debtors were entitled on the petition date, based on the fact that, when their petition was filed, Congress had already enacted the economic stimulus legislation, and the debtors, by filing a tax return for the prior tax year, had done everything required of them in order to obtain the economic stimulus payment.

Brooks Hamilton 2009 WL 226002 (9th Cir.BAP (Cal.)), 09 Cal. Daily Op. Serv. 1382

2009-02-09T05:02:00.000-08:00

Sanction of suspension imposed on attorney was abuse of discretion, absent consideration of relevant factors.

A bankruptcy court abused its discretion when, as a sanction for a frivolous claim objection filed by Chapter 13 debtor's attorney, it suspended the attorney from practicing before bankruptcy courts in that district for a period of six months without considering each of the factors specified by the case law as bearing on the reasonableness of the sanction. To determine an appropriate sanction for frivolous argument made by Chapter 13 debtor's attorney in objecting to a proof of claim, bankruptcy court had to consider: (1) whether the duty violated was to client, the public, the legal system or the profession; (2) whether attorney acted intentionally, knowingly, or negligently; (3) whether attorney's misconduct caused a serious or potentially serious injury; and (4) whether aggravating factors or mitigating circumstances existed. The BAP also identified specific aggravating circumstances.

Bankruptcy Case Law

Clark Contracting Svcs 2008 WL 5459818 (Bankr.W.D.Tex.)

2009-02-09T05:01:00.000-08:00

Avoidance - Assigned Texas motor vehicle liens were not perfected absent notation of assignee's identity on certificates of title.

For its lien to be effective against innocent third parties such as judgment lien creditors, the assignee of a lien on a motor vehicle governed by the Texas Certificate of Title Act must take the affirmative steps set out in that enactment to have its identity as lienholder reflected on the certificates of title, a Texas bankruptcy court has held. Thus, the court rejected the argument of an assignee of six motor vehicle liens, which were duly perfected by the assignor prior to assignment, that it did not need to take any further action to maintain that perfection. Accordingly, the Chapter 11 debtor-in-possession could avoid the liens under its 544(b) "strong-arm" powers. Although, generally speaking, the assignment of a duly perfected security interest does not affect the perfection status of that security interest under Texas law, the rules are different when the collateral is a motor vehicle. Because there is no searchable database for lienholders on certificated vehicles, assigned liens on such vehicles must be notated on the certificates of title as a condition to continuous perfection.

Bankruptcy Case Law

Cantu 2008 WL 5459834 (Bankr.S.D.Tex.)

2009-02-09T04:59:00.000-08:00

Discharge 523(a)(6) - Jury's findings on intentional interference claims did not show actual intent to cause injury supporting nondischargeability.

Under Texas law, a jury's finding that a debtor acted with intentional interference was insufficient, alone, to show a subjective motive to injure, as would establish the actual intent to cause injury required for a judgment debt for tortious interference with contract and prospective contract to fall within the discharge exception for willful and malicious injury. Likewise, the jury's finding that the debtor's interferences with the judgment creditor's contract and prospective contract proximately caused the judgment creditor's injury was insufficient, alone, to show that the debtor acted with the objective substantial certainty of harm constituting actual intent to injure required to bring the judgment debt within the discharge exception.

Downey 2009 WL 50180, Bankr.W.D.Ky

2009-01-27T05:50:00.000-08:00

A creditor had no basis for her objection to any unclaimed exemption in the debtors' vehicles or in any disc jockey equipment that they owned, a Kentucky bankruptcy court held. The debtors had not claimed an exemption in any of their scheduled vehicles, nor had they moved to amend their schedules to claim an exemption in a vehicle. The disc jockey equipment, moreover, was not even listed on the debtors' schedules. The court was at a loss to explain how the creditor could object to an exemption that had not been claimed.--

Blausey v. US Trustee, No. 07-15955

2009-01-27T05:37:00.000-08:00

Dismissal of a petition for Chapter 7 bankruptcy is affirmed where private disability insurance benefits are income that should be included in petitioners' current monthly income under the statutory means test, and with the benefits included the petitioners' current monthly income was high enough to trigger a presumption of abuse.

Full opinion click here,

Carter v Welles Realty Co., 6th Cir. 20090121

2009-01-27T05:26:00.000-08:00

On January 23, 2009 the 6th Circuit held that a plaintiff has Article
III standing to pursue a violation of RESPA's prohibition against
providing referral fees or kickbacks in connection with real-estate
settlement services even though the plaintiff was not overcharged for
the settlement services. Carter v. Welles-Bowen Realty, No. 07-3965
(6th. Cir., Jan. 23, 2009)

The court reasoned that RESPA "creates an individual right to receive
referral services untainted by kickbacks or fee splitting." p. 12. And,
because the the referral to the company that provided plaintiffs'
settlement services was "sullied by kickbacks in violation of RESPA,
they have article III standing [to sue]." p.13.

Riggert 2009 WL 62254 (Bankr.N.D.Tex.).

2009-01-27T05:17:00.000-08:00

Pleading - Creditor could not amend denial-of-discharge complaint to assert new claims once discovery had ended and deadline had passed.

A creditor would not be allowed to amend its denial-of-discharge complaint in order to assert entirely new facts in support of its claims after the deadline for filing such complaints had passed, after the time for discovery had ended, and with less than four months remaining before trial was set to begin. The creditor failed to provide any clear or reasonable explanation for its delay. Moreover, the debtor would be prejudiced by this delay, in that the amendment would require the debtor to prepare to defend entirely new claims after discovery had ended. Finally, the amendment, not arising out of the same conduct or transaction addressed in original complaint, would not relate back. Thus, the amendment could be denied on undue delay, unfair prejudice, and futility grounds.

Mora 2008 WL 5424132 (Bankr.E.D.Mo.).

2009-01-25T05:14:00.001-08:00

Debtor "refused" to obey lawful order of court and could have her discharge revoked.

A Chapter 7 debtor who had been ordered by the court to deliver her tax refunds to the trustee, who failed to deliver the refunds, or any portion of the refunds, which she received, who admitted that she had not turned over the refunds to the trustee, and who, after the court issued an order for turnover of the refunds, disobeyed that order, could have her discharge revoked for "refusing" to obey a lawful order of the court. The debtor knowingly and fraudulently failed to surrender refunds to the trustee.

Bankruptcy Case Law

Mora 2008 WL 5424132 (Bankr.E.D.Mo.).

2009-01-25T05:14:00.000-08:00

In re Cooper, (Bkrtcy.E.D.Ark.)

2009-01-24T22:01:00.000-08:00

January 23, 2009: Discharge - Sins of debtor-husband could not be visited on debtor-wife for denial of discharge purposes.

A Chapter 7 debtor-husband's fraudulent intent, in failing to disclose on the statement of financial affairs (SOFA) certain stock transactions that generated more than $275,000 for the debtors, a substantial portion of their liquid assets on the eve of their bankruptcy filing, could not be imputed to the debtor-wife, for purpose of denying her a discharge based on her material false oaths. The debtor-wife was a stay-at-home "soccer mom," who was not involved in her husband's business dealings, and who, while generally aware that her husband at one point sold his stock, did not know the details of these transactions, including what he received and precisely when the transactions took place. The debtor-husband alone signed the transfer documents, and the proceeds from these stock sales were deposited in his individual account.

In re Ochoa, (Bkrtcy.S.D.Fla.)

2009-01-24T21:56:00.000-08:00

January 23, 2009: Process - Mortgage lender's attorneys did not have implied authority to accept service of process on its behalf.

Attorneys whose participation in a Chapter 13 case on a corporate mortgagee's behalf was generally limited to filing notices of appearance which were not signed by the corporation, and none of whose involvement exceeded the filing of an unprosecuted motion for relief from the stay, were not sufficiently involved in the bankruptcy proceedings that they could be regarded as having implied authorization to accept, on the corporate mortgagee's behalf, service of the debtor-mortgagor's motion to deem her mortgage current upon the completion of her "cure" payments under the plan.

In re Hill, (Bkrtcy.W.D.Ky.)

2009-01-23T15:21:00.000-08:00

January 22, 2009: Claims - Proof of claim by assignee cannot be disallowed based on amount paid vis-a-vis proposed distribution.

