tag:blogger.com,1999:blog-32454117349548532762024-02-19T07:05:44.125-05:00New Hampshire's Foreclosure and Bankruptcy SourcePlease visit The Gardner Law Firm at www.GardnerBusinessLaw.com.Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.comBlogger186125tag:blogger.com,1999:blog-3245411734954853276.post-15851449327409447312014-05-07T14:51:00.002-04:002014-05-07T14:52:09.423-04:00New NH Court rules as of April 2014<a href="http://www.courts.state.nh.us/supreme/orders/04-04-14-Order.pdf" style="background-color: white; color: #1155cc; font-family: arial, sans-serif; font-size: 13px;" target="_blank">http://www.courts.state.nh.us/<wbr></wbr>supreme/orders/04-04-14-Order.<wbr></wbr>pdf</a>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-76597403203441776042014-05-01T08:48:00.000-04:002014-05-02T14:47:00.826-04:00Recent cases from around the Circuits - First Quarter, 2014.<div align="center" class="MsoNormal" style="background-color: white; color: #222222; font-family: Calibri, sans-serif; font-size: 11pt; margin: 0in 0in 0.0001pt; text-align: center;">
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<b><u><span style="font-family: 'Times New Roman', serif; font-size: 12pt;">Bankruptcy Circuit Update</span></u></b><span style="font-family: 'Times New Roman', serif; font-size: 12pt;"><u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Featuring cases from January and February 2014<u></u><u></u></span></i></div>
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<i><span style="font-family: 'Times New Roman', serif;">Case files available for download: </span></i><i><span style="font-family: Cambria, serif;"><a href="http://www.fedbar.org/FY14-Cases-by-Circuit" style="color: #1155cc; text-decoration: none;" target="_blank">http://www.fedbar.org/FY14-<wbr></wbr>Cases-by-Circuit</a></span></i><i><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></i><br />
<i>The Federal Bar Association, Bankruptcy Division, has a writer or group of writers from each Circuit periodically summarize cases of interest in the area of Bankruptcy Law - here is their most recent posting. I will be summarizing the cases for the First Circuit.</i><br />
<i>Pat Gardner, ESQ.</i></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Law v. Siegel</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 188 L. Ed. 2d 146 (S. Ct. Mar. 4, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Court unanimously found that the Ninth Circuit was incorrect in affirming the decision of the bankruptcy court that a court could surcharge the debtor’s exempt property under the court’s § 105 equitable powers for the debtor’s misconduct regarding bad faith litigation. The trustee in <i>Law v. Siegal</i> had sued the debtor regarding a fictitious loan and fraudulent second deed of trust the debtor had asserted existed against his home as a means to eliminate any equity in the debtor’s house and remove any prospect that the trustee would attempt to liquidate the exempted home for the benefit of creditors. The litigation took five years and hundreds of thousands of dollars in litigation costs. The bankruptcy court granted the trustee’s motion to surcharge the debtor’s exempted home for $75,000 to compensate the trustee for the exorbitant litigation costs. The bankruptcy court found that pursuant to its equitable powers under § 105 that it had the authority to surcharge otherwise exempt property. Justice Scalia found that the surcharge contravened § 522, which determines exemptions in a debtor’s property and precludes further attempts to use exempted property for the satisfaction of a debtor’s creditors. The Court further held the bankruptcy court’s ruling pursuant to § 105 exceeded the court inherent equitable powers by contravening the specific provisions of § 522 regarding a debtor’s otherwise valid exemption of his home.<b><u><u></u><u></u></u></b></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">GMAC Mortgage, LLC v. Orcutt</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. Dist. LEXIS 23001 (D. Vt., Feb. 28, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">GMAC Mortgage LLC ("GMAC") appealed from orders of the Bankruptcy Court for the District of Vermont confirming the debtors' Chapter 13 Plan and treating GMAC as an unsecured creditor, and holding mortgage executed and delivered to GMAC was inoperative under Vermont law. GMAC argues that the debtors cannot properly claim a homestead exemption for the property at issue, that the Bankruptcy Court lacked statutory and constitutional authority to determine the validity of the mortgage, and that even if the mortgage was invalid the Bankruptcy Court should have considered the doctrine of equitable subrogation and treated GMAC as a secured creditor. The District Court found that the Bankruptcy Court had statutory and constitutional authority to decide the validity of the mortgage under Vermont law, consistent with <i>Stern v. Marshall</i>, because the validity of the lien and secured creditor status of GMAC would have been resolved in the claims allowance process and that the Bankruptcy Court had authority to decide that state law issue. Addressing the validity of the mortgage, the District Court noted that GMAC had failed to raise various arguments before the Bankruptcy Court and deemed those arguments waived on appeal. The District Court examined Vermont statutes and case law and found that the Bankruptcy Court erred in not considering the doctrine of equitable subordination after finding the mortgage invalid under Vermont law. Accordingly, the District Court remanded the proceedings to the Bankruptcy Court for further consideration of the validity of the mortgage during the claims allowance process.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Carval Investors UK Ltd. v. Giddens</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. Dist. LEXIS 25716 (S.D.N.Y., Feb. 26 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Carval Investors UK Limited ("Carval") and the Federal Deposit Insurance Company (FDIC) appealed from an order of the Bankruptcy Court denying them customer status under the Securities Investor Protection Act ("SIPA") with respect to repurchase transactions with Lehman Brothers Inc. ("LBI"). LBI established accounts for the appellants that recorded transaction activities, but did not hold any of the purchased securities in a custodial or safekeeping account, but instead used the purchased securities for its own purposes. Nor did the account agreements require LBI to retain cash or property in the accounts during the term of the agreement. At the time LBI commenced liquidation the purchased securities were not held by LBI, but were in the possession of third parties.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The District Court examined prior case law and agreed with the Bankruptcy Court that there must be indicia of a fiduciary relationship in order to find an entrustment of securities, and therefore, a customer relationship under SIPA. The District Court noted that there were no indicia of a fiduciary relationship, rather than a contractual relationship controlled by the terms of the agreements between the appellants and LBI. Accordingly there was no entrustment, and the appellants were not customers entitled to SIPA protection. The District Court affirmed the decision of the Bankruptcy Court.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Daskal v. Banco Popular North America</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, </span></b><span style="font-family: 'Times New Roman', serif;"> <b>2014 U.S. Dist. LEXIS 23001 (E.D.N.Y. Feb. 24, 2014)<u></u><u></u></b></span></div>
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<span style="font-family: 'Times New Roman', serif;">Plaintiff Daskal moved to refer an action to the bankruptcy court and Defendant Banco Popular North America ("Banco Popular") moved to abstain and remand to state court. The complaint was originally filed by plaintiff in state court alleging breach of fiduciary duty, breach of contract, fraud and request for injunctive and declaratory relief in connection with a loan and subsequent foreclosure of a property located in New York State. Plaintiff subsequently filed for Chapter 11 and removed the suit from state court on the grounds of "related to" jurisdiction and moved the District Court to refer the suit to the Bankruptcy Court. Plaintiff argued that the case was a core proceeding because it, inter alia, concerns the determination of the assets of the estate, the confirmability of any Plan, and the ability of the Debtor to timely proceed in his attempt to liquidate. Defendant argued that the case was non-core because there has been no final recognition and liquidation of the plaintiff's right to recovery. The District Court agreed that in the absence of a final determination on the Plaintiff's right to recovery, the matter was a non-core related to proceeding.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Because the case was non-core, the District Court had to determine whether mandatory abstention under 28 U.S.C. § 1334(c)(2) applied. The District Court found that there was no evidence the bankruptcy court could adjudicate the case faster than the state trial court, or that the bankruptcy court had superior expertise to resolve the issues of law or fact in the case. Accordingly, the District Court remanded the matter to the state trial court.<u></u><u></u></span></div>
