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.

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,

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.

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.

Close 2008 WL 836160 (D.Kan.)

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.

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

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.))

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

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

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.

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

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.

In re Kopp -

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

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

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.

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

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.)

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.)

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.)

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,

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.

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

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.

In re Keefe, Case No: 06-01198

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

Full opinion click here.