The mere fact that an alleged assignee of a credit card debt may have paid significantly less than the face amount of the credit card debt, and would allegedly receive a "windfall" as a result of the fact that the debtor's Chapter 13 plan provided for a 100% distribution on claims, did not provide a basis for disallowing a proof of claim filed by the assignee or not allowing it in the amount filed. What the assignee paid for the assignment of the credit card debt was irrelevant.

Bryant 2009 WL 86758 (Bankr.W.D.Ky.)

2009-01-23T15:17:00.000-08:00

Claims - Debtor's discharge did not prevent setoff of prepetition tax debt against prepetition tax refund.

A Chapter 7 debtor's discharge in bankruptcy did not affect the right of the IRS to offset a debtor's prepetition tax debt against its own prepetition obligation to the debtor for the overpayment of taxes. However, the debtor's discharge prevented the IRS from offsetting any postpetition refund that it owed to the debtor based on a prepetition tax debt that the debtor owed to it.

Reid 2008 WL 4831732 (Bankr.W.D.Ky.)

2009-01-23T15:15:00.000-08:00

Attorney Fees - Fee reduction was warranted for tasks that attorney billed, but that could have been performed by paralegal.

A reduction was warranted in the fees sought by a Chapter 7 trustee for the legal services of his attorney, based on the excessive nature of the time charged by the attorney for some of the services performed, such as the 17.60 hours billed by the attorney as time for preparing for an evidentiary hearing in litigation with the debtor and other claimants about proceeds from the sale of real estate. Many of these entries included ministerial tasks that could have been performed by a paralegal, including the preparation of subpoenas and the digesting of depositions.

Cooper v. ECMC Case No. 02-21129

2009-01-13T02:09:00.000-08:00

Court finds student loan debt non-dischargeable pursuant to § 523(a)(8) where Debtor has maintained the same employment for 13 years, experienced regular pay increases and has a gross monthly income that exceeds her monthly expenses such that making a student loan debt payment is feasible under the ICRP. Debtor testified as to having medical problems and house repair issues but the Court was not convinced her issues limited her ability to generate income sufficient to repay her student loans.

Date of opinion: 12/12/08

For full opinion click here.

In re Roach, Case No. 08-20667

2009-01-13T02:05:00.000-08:00

Debtors filed Chapter 7 case and a non-residential real property lease between Debtors and Creditor was deemed rejected under § 365(d)(4)(A)(I). Subsequently, Debtors converted their case to one under Chapter 13. Creditor filed an application for administrative expense claim for rent arrears that accrued between the filing of the Chapter 7 petition and the lease rejection. Court denied Creditor’s Application for Administrative Expense Claim based on statutory interpretation of §§ 348 & 365. Section 348(d) does not apply to a Chapter 7 to 13 conversion and the interplay of the plain language of §§ 348(c) & 365(d)(3) does not allow for an administrative expense claim.

Date of opinion: 12/23/08

Click here for full opinion.

Lance Addison v. Randall Seaver U.S. Court of Appeals Case No: 07-2064 and No: 07-2727

2009-01-13T01:33:00.000-08:00

Appeal from the Bankruptcy Appellate Panel for the Eighth Circuit [PUBLISHED] [Smith, Author, with Bye and Colloton, Circuit Judges] Civil case - bankruptcy. It was clear error for the bankruptcy court to find that debtor had the requisite intent to hinder, delay or defraud a creditor when he converted some nonexempt property into his homestead
on the day he filed bankruptcy; on the same analysis, the court erred in disallowing a Roth IRA exemption; on the same analysis, the court erred in denying debtor a discharge on the collateral estoppel effect of its earlier findings on disallowing the exemptions; Section 529 tuition savings accounts are nonexempt property of the bankruptcy estate.

Date of the opinion: 8/7/08

Full opinion click here.

In re Montanaro, Case No. 08-60665 (Bankr. W.D. Mo. Dec. 10, 2008).

2009-01-13T01:26:00.000-08:00

Debtor's conversion of non-exempt mutual funds into exempt IRAs on the eve of bankruptcy was permissible exemption planning in light of the Eighth Circuit's opinion in Addison v. Seaver.

Date of the decision: 12/10/08

For the opinion click here.

Marie v. Citibank, Case No. 07-6032

2009-01-13T01:23:00.000-08:00

The Debtor incurred over $210,000 in student loans seeking a doctoral degree in psychology. When she failed to obtain her degree, she filed for Chapter 11 and sought to have her loans discharged under §523(a)(8). At the time of her trial, approximately $180,000 of her student loans were held by ECMC and $30,000 were held by Sallie Mae; while the ECMC loans were subject to an Income Contingent Repayment Plan (ICRP), the Sallie Mae loans were not. The Debtor, relying upon In re Reynolds, 425 F.3d 526 (8th Cir. 2005), claimed that she suffered from depression that affected her ability to work and that was exacerbated by the existence of her loans. The court found that the Debtor suffered only from temporary depression that did not prevent her from being capable of obtaining employment in her field and earning an annual salary of about $40,000. However, using the totality of the circumstances approach followed by the 8th Circuit, set forth in In re Long, 322 F.3d 549 (8th Cir. 2003), the court found that requiring her to repay the Sallie Mae loans and a portion of the ECMC loans would pose an undue hardship on her, and were therefore dischargeable. The court examined the ICRP option available to the Debtor for the ECMC loans and found that, even if she was earning an annual salary of $40,000, her monthly payments calculated under the plan would pose an undue hardship when considered with her reasonable monthly expenditures.

Date of the decision: 11/20/08

For the full opinion click here.

US Supreme Bankruptcy Dcisions

2008-12-30T19:05:00.000-08:00

US Supreme Court Bankruptcy Decisions

Caselaw - BAPCPA Issues

2008-12-27T20:06:00.000-08:00

Attorneys as debt relief agencies.

Attorneys advertising as debt relief agencies.

Attorneys advising assisted persons to incur debt.

Failure to keep or preserve records.

Projected Disposable Income.

Written by Rachel Lynn Foley, Kansas City Missouri Bankruptcy Attorney.

EASTERN DISTRICT OF MISSOURI OPINIONS

2008-12-23T11:39:00.000-08:00

Eastern District of Missouri

Written by Rachel Lynn Foley, Kansas City Missouri Bankruptcy Attorney.

Bankruptcy Appellate Opinions

2008-12-22T18:13:00.001-08:00

What is the BAP?

1st Circuit Opinions

6th Circuit Opinions

8th Circuit Opinions

9th Circuit Opinions

10th Circuit Opinions

Written by Rachel Lynn Foley, Kansas City Missouri Bankruptcy Attorney.

WESTERN DISTRICT OF MISSOURI OPINIONS

2008-12-22T17:59:00.000-08:00

Judge Dow Opinions

Judge Federman Opinions

Judge Venters Opinions

Written by Rachel Lynn Foley, Kansas City Missouri Bankruptcy Attorney.

Lopez v. Washington Mutual Bank, Inc.,

2008-12-22T14:03:00.000-08:00

If a bank account has a negative balance resulting from paying overdrafts and overdraft fees, the bank cannot apply a future direct deposit of Social Security or V.A. benefits to make up the deficit balance owed to the bank.

The court analyzed Sections 407(a) and 1383(d)(1) of 42 U.S.C., which prohibit creditors from reaching Social Security or SSI benefits by levies, garnishments, or "other legal process," and decided that these sections do not allow a bank to apply a future direct deposit of Social Security and SSI benefits to cover overdrafts and overdraft fees owed by the customer to the bank on that same account!

In re Spencer, (Bkrtcy.D.Dist.Col.)

2008-12-18T10:37:00.000-08:00

June 4, 2008: Case Administration - Court interprets "automatic dismissal" language in payment advice provision. The "automatic dismissal" language in a provision of the Bankruptcy Code indicating that a case shall be automatically dismissed if the debtor fails to file payment advices or other required information within 45 days of the petition date, even when read in isolation from provisions in companion paragraphs, had to be interpreted simply as directive that court had no discretion other than to dismiss a case in which required payment advices are not filed, and not as effecting the automatic dismissal of such cases, with no need for court intervention, on the 46th day after the petition date. Dismissal would be effective on the date the dismissal order was entered.