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<b><span style="font-family: 'Times New Roman', serif;">Yosef Ibrahimi<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Skadden, Arps, Slate, Meagher & Flom LLP<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Four Times Square | New York | 10036-6522<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">T: <a href="tel:212.735.2562" style="color: #1155cc; text-decoration: none;" target="_blank" value="+12127352562">212.735.2562</a> | F: <a href="tel:917.777.2562" style="color: #1155cc; text-decoration: none;" target="_blank" value="+19177772562">917.777.2562</a><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">3rd Circuit</span></u></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re ID Liquidation One, LLC</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. App. LEXIS 2971 (3d Cir. Feb. 19, 2014) (Unreported)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Pre-petition, the Debtors (casino owners) terminated a management agreement with their management company. The management company filed a $33 million administrative claim against the estates. The Debtors filed an adversary action to contest the administrative claim and to assert counterclaims. The parties settled, and the settlement allowed for, among other things, a $3.5 million administrative claim and a release of counterclaims. Certain creditors opposed the settlement, but the Bankruptcy court approved the settlement. The Third Circuit, after considering the four <i>Martin</i> standards, held that the Bankruptcy Court had considered enough facts to make a determination on the approval of the settlement agreement, and did not abuse its discretion in approving a proposed compromise that resulted in (a) a substantial reduction of administrative expense claims against jointly-administered Chapter 11 estates; and (b) a release of the Debtors’ counterclaims against claimants.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Stephan, LLC,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 U.S. Dist. LEXIS 14527 (D.N.J. Feb. 5, 2014)</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Bankruptcy Court issued an order on May 20, 2013 denying the Debtor’s motion to preclude distribution to Wells Fargo as to the Debtor’s second mortgage. The District Court affirmed, and found that Wells Fargo was entitled to distribution on the second mortgage claim, and that while the automatic stay precluded Wells Fargo from foreclosing, it did not make Wells Fargo’s mortgage claim unenforceable in the Bankruptcy.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Brown</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. Dist. LEXIS 22891 (<a href="http://e.d.pa/" style="color: #1155cc; text-decoration: none;" target="_blank">E.D.Pa</a>. Feb. 24, 2014)</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Bankruptcy Court held that the absolute priority rule’s application in individual Chapter 11 cases had not been affected or abrogated by the 2005 amendments to the Bankruptcy Code. The District Court affirmed. Section 1129 provides that “except in the case in which the debtor is an individual, the debtor may retain property included in the estate under Section 1115…” The District Court held that the term “included in the estate under Section 1115” refers only to the property that was added to the Bankruptcy estate post-petition by virtue of Section 1115 and does not supplant the definition of property of the estate in Section 541. If Congress intended to exempt an individual debtor’s entire estate, it would have referred to Sections 541 and 1115 in Section 1129, but it did not, and there is nothing in the statutory language or legislative history indicating that Congress intended to repeal the absolute priority rule by the BAPCPA amendments.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
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<b><span style="font-family: 'Times New Roman', serif;">Meena Untawale<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">McCARTER & ENGLISH, LLP<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">100 Mulberry Street, Four Gateway Center // Newark, New Jersey 07102<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">T: <a href="tel:973-849-4299" style="color: #1155cc; text-decoration: none;" target="_blank" value="+19738494299">973-849-4299</a><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="mailto:muntawale@mccarter.com" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: #225599;">muntawale@mccarter.com</span></a> // <a href="http://www.mccarter.com/" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: #225599;">www.mccarter.com</span></a><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><br /></span><b><u><span style="font-family: 'Times New Roman', serif;">4th Circuit</span></u></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Gold v. First Tennessee Bank Nat'l Assoc.</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> (<i>In re Taneja</i>), 2014 U.S. App. LEXIS 3279 (4th Cir. Feb. 21, 2014)</span></b><span style="font-family: 'Times New Roman', serif;">:<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On February 21, the Fourth Circuit Court of Appeals, in a 2-1 decision, affirmed the U.S. District Court for the Eastern District of Virginia, which had upheld the Bankruptcy Court's ruling that First Tennessee Bank (the "<u>Bank</u>") was a good faith transferee under 11 U.S.C. § 548(c).<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Debtors operated a home loan origination business and financed that business through warehouse loans from large financial institutions, including the Bank. The warehouse lenders required that the loans originated by the Debtor be sold on the secondary market. The Debtor struggled to sell the loans and engaged in fraud to conceal those struggles in order to obtain new credit. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Trustee sued the Bank to recover payments alleged to be fraudulent transfers made by the Debtors to the Bank. In holding that the Bank, through two employees, established the affirmative defense of good faith, the Fourth Circuit wrote that the lower courts must consider whether the transferee was aware or should have been aware, at the time of the transfers and in accordance with routine business practices, whether the debtor intended to hinder, delay, or defraud. The Court held that the good faith affirmative defense may be proven by either expert or lay testimony, as the Bank's employees did through lay opinions. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The dissent, however, contended that the District Court had committed clear error by finding good faith on the part of the Bank due to red flags on the part of the Debtor of which the Bank ought to have been aware. The Bank failed to carry its burden to prove good faith.<u></u><u></u></span></div>
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<b><span style="font-family: 'Times New Roman', serif;">Jed. K. Donaldson<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Spotts Fain<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">411 E. Franklin Street<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Suite 600<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Richmond, VA 23219<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="tel:%28804%29%20697-2036" style="color: #1155cc; text-decoration: none;" target="_blank" value="+18046972036">(804) 697-2036</a><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="tel:%28804%29%20697-2136" style="color: #1155cc; text-decoration: none;" target="_blank" value="+18046972136">(804) 697-2136</a> fax<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="mailto:jdonaldson@spottsfain.com" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">jdonaldson@spottsfain.com</span></a><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">5th Circuit<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Credit Union Liquidity Servs., L.L.C. v. Green Hills Dev. Co., L.L.C.