Friday, March 1, 2013

Recent Bankruptcy Decisions and news from NACBA: February 2013

News from the National Association for Consumer Bankruptcy Attorneys, for which I am a member:
Bankruptcy-Specific Exemptions Constitutional
The Bankruptcy Appellate Panel for the Tenth Circuit found that Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, is constitutional. Williamson v. Westby (In re Westby), No. 12-27 (B.A.P. 10th Cir. Feb. 4, 2013). The panel deferred to Kansas Bankruptcy Judge Karlin’s “extremely well-crafted” opinion in which she held as follows: “1) because the Kansas exemption statute is a state rather than federal enactment relating to bankruptcy, there is no Uniformity Clause violation; 2) because the Trustee demonstrated no express conflict between the Kansas exemption statute and the Bankruptcy Code, nor an implied conflict between the EIC exemption and the language and goals of the Bankruptcy Code, there is no Supremacy Clause violation; and 3) the Kansas exemption statute does not impermissibly reprioritize or preempt bankruptcy law with regard to the payment of bankruptcy claims.” In re Westby, 473 B.R. 392 (Bankr. D. Kan. 2012).
The Panel went on to address the impact of the recent case out of the Sixth Circuit, Richardson v. Schafer (In re Schafer), 689 F.3d 601 (6th Cir. 2012),petition for cert. denied, (Feb. 19, 2012) (No. 12-643). In that case, the Sixth Circuit found with respect to the Uniformity Clause that it is “not the outcome that determines the uniformity, but the uniform process by which creditors and debtors in a certain place are treated.” There was also no Supremacy Clause violation because section 522(b) of the Bankruptcy Code specifically authorizes use of state law over federal exemption law and the state statute actually furthers the federal bankruptcy goal of providing debtors with a fresh start.
NCBRC assisted with the debtor’s brief in this case.
The trustee filed a notice of appeal to the Tenth Circuit on February 15, 2013.
The constitutionality of Kansas’s bankruptcy-specific exemption is currently under consideration in the Kansas District Court in the cases of Nazar v. Hudson (In re Hudson), No. 12-1298, and In re Lea, No. 12-1297. NACBA has filed amicus briefs in those cases.

Amicus Brief
NACBA has filed an amicus brief in the en banc rehearing of Danielson v. Flores (In re Flores), No. 11-55452 (9th Cir.), arguing that a chapter 13 plan for an above-median debtor with negative disposable income need not extend for 60 months under the plain language of section 1325(b)(4) because there is no “projected disposable income.” On August 31, 2012, the Ninth Circuit stood by its previous decision in Maney v. Kagenveama, 541 F.3d 868 (9th Cir. 2008), to find that an above-median debtor with zero or negative disposable income does not need to confirm a 60 month plan under section 1325(b). Danielson v. Flores (In re Flores), No. 11-55452 (9th Cir. Aug. 31, 2012). The rehearing is scheduled for the week of March 18, 2013. The same issue is pending in the case of American Express v. Henderson, No. 11-35864 (9th Cir.). That panel has withdrawn submission of the case pending the decision in Flores. NACBA’s amicus brief was written by Norma Hammes.  
Supreme Court News
The Supreme Court denied the trustee’s petition for certiorari in the case of Richardson v. Schafer (In re Schafer), No. 12-643. The trustee sought to appeal the Sixth Circuit’s finding that Michigan’s bankruptcy-specific exemptions statute did not violate the U.S. Constitution’s Supremacy Clause or the uniformity requirement of the Bankruptcy Clause. NACBA submitted an amicus brief in the Sixth Circuit. 
In re Bullard, No. 12-54 (B.A.P. 1st Cir.)Issue: Whether bankruptcy court erred in denying confirmation of “hybrid” plan under which lien would be bifurcated into an unsecured portion to be paid through the plan and a secured portion to be paid outside the plan and extending beyond the term of the plan.Argument date: January 28, 2013NACBA filed an amicus brief.
Scheduled for argument;
In re Ranta, No. 12-2017 (4th Cir.)
Issue: Whether social security benefits must be included in projected disposable income in chapter 13.
Argument date: March 20, 2013
NACBA filed an amicus brief in this case.

Thanks to Robin Miller of CBAR for assistance in keeping up with important bankruptcy decisions and appeals.

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