Rachel Lynn Foley, Kansas City Missouri Bankruptcy Attorney.

In re Mabry, (Bkrtcy.E.D.Mo.)

2008-12-18T08:44:00.000-08:00

December 16, 2008: Discharge - Unemployed Chapter 7 debtor was entitled to "undue hardship" discharge of student loans.

A 49-year-old Chapter 7 debtor who, despite graduating more than 26 earlier from a prestigious Ivy League school, had been unemployed or underemployed for many years since he graduated for various circumstances not entirely within his control, including the failure of a promising business that he had started when a major customer decided to change its method of operation and no longer needed the debtor's product, was entitled to an "undue hardship" discharge of his more than $80,000 in student loan debt. The debtor was currently unemployed, penniless, homeless and receiving food stamps. Moreover, the debtor, since the failure of his business, had been employed principally as a waiter and/or bartender, and despite having sent out employment applications to more than 40 restaurants, had been unable to obtain work in the food and beverage industry. Even if the debtor could obtain such employment, his earnings therefrom would be insufficient to permit payment on the student loans while still allowing for a minimal standard of living.

Maxon Engineering Services, Inc., ex rel. Wiscovitch-Rentas v. Municipality of Aibonito, (D.Puerto Rico)

2008-12-18T08:32:00.000-08:00

December 17, 2008: Appeals - Trustee's disregard for court orders and rules warranted appeals' dismissal for failure to prosecute and comply with orders.

A Chapter 7 trustee's disregard for the district court's orders regarding the filing of appellate briefs for the trustee's appeals from the dismissal of her adversary proceedings against a municipality and for the rules governing the filing of appellate briefs excessively delayed the proceedings before the district court and was inexcusable. Thus, the exercise of the court's discretion to dismiss the appeals for failure to prosecute and to comply with court orders was warranted.

In re Crystal Cascades Civil, LLC, (Bkrtcy.D.Nev.)

2008-12-18T08:29:00.000-08:00

December 17, 2008: Claims - Tax lien notices that omitted part of debtor's name and misidentified its form were not effective against third parties.

Where tax lien notices filed by the Internal Revenue Service (IRS) left out one of the nontrivial words of the Chapter 11 debtor-taxpayer's name and misidentified the debtor's organizational form, that is, identified the debtor as "Crystal Cascades, LLC, a corporation," instead of its full and proper name, "Crystal Cascades Civil, LLC, a Nevada limited liability company," a reasonable computerized search of the relevant real property records would not have revealed either tax lien. Consequently, the notices were not effective against third parties, and the creditors, rather than the IRS, were entitled to the surplus proceeds from the foreclosure sale of the debtor's real property. Although use of the two-term parameter "Crystal Cascades" would have discovered the filings, a reasonable nonprofessional searcher would not have used that parameter, but would have used the name from the grant deed that vested the property in its current owner, or a reasonable truncation of that name, and such a search would not have discovered the filings. Furthermore, a reasonable searcher would not have searched the Secretary of State's records, but only those indexed and filed at the county recorder's office.

In re Swanson, (Bkrtcy.N.D.Iowa)

2008-12-18T08:25:00.000-08:00

December 17, 2008: Discharge - Credit counseling services that debtor purchased with credit card were not "luxury" services.

While items that a Chapter 7 debtor purchased with a credit card over a thirteen-day period immediately proceeding her consultation with and retention of a bankruptcy attorney, consisting of clothing, shoes, books, beads and household items, might generally be considered necessary items, the fact that debtor spent more than $3,200 on such items over a period of just thirteen days, at time when she was experiencing financial difficulties, was sufficient to make the purchases excessive, and to trigger the statutory presumption of nondischargeability for a debtor's eve-of-bankruptcy purchases of "luxury goods." However, credit counseling services that the debtor purchased with her credit card were not in the nature of "luxury" services.

In re Pena, (1st Cir.BAP (Mass.))

2008-12-18T08:22:00.000-08:00

December 17, 2008: Jury - Adversary defendants were not entitled to a jury trial.

A Massachusetts bankruptcy court did not err in denying the adversary defendants' request for a jury trial, the First Circuit's Bankruptcy Appellate Panel (BAP) has held. The defendants did not request a jury trial prior to the bankruptcy court's entry of default, but only did so in their late-filed answer to the Chapter 7 debtors' complaint. The defendants thus had no constitutional right to trial by jury, and they failed to identify a specific federal statute that guaranteed them a right to jury trial.

In re Carson, (Bkrtcy.E.D.Wis.)

2008-12-18T08:15:00.000-08:00

December 17, 2008: Plans - Debtor could not modify confirmed plan to relieve her of any further payment obligation.

A Chapter 13 debtor who, because the secured claims that were filed differed from her projections, had satisfied the secured and priority claims in less than the 60 months originally planned would not be allowed to modify her confirmed plan to relieve her of any obligation to make any further payment to unsecured creditors, though the unsecured creditors may have already received the minimal 2% distribution guaranteed, and though the debtor might not originally have been obligated to propose a plan of more than 36 months. Any such attempted modification was an improper attempt to cure the debtor's default in failing to make one-half of any postpetition income tax refunds available for the payment of creditor claims, and was in the nature of an attempt to obtain a hardship discharge without satisfying the requirements therefor.

Hildebrand v. Thomas (In re Thomas), 395 B.R. 914, 922-23 (B.A.P. 6th Cir. 2008) (Gregg, McIvor, Shea-Stonum)

2008-12-18T08:11:00.000-08:00

(To determine disposable income for debtor with CMI greater than applicable median family income, amount scheduled as contractually due on account of secured debt is deductible notwithstanding that plan proposes to surrender collateral. Applying Hildebrand v. Petro (In re Petro), 395 B.R. 369 (B.A.P. 6th Cir. 2008), remand is necessary because bankruptcy court did not consider that “projected disposable income” is different from “disposable income” and surrender of collateral through plan may change entitlement of unsecured creditors. “[T]he means test is a mechanical, formulaic approach that as applied is no different in chapter 7 than it is in chapter 13. The Panel has not located any clearly expressed legislative intention that secured debt expenses deducted from the means test in chapter 7 should be different from secured debt expenses deducted from the disposable income test in chapter 13. . . . [A] chapter 13 debtor may deduct, for purposes of determining disposable income under § 1325(b)(2), payments for collateral the debtor intends to surrender. . . . [T]hat disposable income must then be compared to the Debtors’ projected disposable income, as reflected in Debtors’ income and expenses as of the effective date of the plan, as required by § 1325(b)(1)(B). . . . [T]he court may not confirm the plan if the court finds that debtor’s schedules or other credible evidence require a reassessment of disposable income as determined by the means test under § 1325(b)(2) and (b)(3).”).

Commonwealth v. Fremont Investment & Loan & another, 452 Mass. 733 (2008)(Botsford, J.)

2008-12-15T18:25:00.000-08:00

In a landmark decision, the Supreme Judicial Court of Massachusetts issued it opinion on December 9, 2008 unanimously upholding the lower court's order in the case of Commonwealth v. Fremont Investment & Loan & another, 452 Mass. 733 (2008)(Botsford, J.) preliminarily enjoining subprime mortgage lender Fremont Investment & Loan from foreclosing on any "structurally unfair" loan without further prior court approval and a final hearing on the merits. The lower court's ruling of February 25, 2008 was reportedly the first of its kind in the nation that restricts a subprime lender's ability to foreclose based on unfair or deceptive loan origination misconduct.

Date of opinion: December 9, 2008.

Full opinion click here.

Kawaauhau v. Geiger, 523 US 57, 140 L.Ed.2d 90 (1998)

2008-12-02T17:26:00.000-08:00

The exception requires a willful and malicious intent to injure, not merely a willful and malicious act that incidentally causes injury. Geiger was a medical doctor who had no malpractice insurance. Kawaauhau was a patient who had her right leg amputated below the knee due to a mis-treated infection. Geiger did not intend to cause injury, so the debt was discharged. The failure to have malpractice insurance was negligent or reckless, not willful and malicious. Doesn't sound like Melanie's client has a problem.