</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 741 F.3d 651 (5th Cir. Feb. 3, 2014):<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">In an involuntary bankruptcy, the bankruptcy court determined that the mover had standing because its claims were not subject to a bona fide dispute under 11 U.S.C § 303(b). However, the bankruptcy court held that there was insufficient evidence to establish that the debtor was not paying his debts as they became due, and alternatively, the claims were subject to a bona fide dispute under §303(h)(1). The district court affirmed. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On appeal, the Fifth Circuit clarified that § 303(b) - as amended in 2005 - requires the petitioning creditor to show that there is no bona fide dispute as to liability or amount. Moreover, the court expressly disclaimed all precedent interpreting § 303(b) before the 2005 amendment of the statute. The court ultimately held that the pending, unresolved claims in parallel litigation was a bona fide dispute under § 303(b) and the mover lacked standing to bring the involuntary bankruptcy. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Liberty Bankers Life Ins. Co. v. Grencorp Mgmt</span></i></b><b><span style="font-family: 'Times New Roman', serif;">., No. 13-10731, 2014 U.S. App. LEXIS 3558 (5th Cir. Feb. 25, 2014):</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">In a lien-priority dispute, Grencorp obtained liens on disputed property through an assignment of deeds of trust but failed to record the deed. Six months later, Liberty recorded a deed of trust for a loan secured by the same property; however, the recorded deed inadvertently omitted a description of the property. Subsequently, Grencorp recorded its deeds of trust, and Liberty corrected its property description two months later.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Fifth Circuit affirmed the district and bankruptcy courts and awarded summary judgment in favor of Grencorp. Under Section 13.001 of the Texas Property Code, the court held that once properly recorded, Grencorp’s interest obtained priority over any interest that Liberty subsequently acquired. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Liberty Mut. Ins. Co. v. Holloway</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, No. 1260762 c/w No. 12-60777, 2014 U.S. App. LEXIS 2298 (5th Cir. Feb 4, 2014):<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">An insurer agreed to settle a fraud action against several companies conditioned upon full payment of $4.5 million to be paid in three installments. Additionally, the owner of one company personally guaranteed the third payment of $1.25 million. The first two payments were made timely; however, the owner’s company filed for Chapter 11 bankruptcy before the third and final payment was made to the insurer. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The bankruptcy trustee sought to recover the first two settlement payments as preference payments. The insurer sought the remaining payment from the owner in accordance with his personal guaranty. Although the owner agreed to pay, the insurer refused to release the defendants due to the pending bankruptcy preference litigation. Subsequently, the insurer settled the preference suit and returned $1.9 million to the bankruptcy, retaining only $1.35 million. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Meanwhile, the insurer released the other co-defendants for $500,000. The owner sought to receive a credit for the co-defendants’ payment, which the district court granted. The district court further ruled that the insurer could not recover the $1.9 million returned to the Trustee, and the pending fraud litigation was subsequently dismissed.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On appeal, the Fifth Circuit held that the owner was not entitled to any credit as the guaranty was a separate and distinct contract from both the original settlement agreement and the co-defendants’ $500,000 settlement. Further, the court held that the insurer had retained its right to re-open the fraud action if they did not receive full payment, and due to the preference payment the insurer had the right to re-open the fraud litigation. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Shankle v. Shankle</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, No. 13-60251, 2014 U.S. App. LEXIS 2356 (5th Cir. Feb. 7, 2014):<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Where an ex-husband refused to tender a debt for marital property for over three years, his conduct constituted willful and malicious economic harm to his former wife under 11 U.S.C. § 523(a)(6) and rendered the debt nondischargeable in his subsequent bankruptcy proceeding. The Fifth Circuit affirmed the bankruptcy and district courts’ finding that the husband’s conduct caused a “willful and malicious injury” because there was an objective substantial certainty of harm.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
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<b><span style="font-family: 'Times New Roman', serif;">Anne-Marie Mitchell<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Stone Pigman Walther Wittmann L.L.C.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">546 Carondelet Street | New Orleans, Louisiana 70130<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Direct Dial: <a href="tel:%28504%29%20593-0958" style="color: #1155cc; text-decoration: none;" target="_blank" value="+15045930958">(504) 593-0958</a> | Direct Fax: <a href="tel:%28504%29%20596-0958" style="color: #1155cc; text-decoration: none;" target="_blank" value="+15045960958">(504) 596-0958</a><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">E-mail: <a href="mailto:amitchell@stonepigman.com" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">amitchell@stonepigman.com</span></a> | Website: <a href="http://www.stonepigman.com/" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">www.stonepigman.com</span></a><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">6th Circuit</span></u></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Baldridge</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. App. LEXIS 2213 (6th Cir. Feb. 3, 2014).</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Chapter 7 case where 7 Trustee sold debtor’s principal residence. Two secured creditors; sale proceeds were sufficient to pay senior secured creditor in full, and left a deficiency to second secured creditor. Second secured creditor and Trustee agreed to a $28,000 payment from second creditor to Trustee. Debtor claimed homestead exemption as to that $28K.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Sixth Circuit denied Debtor’s claim to that $28K. $28K was not part of estate that could be subject to exemptions at time case was filed. The amount of secured debt exceeded the value received at sale. Reason that second creditor made this payment to Trustee was irrelevant because there was nothing for homestead exemption to attach to.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Rizzo</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 741 F.3d 703, 704 (6th Cir. 2014)</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Chapter 7 debtor was officer of an LLC that failed to pay Michigan state business taxes; state statute made him responsible for payment of those taxes; issue was whether his individual liability was non-dischargable.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">§ 523(a)(1)(A) excepts from discharge taxes specified in § 507(a)(8). § 507(a)(8) includes “an excise tax on a transaction.” From the company’s perspective the tax was an excise tax, but was the individual officer’s liability an excise tax?<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Court of Appeals said yes it was an excise tax, and therefore non-dischargable. The officer’s derivative liability (if corporation does not pay) does not change the nature of the tax, which is still an excise tax. It just makes him additionally liable for payment of that excise tax. The Michigan tax statute “functionally pierces the corporate veil” making the officer individually liable for the same excise tax as the corporation.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
