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

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 Gregory A. Wilson, et ux., Debtors

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

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

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.

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

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 Bivins Case No:06-51778

Chapter 13 debtor proposed to surrender her vehicle in full satisfaction of her obligation to secured creditor. Creditor contended that it was entitled to file an unsecured claim for any deficiency that remains after it disposes of the vehicle. The court held that the creditor was not entitled to file an unsecured claim for a deficiency.

Date of decision:

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In re Murray Case No: 05-48017

Creditor Nuvell Financial Services Corp. (hereinafter, “Nuvell”) filed an objection to the confirmation of Debtors’ Chapter 13 Plan on the basis that the treatment of Nuvell in the plan did not comport with the requirements of the “hanging paragraph” of 11 U.S.C. § 1325(a) (hereinafter, “§ 1325(a)(*)”). Debtors purchased a motor vehicle within 910 days of filing their Chapter 13 bankruptcy petition. The vehicle was purchased for the personal use of Debtors. At the time the vehicle was purchased, Debtors also purchased an extended service contract and were assessed a documentary fee by the seller. Debtors argued that the purchase of the extended warranty and the payment of the documentary fee with monies meant for the purchase of the vehicle alone, prevented Nuvell from holding a purchase-money security interest.

The Court held that Nuvell in fact held a purchase-money security interest and that the other requirements of § 1325(a)(*) were met so as to qualify Nuvell’s claim for treatment under that section. Further, the Court held that § 1325(a)(*) does not prevent a claim qualifying under that section from being an “allowed secured claim” for purposes of § 1325(a)(5) and its present interest requirement. Section 1325(a)(*) serves to prevent the bifurcation of an under-secured claim into a secured and unsecured portion under § 506. This holding is consistent with the vast majority of cases considering the meaning of § 1325(a)(*). The Court’s interpretation is also consistent with the plain meaning of the statute and with the legislative history on the section.

The Court also considered the issue of post-petition interest rates to be paid in accordance with § 1325(a)(5) on secured claims that qualify for treatment under § 1325(a)(*). The Court concluded that the United States Supreme Court case of Till v. SCS Credit Corp., 541 U.S. 465 (2004), was applicable to claims falling under § 1325(a)(*). The Supreme Court held in Till that § 1325(a)(5) required that interest on allowed secured claims should be paid at a current rate determined by an adjustment from the prime rate based upon the risk of nonpayment. Being as the Court concluded that a claim qualifying under § 1325(a)(*) is an “allowed secured claim” for purposes of § 1325(a)(5), the interest rate set forth in Till is appropriate.

Date of decision: 6/6/06

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In re Sanders Case No: 07-50783

Date of decision: 10/18/07

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In re Lohr

Discharge - Tax debt was "provided for by the plan," as required for it to be discharged on completion of debtor's plan payments.

A Chapter 13 debtor's property tax debt to the tax collector was "provided for by the plan," as required for the debt to be discharged upon completion of the debtor's plan payments. The plan provided that the tax collector would be paid in full over the life of the plan in graduated monthly installments, together with interest at the rate applicable to each of the debtor's obligations to the tax collector. It was immaterial that, as a result of the parties' mistaken belief that one of the proofs of claim filed by the tax collector was included in an earlier proof of claim, one of these claims was designated as an "allowed claim not receiving distribution," and that debtor's payments under the plan were insufficient to satisfy the full amount of his prepetition debt to the tax collector.

In re Burt Case No: 07-23193

Plans - Negative equity payoff did not affect "purchase money" status of "910 creditor's" security interest.

A creditor that provided financing to the debtor less than 910 days prior to his Chapter 13 filing to allow the debtor to acquire a motor vehicle for his personal use held a "purchase money security interest" (PMSI) in the vehicle for the entire amount financed, and was thus protected by the "hanging paragraph" from having its claim bifurcated for purpose of "cramming down" a plan. It did not matter that the amount advanced included not only a sum sufficient to pay for the cash price of the new vehicle that the debtor was acquiring, including applicable taxes and fees, but to purchase an extended service contract on the vehicle, to pay for gap insurance, and to pay off the debtor's negative equity in a trade-in vehicle. The negative equity payoff and other charges represented part of the "price" of the new vehicle and were "value given to enable the debtor to acquire rights" in the new vehicle, within the meaning of a Utah statute defining "purchase money" obligations, especially where the parties structured the purchase transaction as a "package deal," and where, because of the debtor's marginal credit, he was required to trade in his old vehicle and to pay off the negative equity in order to qualify for financing on the new vehicle.

Date of decision: 10/24/07

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In re Pak - Adversary Pak vs. ECast Case No: NC-07-1201

Plans - Chapter 13 debtor's historically-based "disposable income" is mere starting point in fixing "projected disposable income."

The Ninth Circuit BAP has held that a Chapter 13 debtor's historically- based "disposable income" is merely the starting point in determining the "projected disposable income" that the debtor will have to devote to the payment of unsecured creditors, in order to obtain confirmation of any plan that which result in less than a 100% distribution on creditor claims over the objection of the trustee or an unsecured creditor. If the interpretation of "projected disposable income" is not to degenerate into absurdity, deriving "projected disposable income" from "disposable income" must be subject to the presentation of contrary evidence prior to confirmation of the debtor's proposed Chapter 13 plan.

Date of decision: 11/28/07

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In re Williams

Attorney Fees - Chapter 13 debtor's attorneys were not entitled to be compensated for their postconfirmation services.

Chapter 13 debtor's attorneys were entitled to be compensated from the bankruptcy estate for their postconfirmation services only up until the hearing on creditors' motion for relief from the stay to exercise their rights in the debtor's and her unemployed husband's motor vehicles and on the debtor's proposal to modify her already significantly underfunded plan in order to further delay payments to her creditors. While the debtor may have requested that the attorneys represent her at this hearing and may have derived some benefit by further delaying creditors, it should have been obvious that the debtor did not have the income to afford the assets she sought to retain for herself and her husband, much less another $5,654.15 of postconfirmation fees and costs. The first question that must be asked and answered by a Chapter 13 debtor's counsel in rendering postconfirmation services is whether those services are reasonably likely to benefit the debtor, if not the estate, and whether the burden of legal fees being incurred is disproportionate to the benefit to be gained.

Date of decision: 12/7/07

In re Spurgeon,

Plans - 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.

Date of decision: 12/7/07

Tanna LaTisha Suggs, Debtor. Tanna LaTisha Suggs, Plaintiff-Appellant v. Regency Financial Corp., Defendant-Appellee. Case No. 06-6077

Western District's Local Rule 4070-1.D, allowing creditors to repossess uninsured vehicles in Chapter 13 cases without first filing a motion for relief from stay, is found invalid.

Date of decision: 9/12/07

Full opinion here.