Date of this opinion: March 3, 1998

For the full opinion click here.

n re Dawson, Case No. 06-30322; Adversary Case No. 07-3027

2008-04-16T06:01:00.000-07:00

Creditor's purported lien on vehicle purchased in Arkansas but located in Missouri as of the petition date was unperfected because, under Mo. Rev. Stat. 301.600(a)(2)(B), three-month grace period for vehicles perfected outside of Missouri did not apply where evidence showed that the parties understood that vehicle was to remain in Missouri.

Date of opinion: 2/14/08

Full opinion click here.

Close 2008 WL 836160 (D.Kan.)

2008-04-16T05:43:00.000-07:00

Statement as to whether Chapter 7 case is presumptively abusive must be filed within ten days of first meeting date.

The "date of the first meeting of creditors," as that phrase is used in a bankruptcy statute requiring the United States Trustee (UST), no later than 10 days after the date of the first meeting of creditors, to file a statement indicating whether the debtor's Chapter 7 case is presumptively abusive, refers to the first meeting date, and not to the date that the meeting of creditors is finally concluded following any continuations or reschedulings by the UST. Thus, where the UST waited more than 10 days after the first meeting date to file her statement, this statement, and her subsequent motion to dismiss based on the presumption of abuse, were both untimely.

In Re Gregory A. Wilson, et ux., Debtors

2008-04-15T19:24:00.000-07:00

Above-median Chapter 13 debtor may not claim an ownership expense deduction under section 707(b)(2)(A)(ii)(I) for an automobile the debtor owns outright.

Date of opinion: 3/14/08

Full opinion click here.

Ann B. Lasowski, Debtor. David D. Coop, Trustee-Appellant, v. Anne B. Lasowski, Debtor-Appellee. Case No. 07-6063

2008-04-15T19:23:00.000-07:00

Debtor may only deduct actual amounts required to repay 401(k) loans when calculating disposable income on means test; once the loans are repaid, debtor's chapter 13 plan must redirect those payment amounts to unsecured creditors.

Date of opinion:3/21/08

Full opinion click here.

Bradley R. Thayer and Judith N. Thayer, Debtors - Defendants. American Residential Mortgage, LP, Plaintiff - Appellee. v. Bradley R. Thayer and Judi

2008-04-15T19:20:00.000-07:00

Bankruptcy court properly reinstated note and deed of trust that were mistakenly paid and released after debtors rescinded a refinancing transaction under TILA. Court erred in sanctioning debtors' attorney $15,000 for presenting inconsistent arguments. (Dissenting opinion on sanctions issue.)

Date of opinion: 3/31/08

Full opinion click here.

Jordan 2008 WL 917117 (4th Cir.(Va.))

2008-04-15T19:15:00.000-07:00

Discharge - Debtor did not "willfully" violate court order by refinancing home, as would have warranted revocation of her discharge.

A Chapter 7 trustee seeking revocation of a debtor's discharge under 11 U.S.C.A. 727(a)(6)(A) and (d)(3) for the debtor's "refusal" to obey a lawful court order must establish that the debtor willfully and intentionally refused to obey the court's order, the Fourth Circuit Court of Appeals has held, noting a split of authority and following the majority view. Moreover, in the case at bar, the Chapter 7 debtor did not "willfully" refuse to obey the court's administrative order when she refinanced her home without the court's or the trustee's knowledge or consent. In addition to requiring that she cooperate with the trustee, the order in question prohibited the debtor's "selling, transferring, removing, destroying, mutilating or concealing" of property. The order did not specifically prohibit the "refinancing" of property and, the Court of Appeals reasoned, it would not have been apparent to the typical debtor that refinancing property may technically involve a transfer in connection with the execution of a deed of trust. The burden to clarify any restriction on refinancing rested not on a layperson such as the debtor, but on the business-savvy drafters of the administrative order. One judge concurred in part and dissented in part, agreeing that the bankruptcy court had applied the correct legal standard, but concluding that the undisputed facts established that this debtor willfully violated the bankruptcy court's order when she refinanced her home.

IN re Gen Mort Co of America 2008 WL 850328 (Bankr.M.D.Fla.)

2008-04-15T19:13:00.000-07:00

Avoidance - Assignee of note and mortgage was a mere conduit of avoided payments.

The assignee of a note and mortgage executed by the debtor's principals, which itself assigned the note and mortgage to another company and retained only a service fee, was not an "initial transferee" but, rather, was merely a "conduit," a Florida bankruptcy court has held. Thus, pursuant to 11 U.S.C.A. 550, the assignee was not liable to the bankruptcy trustee for the debtor's prepetition and postpetition transfers, which had been avoided under 548 and 549 of the Code. The assignee had no legal right to use the funds for its own purposes, the court reasoned.

Mobley 2007 WL 5037682 (Bankr.M.D.Fla.)

2008-04-15T19:11:00.000-07:00

Debtor Protections - Sanctions of $2,000.00 would be imposed upon litigants for their violation of the automatic stay.

A Florida bankruptcy court has imposed sanctions of $2,000.00 upon an attorney and his clients who violated the automatic stay by filing a third- party complaint against the Chapter 7 debtor in state court and then, though twice asked by the debtor's counsel to dismiss the complaint, failed to do so. Although the invoice submitted by the debtor's counsel sought fees in the amount of $4,637.50, representing 13.25 hours of work, the court declined to award compensation for research regarding the discharge of a contingent claim which was not involved in the matter currently before the court, as well as for several miscellaneous items listed by the debtor's counsel.

Pratt 2008 WL 933633 (5th Cir.(Tex.))

2008-04-15T19:06:00.000-07:00

Creditor's informal warning letters did not satisfy Rule 9011's service requirement.

Addressing an issue of apparent first impression for the circuit, the Fifth Circuit Court of Appeals has held that informal warning letters that a creditor sent to counsel for the Chapter 7 debtor prior to filing its motion for Rule 9011 sanctions with the bankruptcy court did not satisfy the service requirement of F.R.B.P. 9011. The plain language of Rule 9011 mandates that the movant serve the respondent with a copy of the motion before filing it with the court, the Court of Appeals explained, and there was no indication in Rule 9011, Rule 11, or the advisory notes to support the creditor's contention that a motion for sanctions may be filed with the court without serving the respondent with a copy at least 21 days in advance. Although the Seventh Circuit had awarded sanctions under Rule 11 even though the defendant had sent the respondent only a "letter" or "demand" and not a copy of the motion for sanctions, the Fourth, Eighth, Tenth, and Eleventh Circuits had required service of a copy of the Rule 11 motion, the Court of Appeals noted

Frost 2008 WL 852650 (Bankr.S.D.Ohio)

2008-04-15T19:04:00.000-07:00

Avoidance - Trustee had constructive knowledge of prepetition foreclosure action and could not avoid debtor's mortgage under 544(a)(3).

Where a mortgagee had initiated prepetition foreclosure proceedings against the debtor-mortgagor and had served the debtor with the summons and a copy of the foreclosure complaint, which specifically described the subject property, the day before he filed his bankruptcy petition, the Chapter 13 trustee, by operation of Ohio's lis pendens statute, had constructive knowledge of the mortgagee's mortgage at the time the bankruptcy petition was filed. Therefore, the trustee could not acquire the status of a bona fide purchaser and could not maintain an action to avoid the mortgage pursuant to the Bankruptcy Code's "strong arm" provision.

Schubert 2008 WL 857466 (Bankr.S.D.Ohio)

2008-04-15T19:00:00.000-07:00

Granting of Chapter 7 relief would have been an "abuse" under the totality of the circumstances.

Under the totality of the circumstances, the granting of relief to the debtors would have been an "abuse" of the provisions of Chapter 7, such that dismissal of their case was warranted, an Ohio bankruptcy court has ruled. Both debtors had excellent jobs that would provide a stable source of future income, the court observed. The debtors' combined gross annual income of $102,122.00 was sizeable, and the debtors, through a tax refund, an adjustment in their withholding, and/or reduced spending on housing and/or vehicles and/or general daily belt-tightening, had the ability to make a monthly payment of at least $250.00. Therefore, they had the ability to pay unsecured creditors a meaningful percentage without depriving themselves or their children of adequate necessities. Finally, the court noted, the debtors' bankruptcy was not caused by an unforeseen or catastrophic event but, rather, by one or both of the debtors' desire to have jobs with more predictable hours at less pay, and their reluctance to change their lifestyle to match their reduced income.