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<b><span style="font-family: 'Times New Roman', serif;">Mike Abelow<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Sherrard & Roe, PLC<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">150 3rd Avenue South<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Nashville TN 37201<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="mailto:mabelow@sherrardroe.com" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">mabelow@sherrardroe.com</span></a><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Tel: <a href="tel:%28615%29%20742-4200" style="color: #1155cc; text-decoration: none;" target="_blank" value="+16157424200">(615) 742-4200</a> Fax: <a href="tel:%28615%29%20742-4539" style="color: #1155cc; text-decoration: none;" target="_blank" value="+16157424539">(615) 742-4539</a><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">7th Circuit<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Equipment Acquisition Resources, Inc.</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 742 F.3d 743, (Feb. 4, 2014) (Flaum, J.).<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Summary of decision:<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On February 4, 2014, the Seventh Circuit Court of Appeals reversed the decision of the Bankruptcy Court of the Northern District of Illinois, holding that the abrogation of sovereign immunity with respect to 11 U.S.C. § 544 found in 11 U.S.C. § 106(a)(1) does not allow a bankruptcy trustee to assert a claim under § 544(b)(1) against the IRS to recover tax payments. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">This decision represented the first Circuit Court of Appeals to address the issue and “diverge[d] from all of the bankruptcy and district courts to consider this issue in the context of the federal government.” Slip Op. at 10.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Here, the Court held that the trustee’s claim to recover tax payments made to the IRS under § 544(b)(1) (which authorizes the trustee to avoid transfers by standing in the shoes of an actual unsecured creditor) necessarily failed for at least two reasons: (1) “there is no question that no creditor exists in this case,” and (2) even if there were, “an unsecured creditor would have been barred from bringing an Illinois fraudulent-transfer action against the IRS outside of bankruptcy.” <i>Id. </i>at 7.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re A&F Enterprises, Inc., II</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, No. 13-3192, 742 F.3d 763 (Feb. 7, 2012) (Sykes, J.)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Summary of decision:<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On February 7, 2014, the Seventh Circuit Court of Appeals reversed the decision of the Bankruptcy Court of the Northern District of Illinois, holding that a Chapter 11 debtor-franchisee was entitled to continuation of an order staying enforcement of an underlying order holding that certain leases associated with the franchise agreements had been rejected pending resolution of the debtor-franchisee’s appeal of that order before the district court. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Seventh Circuit expressly did not address the merits of the underlying issue: whether the debtor-franchisee had until confirmation of its plan to reject or assume leases associated with various IHOP franchise agreements under 11 U.S.C. § 365(d)(2), governing franchise agreements, or only 120 days (subject to a possible 90 day extension) under 11 U.S.C. § 365(d)(4), governing leases generally. <i>See</i> Slip Op. at 6. However, the court granted the stay of the underlying order that turned on this legal issue because it “does not have a clear-cut answer,” that the Court was “provisionally persuaded that [debtor-franchisee’s] position has substantial merit,” and that, therefore, it would “rest [its] decision on whether to grant the stay primarily on the balance of potential harms,” which it found favored the debtor-franchisee. <i>Id.</i> at 7-9.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:</span></i><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><span style="font-family: 'Times New Roman', serif;">Michael R. Cedillos<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Greenberg Traurig, LLP | 77 West Wacker Drive | Suite 3100 | Chicago, IL 60601<u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">8th Circuit<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Kaler v. Bala (In re Racing Services, Inc.)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. App. LEXIS 3714 (8th Cir. Feb. 27, 2014)</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The court was required to determine whether an employee or the bankruptcy estate of her former employer had the superior claim to the liquidation proceeds of a cash-value life insurance policy purchased for her by the employer. As a result of a conviction for federal criminal gaming and money laundering violations against both the employer and employee, the Department of Justice sought a forfeiture order against the employee which included the insurance policy as an asset for forfeiture. Although no final order on the forfeiture was entered by the district court, the insurance company sent a check to the DOJ for the cash value of the policy and a letter to the employee saying that the policy had been “surrendered.” Subsequently, the conviction and forfeiture order were overturned by the Eighth Circuit, and the proceeds from the policy were returned. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Pursuant to an agreement between the employer and employee the employer had the right to “obtain upon surrender of the policy by the Assignor [Bala], an amount of the cash surrender proceeds up to the amount of the Assignee’s interest in the policy.” The trustee of the employer’s bankruptcy filed an adversary proceeding to determine if the proceeds from the insurance were property of the estate.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The bankruptcy court found for the Trustee. This ruling was affirmed by the BAP, which held that the insurance company’s treatment of the policy as surrendered in response to the forfeiture order obtained by the DOJ was substantively the same as a surrender by the employee. The Eighth Circuit overturned the BAP’s ruling, holding that the plain language of the agreement made surrender by the employee herself the only trigger regarding the employers rights to the surrender proceeds, and that the forfeiture order which required the DOJ to avoid disposition of the property until expiration of the notice period or resolution of competing claims could not transfer title of the policy to the DOJ until entry of a final order. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Bank of England v. Rice (In re Webb)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 742 F.3d 824 (8th Cir. Feb. 6, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">In this action, the debtors, a husband and wife, listed in their schedules farming equipment and rice grain (the “property”) owned in connection with a joint venture, purportedly created between them. The Bank of England (“Bank”) asserted that it had a perfected security interest in this property pursuant to an agreement between the Bank and the Joint Venture. The Chapter 7 Trustee moved for a permanent injunction to prevent the Bank from exercising control over the property in dispute. Bankruptcy court granted the injunction, determining that the joint venture was not a separate legal entity and the property belonged to the estate. The District court upheld the bankruptcy court ruling and the Eighth Circuit affirmed. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Bank asserted that the joint venture was a partnership under Arkansas law and that the bankruptcy court erred in looking at testimonial and documentary evidence beyond the joint venture agreement itself, which the Bank claimed demonstrate a clear intent to create a separate legal entity. The Eighth circuit held that, at the least, provisions of the joint venture agreement mandating equal divisions of profits and asserting the creation of “an entity” were ambiguous when read together with the agreements specific state that “nothing herein shall be construed to create a partnership of any kind.” As a result of this ambiguity the bankruptcy court did not err when it considered evidence outside the four corners of the agreement. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Behrens v. US (In re Behrens)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 Bankr. LEXIS 565 (8th Cir. BAP Feb. 14, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The debtor brought an adversary proceeding against the United States of America asking the bankruptcy court to invalidate a restitution lien resulting from a pre-petition federal criminal charge against the debtor. The debtor argued that his criminal prosecution and the government’s actions to collect on the restitution judgment violated an order staying litigation and proceedings against the debtor and the automatic stay provided by 11 U.S.C. § 362. The stay order was entered by US district court as part of a consent judgment in a civil action brought by the SEC that preceded the bankruptcy and the criminal prosecution.