In re Booker, Case No. 08-42466

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

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

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

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.)

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.)

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.)

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

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.)

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.)

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

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

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

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.).

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.).

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.).

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.

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

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.)

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.)

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.)

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.