Owsley 2008 WL 868044 (Bankr.N.D.Tex.)

2008-04-15T18:56:00.000-07:00

Plans - Recreational vehicle had to be necessary to support for payments thereon to be deductible by high-income Chapter 13 debtors.

The "secured debt" portion of the "means test" formula for calculating the reasonable, necessary expenses of above-median-income Chapter 13 debtors consists of two apparently independent subclauses, one of which allows debtors to deduct "amounts scheduled as contractually due" to secured creditors with no apparent requirement that the property on which such payments are due must be necessary to the support of the debtor or the debtor's dependents 11 U.S.C.A. 707(b)((2)(A)(iii)(I), and only the second of which, that authorizing a deduction for any "additional payments" on secured debts on which the debtor defaulted prepetition 707(b)((2)(A)(iii)(II), expressly requires any showing that the collateral is necessary to the support of the debtor or his/her dependents. Nonetheless, in order to avoid an absurd result, a bankruptcy court interpreted this "necessity to support" requirement as applying to both subclauses, so as to prevent above-median income Chapter 13 debtors from taking a deduction for their payments on a recreational vehicle absent a showing by the debtors that this recreational vehicle was necessary for the support of themselves or their dependents.

DeAndrade v Trans Union, LLC, 07-1844-01A

2008-04-15T18:53:00.000-07:00

In this case, the Circuit court affirms SJ for TU based on a finding
that the consumer must establish the "factualy inaccuracy" of the
information reported before asserting a 1681i claim. In this case, the
debtors had filed an action in state court to invalidate a home
improvement loan secured by a second mortgage on their home. The state
action was pending when they sent the disptue to TU and requested a
reinvestigation. TU argued that the FCRA was an impermissible attack on
the validity of the Key Bank loan through the FCRA and this fact
persuaded the Magistrate Judge, the District Court Judge and the First
Circuit. The Circuit Court also adopted the position that the consumer
must in fact establish the "lack of accuracy or completeness" of any
item in order to maintain a 1681i claim.

Date of opinion: 4/15/08

In re Vantage Investments, Inc.

2008-04-15T18:39:00.000-07:00

Description: Debtor ′ s objection to deficiency claim sustained in part and overruled in part. Court disallows claim for real estate taxes paid and expenditures incurred for repairs made to real property after a foreclosure sale. Court found claimant had an oral assignment of the necessary loan documents, but that there was insufficient evidence regarding when the assignment occurred to find that it held the loan documents at the time the taxes were paid or expenditures made for the repairs. Absent being the note holder when making expenditures related to property purchased at a foreclosure sale, the purchaser takes the property "as is." Court found claimant foreclosed real and personal property together pursuant to Mo.Rev.Stat.section 400.9-604(a)(2), thus, Part 6 of Article 9 of the UCC was inapplicable and debtor ′ s multiple claims for affirmative relief were unfounded.

Date of opinion: 3/14/08

Full opinion click here.

Dains v. Dains (In re Dains), Case No. 07-2038

2008-04-15T18:36:00.000-07:00

Description: Plaintiff brought claims for nondischargeability for false representation and willful and malicious injury to property under 532(a)(2) & (a)(6). Court denied these claims based on Plaintiff ′ s failure to meet her burden of proof on the elements of fraud by a preponderance of evidence and her failure to establish that Debtor willfully and maliciously injured the property. Plaintiff also sought denial of discharge for Debtor ′ s alleged concealment of property with the intent to hinder, delay or defraud creditors and for his making a false oath or account under 727(a)(2)(A) and (a)(4)(A). Court also denied these claims based on Plaintiff ′ s failure to prove each of the elements of the applicable claim by a preponderance of evidence. Court also denied Debtor ′ s counterclaim for attorney ′ s fees under 523(d) due to fact debt at issue was not a consumer debt.

Date of the opinion: 3/24/08

For full opinion click here.

STEVEN KETH MOWRIS and MARILYN SUE MOWRIS,Case No. 07-61100

2008-04-15T18:32:00.000-07:00

Above-median Chapter 7 debtors are not permitted take a deduction on the means test for payments on loans against retirement accounts.

Date of opinion: 3/17/08

Click here for the full opinion.

Schlosser vs. Fairbanks 323 F3rd 534

2008-03-29T08:14:00.000-07:00

Fairbanks purchased the Schlossers' mortgage from ContiMortgage as part of Fairbanks's acquisition of 128,000 subprime mortgages, 10% of which were identified as in default. According to ContiMortgage's records, the Schlossers' mortgage was delinquent at the time of the transfer, and Fairbanks treated it as such. It sent a letter to the Schlossers, identifying itself as a debt collector, notifying the Schlossers that they were in default, and attempting to collect:
3

DEMAND LETTER—YOU COULD LOSE YOUR HOME! ...
4

This letter constitutes formal notice of default under the terms of the Note and Deed of Trust or Mortgage because of failure to make payments required....
5

This letter is a formal demand to pay the amounts due. In the event that these sums are not paid to Fairbanks Capital Corp. "Fairbanks" within 30 days of this letter the entire unpaid balance, together with accrued interest, legal fees and expenses, WILL BE ACCELERATED and foreclosure proceedings will be instituted....
6

You have the right to bring a court action if you claim that the loan is not in default or if you believe that you have any other defense to the acceleration and sale....
7

This letter is from a debt collector and is an attempt to collect a debt. Any information obtained will be used for that purpose.
8

When the Schlossers tried to make their regular monthly payment to Fairbanks, Fairbanks refused, again asserting that the loan was in default, and instead instituted foreclosure proceedings. The Schlossers sent letters insisting that they weren't in default and eventually Fairbanks caused the foreclosure action to be dismissed.
9

The Schlossers filed suit against Fairbanks for violation of the FDCPA, claiming (on behalf of themselves and a class of similar debtors) that Fairbanks's letter did not notify them of their right to contest the debt in writing, which would have required Fairbanks to verify the debt before continuing collection activity. See 15 U.S.C. § 1692g(a)(4). They also asserted an individual claim under the Illinois Consumer Fraud Act, 815 Ill. Comp. Stat. 505/2. The district court granted Fairbanks's motion to dismiss the FDCPA claim, denied as moot the Schlossers' motion for class certification, and declined to take supplemental jurisdiction over the state law claim. The Schlossers appeal.

Date of opinion: 3/20/03

Full opinion click here.

In re Kopp -

2008-03-11T05:34:00.000-07:00

Avoidance - Debtor's catch-me-if-you-can disclosure prevented statute of limitations from running.

A Chapter 7 debtor's catch-me-if-you-can disclosure, as only a "Petition for Damages," of a state court lawsuit against him that prominently included fraudulent transfer avoidance claims was inadequate as a matter of law to permit abandonment of these fraudulent transfer claims upon entry of order closing bankruptcy case, and also prevented the statute of limitations from running on these inadequately disclosed claims when the case was closed. The trustee, upon entry of an order reopening the case, brought the fraudulent transfer avoidance claims within two years of the entry of the order for relief.

Date of decision: 2/28/08

Figueroa v. Wells Fargo Bank N.A., (S.D.Fla.)

2008-03-01T11:46:00.000-08:00

Appeals - Interlocutory appeal from order dismissing debtor's adversary complaint as to three of eight defendants would be denied.

Leave to file an interlocutory appeal from a bankruptcy court order dismissing the debtor's adversary complaint, which asserted claims under the Truth in Lending Act (TILA), as to three of eight named defendants, would be denied, a federal district court in Florida has determined. It was undisputed that the issue on appeal, which involved whether a debtor who enters into a sale/lease-back transaction with the purchaser of her home and continues to live there has standing to assert claims under TILA for rescission and to quiet title against the creditors that provided financing to the purchaser, was a controlling issue of law. However, there was not a substantial ground for difference of opinion as to the relevant legal issue, as there was no binding authority on this legal issue and the debtor failed to demonstrate that at least two courts interpreted this legal principle differently. In addition, an interlocutory appeal in this case would not have advanced the ultimate termination of the underlying adversary proceeding.