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The bankruptcy court dismissed the adversary proceeding for failure to state a claim upon which relief could be granted. The BAP affirmed the bankruptcy court’s ruling. The BAP held that the bankruptcy court correctly dismissed the appeal as a collateral attack on the validity of a pre-petition judgment. The BAP further held that criminal judgments, including restitution awards and attendant liens are given special protection from discharge in bankruptcy pursuant to 11 U.S.C. § 523(a)(13) and 18 U.S.C. §§ 3613(e), 3663, 366A and 3664.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Copeland v. Fink (In re Copeland)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">,</span></b><span style="font-family: 'Times New Roman', serif;"> </span><b><span style="font-family: 'Times New Roman', serif;">742 F.3d 811 (8th Cir. Jan. 31, 2014)</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The debtors filed for Chapter 13 bankruptcy relief and proposed a plan that would pay nondischargeable state and federal tax debts before other unsecured creditors. The bankruptcy court rejected the plan, and the BAP found that the plan unfairly discriminated against the other unsecured creditors and affirmed. The Eighth Circuit affirmed the BAPs ruling.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The debtor’s argued that the plan was not unfairly discriminatory, in part due to the nondischargeability of tax debt which indicates a strong public policy in favor of full tax collection providing a reasonable basis for the discrimination. The Eighth Circuit rejected this argument holding that nondischargeability does not provide a justification for special treatment. The Eighth Circuit also held that the plan lacked good faith in that it proposed to pay those creditors who would be paid in full regardless of the plan while leaving nothing for the other unsecured creditors. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Paul v. Allred (In re Paul)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 739 F.3d 1132 (8th Cir. Jan. 13, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">In this voluntary Chapter 7 proceeding, the debtor listed among his assets real property which he claimed was exempt under South Dakota’s homestead exemption. At the Section 341 meeting of creditors the debtor admitted that he did not had not resided at the property for fourteen or fifteen years and did not plan to resume living there. The trustee brought an objection asserting the homestead exemption did not cover the property in question. The debtor asserted pursuant to the South Dakota statute and constitution required allowed him to assert the homestead exemption for any real property owned in South Dakota even though he made his home somewhere else and had no intent to move. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The bankruptcy court entered an order granting summary judgment in favor of the trustee. The bankruptcy court’s order was affirmed by the BAP, which ruled that the homestead exemption could not be claimed absent an actual intent to return and reside on the property. The Eighth Circuit affirmed the BAP’s decision, holding that the property was not a homestead under South Dakota law.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Cook v. Empire Bank (In re Cook)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, </span></b><b><span style="font-family: 'Times New Roman', serif;">504 B.R. 496</span></b><b><span style="font-family: 'Times New Roman', serif;"> (8th Cir. BAP Jan. 9, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Empire Bank (“Empire”) appealed from an order of the bankruptcy court holding that the judicial lien held by Arvest Bank (“Arvest”) was superior to the liens held by Empire. Arvest claimed that the deed of trust purporting to secure Empire’s lien was not supported by valid consideration or existing indebtedness and was null and void. The debtors also sought a declaratory judgment that Empire did not have a valid need of trust against their property. The bankruptcy court found that the Empire deed of trust was not valid, and even assuming it was supported by adequate consideration, it did not secure obligations of the debtors based on personal guarantees signed by them. The bankruptcy court further held the Arvest lien to be superior to Empire’s judgment lien and that the transfer of two promissory notes to satisfy the Empire judgment was avoidable as a preferential transfer. The BAP reversed the bankruptcy court’s order.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The BAP determined that because Arvest and the debtors alleged that the deed was not enforceable, they had the burden to prove the lack of consideration. The debtors acknowledged the deed of trust was signed, and stated on its face that it was for valuable consideration and offered no contrary evidence. Thus, Arvest and the debtors failed to meet their burden.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The BAP also reversed the bankruptcy court’s holding that the deed of trust, if valid, failed to secure the guarantee obligations. The bankruptcy court found a latent ambiguity in the deeds provision that it was to secure any existing or future debt and the statement in the earlier executed guarantees which stated they were “unsecured.” The BAP noted that at the time of execution the guarantees were unsecured but that in the event of conflicting agreements the latter agreement controls. Having determined that the debt owed to Empire was at least partially secured, the BAP remanded the case for further proceedings on the preference claim.</span> <u></u><u></u></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:</span></i><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><span style="font-family: 'Times New Roman', serif;">Matthew S. Sepuya<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Greenfield Sullivan Draa & Harrington LLP<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">150 California Street, Ste 2200<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">San Francisco, CA 94111<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">(415) 283-1776<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="http://www.greenfieldsullivan.com/" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">www.greenfieldsullivan.com</span></a><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">9th Circuit<u></u><u></u></span></u></b></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">ALASKA</span></u></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Gary Allen Moore, et al.</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 Bankr. LEXIS 214 (D.Alaska Jan. 15, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 15, 2014, the United States Bankruptcy Court for the District of Alaska overruled Debtor’s objection to Secured Lender’s Proof of Claim for lack of legal description in the Deed of Trust, rendering it unenforceable under Alaska state law, and, therefore, leaving the Secured Lender unsecured.<u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">No notable points of interest to the bankruptcy practitioner. <u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">ARIZONA</span></u></b><b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In Gayle Ann Derrick,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 U.S. Dist. LEXIS 5199 (D.Ariz. Jan. 15, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 15, 2014, the United States District Court for the District of Arizona reversed the Bankruptcy Court’s Order disqualifying counsel for the Debtor for violating 11 U.S.C. § 329(a) by not disclosing that Debtor’s personal injury attorney was representing her in the bankruptcy proceeding. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Debtor’s attorney failed to review the engagement agreement closely and upon a thorough review would have discovered that the paralegal’s draft of the engagement agreement mistakenly included the personal injury lawyer in the agreement. This was a clerical error and the personal injury lawyer was not an attorney representing a Debtor in a case under Title 11; therefore, 11 U.S.C. § 329 did not obligate a filing of a statement of compensation. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Jeffrey Albert Kolb and Heidi Elaine Kolb,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 U.S. Dist. LEXIS 3069 (D.Ariz. Jan. 9, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 10, 2014, the United States District Court for the District of Arizona affirmed the Bankruptcy Court’s denial of a filing of an amended complaint where the only change to the complaint was the addition of a request for attorney fees and denied the motion to dismiss the appeal based on jurisdictional defects. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Joseph Otto Letizia and Zhanhong Chen,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 179 (D.Ariz. Jan. 14, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 10, 2014, the United States Bankruptcy Court for the District of Arizona held that debtors in Arizona, doing business as sole proprietors, may not exempt vehicles used primarily for business purposes using Arizona’s personal property exemptions, but instead must use Arizona’s tools of the trade exemptions. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner<b>:</b></span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">A short and concise opinion any consumer practitioner in Arizona should be aware of and read. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Calderon,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 1136 (BAP 9th Cir. Feb. 28, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On February 28, 2014, the United States Bankruptcy Appellate Panel vacated the United States Bankruptcy Court’s Order disallowing the Debtor’s homestead exemption in property based solely on the Debtor’s vague expression to return to the property someday. It remanded for a proper interpretation and application of Arizona’s homestead exemption law. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On petition date, if the Debtor has been living away from his home for less than two years, only evidence of clear intent of permanent removal will be sufficient to allow a bankruptcy court to find a Debtor has abandoned his homestead exemption under Arizona law. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Scannell,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 803 (D.Ariz. Jan. 24, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 24, 2014, the United States Bankruptcy Court for the District of Arizona held that a purchase money deed of trust has priority over an earlier recorded restitution lien in Arizona. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">In a matter of first impression in Arizona, the Court parsed the legislative intent of two competing statutes and determined, based on multiple factors, but mainly, that the most recent specific statute governs the older. The Court did note it assumed the legislature knew what it was doing. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Dale,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 495 (BAP 9th Cir. Feb. 5, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On February 5, 2014, the United States Bankruptcy Appellate Panel of the Ninth Circuit affirmed the United States Bankruptcy Court for the District Court of Arizona decision holding that an inheritance received by a chapter 13 debtor more than 180 days following the petition date, but before confirmation of a chapter 13 plan and before the case was closed, is property of the estate. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">An opinion worth reading concerning the interplay between two subsections of the Bankruptcy Code, §§ 541(a)(5)(A) and 1306(a)(1). <u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">CALIFORNIA</span></u></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Schoenmann v. Federal Deposit Insurance Corporation,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 U.S Dist. LEXIS 1121 (N.D. Cal. Feb. 6, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 6, 2014, the United States District Court for the Northern District of California denied a motion to compel discovery of communications between a non-party witness, the U.S. Trustee and her attorney, based on the work product doctrine as set forth in Rule 26(b)(3) of the Federal Rules of Civil procedure. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:<u></u><u></u></span></u></div>
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<span style="font-family: 'Times New Roman', serif;">No notable points of interest to the Bankruptcy Practitioner; however, a good review of the work product doctrine and its application. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Shart,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 411 (C.D. Cal. Jan. 29, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 29, 2014, the United State Bankruptcy Court for the Central District of California held that the fraudulent conduct of a debtor-husband could not be imputed to the debtor-wife for purposes of dischargeability for debts arising from false pretenses, false representation, or actual fraud. <b><u><u></u><u></u></u></b></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:<u></u><u></u></span></u></div>
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<span style="font-family: 'Times New Roman', serif;">A well written opinion by the Honorable Barry Russell discussing the origin of the imputation of fraud in non-dischargeability proceedings. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re NNN Parkway 400 26, LLC,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 269 (C.D. Cal. Jan. 21, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 28, 2014, the United States Bankruptcy Court for the Central District of California denied confirmation of the chapter 11 plan of reorganization and granted relief from the automatic stay.<u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">A good discussion on the new value exception to the absolute priority rule and market testing as provided by <i>Bank of America Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle Street P’ship</i>, 526 U.S. 434, 456-57, 119 S. Ct. 1411, 1424, 143 L.Ed.2d 607 (1999). The case also provides a good synopsis of classification, consent of an impaired class, and feasibility. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In Riding v. Cach LLC,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 U.S. Dist. LEXIS 6518 (C.D. Cal. Jan. 17, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 17, 2014 the United States Bankruptcy Court for the Central District of California granted in part and denied in part Defendant’s motion to dismiss.<u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">A good discussion of the <i>Rooker-Feldman</i> doctrine. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Hudson,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 219 (BAP 9th Cir. Jan. 14, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 17, 2014, the United States Bankruptcy Appellate Panel of the Ninth Circuit reversed an Order entered by the United States Bankruptcy Court for the Central District of California annulling the automatic stay to allow foreclosure purchaser who allegedly acquired Chapter 13 debtor’s property a few minutes prepetition to complete an unlawful detainer action. <u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:</span></u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">A good opinion on the application of the business records exception to the hearsay rule and other issues regarding the admissibility of evidence. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Neff,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 471 (BAP 9th Cir. Feb. 4, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On February 4, 2014, the United States Bankruptcy Appellate Panel of the Ninth Circuit affirmed the United States Bankruptcy Court for the Central District of California’s opinion that 11 U.S.C. § 727(a)(2)(A) is a statute of repose and not subject to equitable tolling.<u></u><u></u></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">Notable Points to Bankruptcy Practitioner:<u></u><u></u></span></u></div>
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<span style="font-family: 'Times New Roman', serif;">An issue of first impression in the Ninth Circuit and worth the read, although probably not something that will arise in your every day practice.<u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">HAWAI’I<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Parsons</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 Bankr. LEXIS 270 (Bankr. D. Hawai’i Jan. 21, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Hawai’i Office of Consumer Protection (OCP) brought an adversary proceeding to except from discharge Debtor’s alleged obligation for fines, civil restitution, attorneys’ fees and interest payable in connection with alleged unfair and deceptive practices. The parties cross-moved for summary judgment. <b><i>Held:</i></b> OCP entitled to summary judgment to the extent it is permitted to collect fines and penalties and interest thereon under the plain language of §527(a)(7); Debtor entitled to summary judgment holding that claims for civil restitution, attorneys’ fee and interest thereon are dischargeable. The claims of civil restitution are “compensation for actual pecuniary loss” suffered by consumers and are not payable “for the benefit” of OCP; the statute requires that the claim be both punitive (“a fine, penalty, or forfeiture”) and noncompensatory.