In re Horob Livestock Inc., (Bkrtcy.D.Mont.)

2008-03-01T11:44:00.000-08:00

Avoidance - Prepetition quitclaim deeds transferring debtors' interests in real property were avoidable preferential transfers.

Prepetition quitclaim deeds transferring interests in real property from an individual debtor, a related corporate debtor, and the individual debtor's father to the individual debtor's brother were avoidable by the Chapter 7 trustee as preferential transfers. The transfers were made for the purpose of benefiting the brother and for antecedent debt owed by both debtors. In addition, both debtors were insolvent when the transfers were made, given that the sum of the debts owed by each debtor at the time of the transfers exceeded the fair market value of each debtor's assets. The transfers, moreover, enabled the brother to receive more than he would have if the debtors' property interests had been liquidated and distributed to all creditors. By virtue of the transfers, the brother received property worth approximately $312,541.67 on an obligation of $711,057.50, rather than the approximately $31,254.17 he would have received from a pro rata distribution in the individual debtor's case. The brother also would have benefited in similar amounts with respect to the corporate debtor's case.

Mukamal v. Bakes, (S.D.Fla.)

2008-03-01T11:43:00.000-08:00

Claims - Allegations in trustee's complaint were insufficient to state claim on deepening insolvency theory.

Allegations in a complaint filed by the trustee of a liquidation trust, regarding misconduct of directors of corporate Chapter 11 debtors during their slide into bankruptcy in purportedly "propping" the debtors up, by misrepresenting their fiscal health, in an attempt to allow their business to be sold at a high enough price to generate a return for original investors, were insufficient to state a breach of fiduciary duty claim under Delaware law, absent any allegation that the original investors were being preferred at the expense of minority shareholders or that the directors' conduct was not aimed at benefiting all shareholders. Under Delaware law, the mere act by a corporate fiduciary of causing the corporation to incur additional debt in the face of insolvency does not alone establish bad faith or disloyalty, if the purpose was to maximize the value of the corporation as to all shareholders.

In re Anderson, (Bkrtcy.D.Or.)

2008-03-01T11:42:00.000-08:00

Plans - Debtors could require additional notice regarding mortgage escrow through Chapter 13 plan language.

Chapter 13 debtors could, through language in their proposed plan, require their residential mortgage lender to provide notice to the Chapter 13 trustee and the debtors' counsel, in addition to the debtors, about changes in the escrow amounts required and about any shortages, deficiencies, or surplus of funds held in escrow. The additional notice was more in the nature of a procedural requirement to aid case administration than an impermissible modification of the lender's rights, and the debtors' deemed authorization of such notices under a local rule insulated the lender from automatic stay violations.

In re Dawes, (Bkrtcy.D.Kan.)

2008-03-01T11:39:00.000-08:00

Plans - Capital gains tax arising from postpetition sale of farm real property may be denied full payment in a Chapter 12 plan.

Under 1222(a)(2)(A) of the Bankruptcy Code, the debtors' Chapter 12 plan could treat the Internal Revenue Service's (IRS') postpetition capital gains tax claim incurred as a result of the IRS' forced sale of the debtors' farm real property as an unsecured claim not entitled to priority, limited by the condition that such treatment was allowed only if the debtors received a discharge, a Kansas bankruptcy court has held, recognizing a split of authority. The capital gains taxes at issue were not priority taxes under 507(a)(8) of the Code, and, even though the estate was not itself a separate taxable entity, the taxes were "incurred by the estate" within the meaning of 503(b)(1)(B)(i), as the tax liability arose after the creation of the debtors' estate.

Date of decision: 2/11/08

Full opinion click here.

In re Figard, (Bkrtcy.W.D.Pa.)

2008-03-01T11:37:00.000-08:00

Claims - Bankruptcy Code's claims allowance statute did
not implicitly repeal RESPA provision governing borrower information
requests.

The Bankruptcy Code's claims allowance statute, which allowed parties in
interest to file objections to proofs of claim filed in bankruptcy cases,
did not implicitly repeal the provision of the Real Estate Settlement
Procedures Act requiring loan servicers to timely reply to a borrower's
written request for information related to loan servicing. Congress did
not clearly express its intent to have the bankruptcy statute act as a
substitute means for debtors to gather information from mortgagees, and no
conflict existed between the two statutes.

In re Communication Dynamics, Inc., (Bkrtcy.D.Del.)

2008-02-29T06:08:00.000-08:00

Claims - Rejection damages claim was prepetition claim for purposes of setoff.

The statutorily mandated treatment, as a claim that arose immediately prior to the commencement of the debtors' Chapter 11 case, of a damages claim arising out of an affiliated debtor's rejection of an executory contract to purchase a minimum amount of product that an asset purchaser produced using the acquired assets was not just for purposes of determining the claim and of either allowing or disallowing it. The rejection damages claim also had to be regarded as a prepetition claim for setoff purposes. Thus, the asset purchaser could use the claim in order to reduce its own obligation to debtor on promissory notes, provided that this obligation was also a prepetition obligation, and that the requisite mutuality existed. a bankruptcy judge in Delaware disagreed with a contrary case out of New York.

In re Noyes, (Bkrtcy.D.Mass.)

2008-02-29T06:05:00.000-08:00

Debtor Protections - Mortgagee was entitled to relief from automatic stay and co-debtor stay allowing it to foreclose its mortgage.

A Chapter 13 debtor failed to demonstrate the likelihood that she and her son would succeed on the merits of the claims that they had asserted against their mortgagee in state court pursuant to, inter alia, Massachusetts's unfair trade practices law and the Real Estate Settlement Procedures Act, so as to establish a defense to the mortgagee's motion for stay relief by, in effect, establishing the debtor's entitlement to an injunction against the continuation of the mortgagee's foreclosure proceedings pending a merits determination in the state court. Although the debtor presented serious questions about the conduct of the mortgage brokerage firm and its mortgage broker and the propriety of the loan transaction, and possibly could succeed in the state court, in the bankruptcy court she did not tie any misconduct by the firm or the mortgage broker to the mortgagee. Therefore, the mortgagee, which had demonstrated its legitimate claim to the real property owned jointly by the debtor and her co-borrower son, based on their failure to make the required monthly payments, was entitled to relief from the automatic stay and co-debtor stay allowing it to foreclose its mortgage.

In re Trico Marine Services, (S.D.N.Y.)

2008-02-29T06:03:00.000-08:00

Plans - Debtor was not liable to former equity holders for alleged fraud at plan confirmation hearing.

A bankruptcy court did not clearly err in finding that a Chapter 11 debtor's chief financial officer (CFO) had not testified falsely at a plan confirmation hearing, and that the debtor was not liable in fraud to former equity owners when the bankruptcy court, in alleged reliance on this testimony, confirmed a plan that wiped out existing equity. The CFO, when questioned about the debtor's fourth quarter earnings before interest, taxes, depreciation, and amortization (EBITDA), failed to mention that the debtor was outperforming its fourth quarter EBITDA projections by more than 30% and indicated instead that this fourth quarter EBITDA was not "materially different." The bankruptcy court, in finding that the CFO's testimony was not false and was not given with the requisite intent to deceive, had relied on its determination of the credibility of the explanation offered by the CFO after the fact, that in stating that debtor's fourth quarter EBITDA was not "materially different," he was referring to the debtor's EBITDA in relation to its overall valuation, which continued to be poor despite this fourth quarter improvement, and not in relation to his projections.

In re Gray, (Bkrtcy.E.D.Tenn.)

2008-02-29T06:02:00.000-08:00

Plans - Security interest was purchase money security interest, as required to prevent claim bifurcation under hanging paragraph.

A Chapter 13 debtor's prepetition retail installment financing agreement for a vehicle applied the cash down payment and rebates to satisfy the negative equity in the vehicle that the debtor was trading in as a part of the transaction, such that no portion of the loan extended to the debtor to buy the new vehicle was used to pay the negative equity. Therefore, under Tennessee's version of the Uniform Commercial Code, the creditor's security interest in the vehicle was entirely a purchase money security interest, as required for the creditor's secured claim to be protected from bifurcation under the plan confirmation statute's hanging paragraph.

AmeriCredit Fin. Servs., Inc. v. Moore, No. 07-1315

2008-02-28T12:31:00.000-08:00

In a Chapter 13 bankruptcy case, a decision finding that debtors were permitted under 11 U.S.C. section 1325(a)(5)(C) to surrender a car, financed by appellant, in full satisfaction of the debt, is reversed pursuant to the court's ruling in Capital One Auto Finance v. Osborn, ____ F.3d ___ (8th Cir. 2008).

Full opinion click here.

Capital One Auto Fin. v. Osborn, No. 07-1726

2008-02-28T12:29:00.000-08:00

The hanging paragraph in 11 U.S.C. section 1325 does not eliminate an under-secured creditor's deficiency claim when, in a Chapter 13 plan, debtors propose to surrender a car purchased within 910 days before filing for bankruptcy. The creditor is entitled to an unsecured deficiency claim if there is a right to a deficiency judgment under state law.

Full opinion Capital One vs. Osborn

Benn vs. Cole 06-2217

2008-02-28T12:19:00.000-08:00

Tax refunds are not exempt and therefore may be seized by trustees.

Date of decision: 7/10/07

Full opinion click here.

2003 Student Loan Case Law Update

2008-02-28T11:24:00.001-08:00

Student Loan Update from 2003.

Neeson v. Sallie Mae, Inc., et al.

2008-02-28T06:00:00.000-08:00

Description: Court sustains Debtor ′ s request to discharge student loan indebtedness as undue hardship pursuant to 11 U.S.C. section 523(a)(8). Debtor s current income barely sufficient to meet extremely modest expenses, which are likely understated given demonstrated need to resort to credit card debt to pay expenses and identified unmet needs. Employment history and Debtor ′ s diagnosed personality disorder and limited intelligence indicate that situation not likely to change in foreseeable future.

Date of decision: 2/12/08

For the full opinion click here.

In re Dewey, (Bkrtcy.W.D.Tenn.)

2008-02-14T18:58:00.000-08:00

Discharge - Unemployed Chapter 7 debtor suffering from bipolar disorder was not entitled to undue hardship discharge of student loans.

An unemployed Chapter 7 debtor whose bipolar disorder allegedly prevented from working in his former occupation as psychiatrist, and whose monthly income, consisting entirely of contributions from relatives, was nearly $1,000 less than his scheduled monthly expenses, failed to satisfy even the first prong of the Brunner "undue hardship" test for the dischargeability of his student loan debt. There was a complete lack of evidence either that the debtor had minimized his expenses, given that he had continued to pay to maintain his psychiatric license despite his alleged inability to practice psychiatry, and that his bipolar disorder, from which the debtor had suffered since high school, and which had not prevented him from graduating from an Ivy league school, completing his medical studies or fulfilling his psychiatric residency, was such as to prevent him from obtaining any employment that would permit him to make payments on his student loans.

In re Weiderhold, (Bkrtcy.M.D.Pa.)

2008-02-14T18:56:00.000-08:00

Case Administration - Chapter 7 debtors were entitled to vehicle ownership expense deduction for vehicles that they owned outright.

Under the "means" test, as applied to determine whether the debtors' Chapter 7 case should be dismissed as presumptively abusive, debtors were entitled to deduct the standard vehicle ownership expenses for which they qualified based on the number of vehicles which they owned and the locality in which they resided, as being the "applicable" vehicle ownership expense deduction to which they were entitled, even though they owned their vehicles outright and thus had no "actual" vehicle ownership expenses. The term "applicable," as used by Congress in formulating the "means" test, had to be contrasted with "actual," as used elsewhere by Congress in allowing a debtor to deduct only his/her "actual monthly expenses" for Other Necessary Expenses, and referred to what was appropriate, as opposed to what was actual or real.

In re Middendorf, (Bkrtcy.D.Kan.)

2008-02-14T18:51:00.000-08:00

Bankruptcy Estate - Court allocates tax refund utilizing "calendar day" method to determine estate's interest therein.

A tax refund to which Chapter 7 debtors were entitled as a result of their overpayment of federal income taxes, both as a result of wage withholding that occurred both pre- and postpetition and due to the debtors' estimated prepayment of taxes, using prepetition income, shortly after realizing a profit from the sale of stock, had to be allocated between the pre and postpetition periods, for purpose of determining what portion of the refund was estate property and what portion was the debtors' separate property. To make this allocation, a bankruptcy judge in Kansas used the "calendar day" method to calculate the amount of taxes that debtors had paid prepetition, either by wage withholding or through their estimated payment, and then subtracted the debtors' total tax debt for the year. The difference was the amount of the refund that was included in property of the estate.

Date of the decision: 2/13/08

Full opinion click here.

In re Wells, (6th Cir.BAP (Mich.)

2008-02-14T18:47:00.000-08:00

Avoidance - Debtor's use of credit card convenience checks to pay other credit card debt diminished bankruptcy estate.

A Chapter 7 debtor who used convenience checks that she received from one credit card company to make challenged prepetition payments to another credit card company thereby effected a "transfer of an interest of the debtor in property," of a kind potentially subject to avoidance as preferential, despite a contention that these transactions merely substituted one creditor for another and did not result in any diminution of the estate. The extensions of credit that the debtor obtained by signing the checks could have been used for other purposes, including the purchase of assets which then would have been available for the payment of creditor claims. Thus, the estate was diminished by the debtor's use of the checks to pay this other credit card debt.

Date of decision: 2/13/08

Full opinion

In re Hartwick,

2008-02-07T12:38:00.000-08:00

The court held that you can deduct ownership expense even though the vehicle was free and clear of any liens.

Date of the decision: 10/13/06

Full opinion click here.

In re Vaccariello 375 BR 809

2008-02-07T12:09:00.000-08:00

Non-dischargeable student loan debt payments may not be used to reduce the income under the means-test to determine abuse

Date of the decision: 8/22/07

Robert D. Klages, Debtor, Habbo Fokkena, U.S. Trustee, Plaintiff-Appellee, v. Robert D. Klages, Defendant-Appellant. Case No. 07-6051

2008-02-07T12:06:00.000-08:00

Bankruptcy court properly revoked debtor's discharge for knowingly and fraudulently failing to turn over his non-exempt tax refund to his Chapter 7 trustee.

Date of the decision: 1/29/08

For the full opinion click here.

Bankruptcy Related Writs of Certiorari Petitions - US Supreme Court 2000-Present

2008-02-07T09:30:00.001-08:00

BNA tracking link of US Supreme Court Bankruptcy Related Writs of Certiorari

In re Mordis 06-42590

2008-02-07T08:56:00.000-08:00

Whether or not the repayment of a 401(k) loan could be used on the means-test to avoid substantial abuse. Judge MacDonald decided that the 401(k) repayment are not the type of expenses that should be deducted from the income when calculating substantial abuse under §707(b)(2)(A)(ii),(iii), or (iv).

Date of decision: 10/9/07

For the full opinion click here.

Prime Realty, Inc., Debtor, James Killips, Chapter 11 Trustee, Plaintiff-Appellants v. Robert C. Schropp, RCS Sons, Inc., and Leo Dahlke, Defendants

2008-01-12T06:45:00.000-08:00

Bankruptcy trustee failed to demonstrate that debtor bank was insolvent at the time it transferred assets or that the transfers left the bank with an unreasonably small amount of capital, and thus failed to meet his burden of proof on preference and fraudulent conveyance actions.

Date of the decision: 12/27/07

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In re Burden, Case No. 07-50366

2008-01-12T06:42:00.000-08:00

Debtors could not claim "means test" deductions for payments on debts secured by two pieces of property they intend to surrender. In the absence of these deductions, the Debtors have sufficient disposable income to trigger the presumption of abuse under section 707(b)(2) of the Bankruptcy Code.