<u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">IDAHO</span></u></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re John P. Squires and Carol A. Squires,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 177 (D.Idaho Jan. 15, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 15, 2014, the United States Bankruptcy Court for the District of Idaho granted Defendant’s Rule 12(b)(6) motion because the claims were barred by the applicable statute of limitations. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Keith Stewart Borup and Judith Ann Borup,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 98 (D.Idaho Jan. 9, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 10, 2014, the United States Bankruptcy Court for the District of Idaho sustained the Trustee’s objection to Creditor’s proof of claim based on insufficiency of evidence.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Jay P. Clark,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 97 (D.Idaho Jan. 10, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 10, 2014, the United States Bankruptcy Court for the District of Idaho granted Plaintiffs summary judgment under 11 U.S.C. § 523(a)(2)(A) excepting from discharge debts owed to Plaintiffs.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">I<b>n re Douglas Carl Johns and Janina Johns,</b></span></i><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 56 (D. Idaho Jan. 7, 2014)</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On January 7, 2014, the United States Bankruptcy Court for the District of Idaho overruled secured creditor’s objection to Debtor’s claimed homestead exemption. <u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Lawrence Darwin McKay,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 2014 Bankr. LEXIS 23(D.Idaho Jan. 3, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">On January 3, 2014, the United States Bankruptcy Court for the District of Idaho held that Debtor’s failure to keep or produce certain documents that could shed light on the Debtor’s finances was not sufficient to deny the Debtor a discharge.<u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">MONTANA<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Blixseth v.Yellowstone Mountain Club, LLC,</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> 742 F.3d 1215 (9<sup>th</sup> Cir. Feb. 14, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Ninth Circuit affirmed the bankruptcy court and District Court of Montana with regard to the denied motion of the co-founder of the Chapter 11 debtor (Blixseth) to recuse the bankruptcy judge asserting that judge was biased against him.<b><i>Held:</i></b> Alleged ex parte communications, the bankruptcy rulings of the court and the judge’s allegedly biased statements did not warrant recusal. The Court stated that judicial rulings alone almost never constitute a valid basis for a bias or partiality [recusal] motion; that the ex parte contacts did not pertain to matters involving Blixseth or his interests and were legitimate under the circumstances; and judicial remarks made during the course of a trial require recusal only if they reveal such a high degree of favoritism or antagonism as to make fair judgment impossible, which were not present in this case.<b><i><u></u><u></u></i></b></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Reisbeck</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 Bankr. LEXIS 597 (Bankr. D. Mont. Feb. 13, 2014) <u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Chapter 13 debtor moved for turnover of funds that the IRS obtained postpetition from debtor’s insurance commissions, based upon its prepetition levy. The IRS objected to Debtor’s motion and moved to lift the automatic stay <i>nunc pro tunc</i> to the petition date so the funds could be retained and applied to debtor’s tax debt. Debtor objected to the IRS motion. <b><i>Held</i></b>: Despite having discretion under §362(d)(1), the Court did not find that the IRS had shown cause to lift the stay retroactively; the IRS was aware of the Debtor’s bankruptcy petition when it levied, the Debtor was not engaged in any unreasonable or inequitable conduct and balancing the equities Debtor required the return of the funds for its reorganization plan or would suffer irreparable harm, while the IRS had adequate protection by its tax liens and priority and nondischargeable status of its claim.<u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">NEVADA<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Shapiro v. Henson</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 739 F.3d 1198 (9<sup>th</sup> Cir. Jan. 9, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Ninth Circuit reversed the bankruptcy court and U.S. District Court of Nevada and held as a matter of first impression that a trustee’s turnover power was not restricted to property of the estate at the time that the turnover motion was filed.<b><i>Held</i></b>: A trustee may seek turnover from an entity that had “possession, custody, or control” of the subject property during the bankruptcy case whether or not the entity had “possession, custody, or control” at the time the turnover motion is filed. The Court looked at the phrases “during the case” and “or the value of such property” in the statute to find that the Debtor, although not holding funds that had been in her bank account and stating she no longer had possession at the time the motion was filed, and, would not comply with the trustee’s demand for turnover, had held the funds during the bankruptcy case and would have to turn over the value of such property to the trustee.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">USACM Liquidating Trust v. Deloitte & Touche</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. App. LEXIS 3036 (9<sup>th</sup> Cir. Feb. 18, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Ninth Circuit affirmed the Nevada district court’s summary judgment in favor of the Defendant (Deloitte) on the ground that the misconduct of the plaintiff’s principals/officers must be imputed to USACM under Nevada’s “sole actor” rule, which imputes an agent’s actions to the principal corporation even where the agent totally abandons the corporation’s interest when the corporation and its agent are indistinguishable from each other<b><i>. Held:</i></b> The plaintiff Trust failed to present evidence of any “innocent decision-makers” within USACM sufficient to permit a reasonable fact finder to find that the principal/officers were not USACM’s sole actors for purposes of imputation. Deloitte’s affirmative defense that USACM’s claims had expired under Nevada law prior to the petition date and were thus ineligible for the two-year extension of applicable limitations period under 11 U.S.C. §108(a) that would have rendered its claims timely was also upheld.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">In re Daecharkhom</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 Bankr. LEXIS 653 (9th Cir. BAP Jan. 24, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The bankruptcy court determined that the creditor was not justified in pursuing a §523(a)(2) nondischargeability action on a consumer debt and that the requested attorneys’ fees and costs under §523(d) were reasonable, but reduced the award on a determination of special circumstances<b><i>. Held</i></b>: A special circumstances determination requires a complete disallowance and on the record special circumstances justifying a disallowance did not exist. Once the bankruptcy court determined that a fee award was appropriate under §523(d), it had the opportunity to reduce fees as a debtor is entitled only to reasonable fees and costs; however, its reliance upon special circumstances to reduce rather than disallow reasonable fees and costs was inappropriate<u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">WASHINGTON<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Meyer v. U.S. Bank N.A</span></i></b><b><span style="font-family: 'Times New Roman', serif;">., 2014 Bankr. LEXIS 651 (Bankr. W.D. Wash Feb. 18, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Chapter 13 debtor-borrowers brought an adversary proceeding against, among others, successor trustee under deed of trust, asserting various foreclosure –related causes of action, including violation of the Washington State Deeds of Trust Act (DOTA), the Washington State Consumer Protection Act (WACPA), and the Fair Debt Collection Practices Act (FDCPA). The court discusses the convoluted and complex history of a loan placed in a securitized trust and the many entities involved with the odyssey of the loan up to the time of foreclosure. <b><i>Held:</i></b> The DOTA recognizes a pre-sale cause of action for damages for the wrongful initiation of foreclosure proceedings; successor trustee failed to materially comply with its duties under the DOTA; successor trustee’s multiple violations of the DOTA also violated the WACPA; and borrowers failed to prove entitlement to relief under the FDCPA because the court found there was a present right of possession of the property through an enforceable security interest, even though the procedure initiating the enforcement of that security interest was defective.<b><u></u><u></u></b></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