Date of the decision: 12/20/07

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Educational Credit Management Group vs. Mason D-04-1075-BMaP 04-1077

2008-01-07T17:12:00.000-08:00

Educational Credit Management Corporation (“ECMC”) appeals from the decision of the Bankruptcy Appellate Panel (“BAP”), which affirmed the bankruptcy court’s partial dis-
charge of government-insured student loans held by Debtor-Appellee Keith Mason (“Mason”). See Educ. Credit Mgmt. Corp. v. Mason (In re Mason), 315 B.R. 554 (B.A.P. 9th Cir. 2004). The bankruptcy court held that full repayment of the
loans would cause Mason an undue hardship within the meaning of 11 U.S.C. § 523(a)(8). It therefore discharged all amounts that Mason owed to ECMC in excess of $32,400.1
The bankruptcy court had jurisdiction under 28 U.S.C. § 157(b). The BAP had jurisdiction under § 158(c). We have jurisdiction under § 158(d), and we reverse.

Date of opinion: 9/28/06

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Educational Credit Management Group vs. Mason D-04-1075-BMaP

2008-01-07T17:07:00.000-08:00

Keith Mason, an intelligent, determined chapter 7 (1) debtor, substantially overcame a learning disability and obtained a law degree, but finds that his disability impedes his admission to the bar, and adversely affects his access to the job market and professional employment.

He sought discharge of his student loans under § 523(a)(8). After trial, the bankruptcy court concluded that, although repayment of the full amount of the loan would impose an undue hardship on him, repayment of some lesser amount would not. Based on § 105(a) and In re Saxman, 325 F.3d 1168 (9th Cir. 2003), the bankruptcy court granted partial discharge. In re Mason, 303 B.R. 459 (Bankr. D. Idaho 2004). We AFFIRM.

Date of decision: 10/28/04

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In re Mason, Mason vs. Educational Credit Mgt. Group 03-6122

2008-01-07T17:00:00.000-08:00

Discussion about the application of the Third Prong of the Brunner test after being directed by the Court of Appeals.

Date of the opinion: 9/9/2006

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In re Keefe, Case No: 06-01198

2008-01-03T22:20:00.000-08:00

Discharge - Debtor's depression at seeing financial records was not justification for their destruction.

A Chapter 7 debtor's alleged depression at seeing the financial records of his failing business and desire not to be reminded of his financial difficulties was not a justification for his deliberate destruction of these records, such as he could raise in defense of a complaint to deny his discharge under 11 U.S.C.A. 727(a)(3). While the debtor may have acted with benign intent in destroying the records and not out of any desire to frustrate his creditors, his destruction of project records was in no sense right, good or appropriate, and could not be regarded as justifiable, for bankruptcy discharge purposes. A debtor's failure to keep or preserve financial records is justified, and will not provide basis for the denial of his bankruptcy discharge, if it is right or appropriate under the circumstances.

Date of decision: 12/27/07

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Ditto v. McCurdy No. 02-16252

2008-01-03T22:14:00.000-08:00

Janie Ditto won a judgment against her doctor, John McCurdy, for a botched surgery. McCurdy subsequently filed for bankruptcy, and received a discharge from the debt. Ditto lost her argument in the district court that the debt was non-dischargeable as a willful and malicious injury. The Ninth Circuit affirmed. The Ninth Circuit applied recent United States Supreme Court case law which interpreted the bankruptcy provision at issue to require an intent to cause injury.

Therefore even if Ditto had recovered under an intentional tort theory (Ditto argued that the doctor failed to give proper information prior to the surgery), the Ninth Circuit found that the medical malpractice judgment did not meet the willful and malicious definition in the bankruptcy code. AFFIRMED.

Date of decision: 12/14/07

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Prime Realty, Inc., Debtor, James Killips, Chapter 11 Trustee, Plaintiff-Appellants v. Robert C. Schropp, RCS Sons, Inc., and Leo Dahlke, Defendants–A

2008-01-03T22:07:00.000-08:00

In re Woods, Case No. 07-41123

2008-01-03T21:59:00.000-08:00

Debtor's objection to secured creditor's request for allowance of fees, costs and expenses sustained in part and overruled in part. The Court found the total request of $560,819, an amount amassed in a little over four months, unreasonable under the circumstances and a case of overreaching. The Court reviewed pre-petition attorney's fees for reasonableness pursuant to language contained in the parties' contract and Missouri law, and the post-petition fees pursuant to section 506(b). The Court disallowed or reduced certain fees, costs and expenses for reasons including lack of specificity in time entry, lumping of numerous tasks, duplication of effort and a general inability by the Court to determine whether time billed was reasonable for the tasks listed.

Date of decision: 12/27/2007

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In re Lisa Kay Weiser

2007-12-23T15:06:00.000-08:00

The Hanging Paragraph of Section 1325(a) protects a purchase money creditor where the loan proceeds were used to not only finance the purchase of a new car, but also to pay off the lien on a separate car being traded in, if the evidence shows that the debtor would not have been able to purchase the new car unless the lien on the trade-in was paid off. Therefore, the creditor's purchase money security interest includes funds used to pay off the old car. In addition, the PMSI covers the portion of the loan used for gap insurance and an extended service warranty, since they represent expenses incurred in connection with acquiring rights in the vehicle.

Date of decision: 12/18/07

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In re Kagenveama 05-28079

2007-12-22T07:18:00.000-08:00

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

Date of Decision:

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In re Schilke Case No: 056-41813

2007-12-18T05:07:00.000-08:00

Under a Code provision added by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), that allows Chapter 12 debtors to pay, as general unsecured debts not included among the priority claims that otherwise must be paid in full, any debt "owed to a governmental unit that arises as a result of the sale, transfer, exchange, or other disposition of any farm asset used in the debtor's farming operation," a Chapter 12 debtor was entitled to pay, as a general unsecured claim not entitled to priority, a capital gains tax that arose in connection with the postpetition sale of real estate and other farm assets to fund the debtor's plan, even though the debtor's Chapter 12 estate was not a separate taxable entity. The bankruptcy estate need not be a separate taxable entity in order for taxes to be "incurred by the estate" and thus entitled to priority under 11 U.S.C.A. 503(b)(1)(B).

Date of decision: 11/28/07

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2007-12-15T12:19:00.001-08:00

Debtors' contribution to adult child attending college was not necessary expense deductible from disposable income.

A $2400 yearly contribution that was made by debtors to their adult child attending college was not a necessary expense. It thus could not be deducted by the debtors in calculating their disposable income for purposes of paying claims under their Chapter 13 plan.

2007-12-15T12:18:00.005-08:00

Anti-Injunction Act barred bankruptcy court from enjoining state- court litigation between bank and debtor's contractor.

The Anti-Injunction Act barred a bankruptcy court from enjoining state-court litigation between a bank and the debtor's contractor, which arose from the debtor's construction project financed by the bank's predecessor, on the grounds that the issues involved in that litigation had already been decided by the bankruptcy court, through its approval of the debtor's settlement of the contractor's claims against it. The only issue resolved in the bankruptcy court was the amount of the contractor's claim in the bankruptcy court, which the state court was not being asked to adjudicate.

2007-12-15T12:18:00.003-08:00

Above-median-income Chapter 13 debtor could not deduct secured debt payments he would not be making on surrendered home.

In calculating the "projected disposable income" that he would have to devote to the payment of unsecured creditors in order to confirm, over the objection of the trustee, a plan which would result in less than a 100% payout to creditors, an above-median-income Chapter 13 debtor could not deduct, as "amounts scheduled as contractually due to secured creditors," the monthly payments that he would not have to make on a mobile home that he was surrendering. While the debtor may have been under a contractual obligation to make these payments on the petition date, a determination of the "amounts scheduled as contractually due to secured creditors" could not be made, at least in the Chapter 13 context for "projected disposable income" purposes, based solely on the facts as they existed on the petition date, without regard to circumstances existing at the time of confirmation or that would result from confirmation.

2007-12-15T12:18:00.001-08:00

Debtor's breach of his obligations as escrow agent was defalcation while acting in fiduciary capacity.

A Chapter 7 debtor-attorney's conduct, in his capacity as escrow agent for both the vendor and purchaser on a sale in which he had represented the vendor, in applying the purchaser's escrowed deposit to attorney fees owed by the vendor without the purchaser's consent, was in the nature of a "defalcation" that the attorney committed while acting in a fiduciary capacity and served to preclude discharge of the resulting debt. A bankruptcy judge in Massachusetts rejected the debtor's argument that the purchaser had breached the sales agreement and lost any right to the escrowed funds.