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<b><span style="font-family: 'Times New Roman', serif;">John C. Smith<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Gerald K. Smith and John C. Smith Law Offices, PLLC<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">6720 E. Camino Principal, Suite 202<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Tucson, AZ 85715<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Tel: (520) 722-1605<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Fax: (520) 722-9096<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">And<u></u><u></u></span></div>
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<b><span style="font-family: 'Times New Roman', serif;">Franklin D. "Troy" Dodge<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Ryan Rapp & Underwood, P.L.C.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">3200 N. Central Avenue, Suite 1600<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Phoenix, Arizona 85012<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">(602) 280-1000<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">(602) 728-0422 Fax<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="mailto:tdodge@rrulaw.com" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">tdodge@rrulaw.com</span></a><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="http://www.rrulaw.com/" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">www.rrulaw.com</span></a><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">10th Circuit</span></u></b><u><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></u></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Clark v. Zwanziger (In re Wolfgang Friedrich Zwanziger</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 741 F.3d 74 (10th Cir. 2014) (Tymkovich, J.) (before Tymkovich, Holloway, and Gorsuch, C.J.) (Appeal from the United States Bankruptcy Appellate Panel).<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Bankruptcy Appellate Panel’s (the “BAP”) decision applying issue preclusion to preclude an award of damages for emotional distress was REVERSED AND REMANDED. In the decision immediately below, the BAP applied issue preclusion to a previous finding in a separate district court matter that held the parties had procedurally waived emotional distress damages. As a result, the BAP reversed the bankruptcy court’s non-dischargeability award to the extent it included amounts arising out of emotional distress. Applying Oklahoma law on issue preclusion, the Tenth Circuit found that litigation determining whether a party has waived a claim is not the equivalent of a decision on the merits of the waived claim. Consequently, the previous district court decision on waiver of the emotional distress claim did not satisfy the requirement of a decision on the merits of the emotional distress claim sufficient to warrant application of issue preclusion. The case was remanded to the bankruptcy court ordering a reinstatement of the original judgment including emotional distress damages.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Rushton v. ANR Company, Inc. et al. (In re C.W. Mining Company)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 740 F.3d 548 (10th Cir. 2014) (Tymkovich, J.) (before Tymkovich, Brorby, and Murphy C.J.) (Appeal from the United States Bankruptcy Appellate Panel).<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Tenth Circuit’s opinion AFFIRMED five of the six appeals at issue agreeing with the Bankruptcy Appellate Panel that the parties’ requests for relief would impermissibly affect the validity of the sale in violation of 11 U.S.C. § 363(m) therefore mooting the appeals. The issue on appeal was whether any relief could be granted that would not affect the validity of the prior sales. In discussing the relative burdens of the parties, the Tenth Circuit stated that while the trustee bears the burden of proving the appeal is moot pursuant to § 363(m), the appellants must at least identify an available remedy that will not affect the sale’s validity. Upon analysis of each appeal, the Tenth Circuit determined that only one appellant satisfied its burden of requesting relief that would not affect the validity of the sale. The successful appellant established he had sought alternative relief pursuant to a state statute providing monetary damages that would not affect the validity of the sale. Consequently, this one appeal was remanded for further proceedings consistent with the Tenth Circuit’s decision that his appeal was not moot under § 363(m).<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">First National Bank of Durango v. Reason Lee Woods (In re Woods)</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, </span></b><b><span style="font-family: 'Times New Roman', serif;">2014 U.S. App. LEXIS 2960</span></b><b><span style="font-family: 'Times New Roman', serif;">, (10th Cir. Feb. 19, 2014) (J. Holmes) (Before Homes, O’Brien, and Matheson, C.J.) (Appeal from the Bankruptcy Appellate Panel for the Tenth Circuit Court of Appeals (B.A.P. No. 11-083-CO).</span></b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The Tenth Circuit Court of Appeals vacated the decision of the United States Bankruptcy Court for the District of Colorado (the “bankruptcy court”) and remanded the case for further proceedings after finding that the bankruptcy court applied the wrong legal standard and test for determining when a debt for a debtor’s principal residence arises out of a farming operation under 11 U.S.C. § 101(18)(A). Otherwise known as the “fifty-percent-farm-debt” rule, § 101(18)(A) identifies the type of debtor that may seek relief under the Chapter 12 of the Bankruptcy Code; namely, an individual that has at least 50% of aggregate noncontingent, liquidated debt arising out of a farming operation. Excluded from this farm debt calculation, is a debt for the individual’s principal residence unless such debt “arises out of a farming operation.” Individuals that meet this rule qualify as “family farmers” under the Bankruptcy Code and are entitled to Chapter 12 bankruptcy relief. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">In this case, the Court’s focus was on a construction loan obtained by the debtors’ to build a house on their farmland. If the construction loan did not evidence a debt arising from a farm operation then the debtors’ would fail the “fifty-percent-farm-debt” rule and be disqualified from Chapter 12 bankruptcy relief. The bankruptcy court found that the construction loan arose from the debtors’ farm operations and should be included in the debtors’ farm debt total, because it was used to build a house that was an “integral part” of the debtors’ farm operation. The bankruptcy court’s conclusion was supported by two (2) factual findings--(1) the debtors’ farming operation’s office and records were located in the residence; and (2) the house was situated in close proximity to the debtors’ farming operation since it was built on the farmland.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Adopting the test articulated in <u>In re Kan Corp.</u>, 101 B.R. 726 (Bankr. W.D. Okla. 1988), the Court held that, when the debt at issue is a loan debt, it arises out of a farming operation and may be included in the debtor’s farm debt total if it is directly and substantially connected to any of the farming operation activities outlined in § 101(21). The Court went on to hold that, to determine whether the “direct-and-substantial-<wbr></wbr>connection” standard is satisfied, an objective “direct-use” test should be employed, which singularly focuses on whether the loan proceeds were directly applied to or used in a farming operation.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
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<b><span style="font-family: 'Times New Roman', serif;">Christopher M. Staine<u></u><u></u></span></b></div>
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<b><span style="font-family: 'Times New Roman', serif;">Lysbeth L. George</span></b><b><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">CROWE & DUNLEVY</span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">A Professional Corporation</span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">20 North Broadway, Suite 1800</span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Oklahoma City, OK 73102-8273</span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">(405) 239-6651 (Facsimile)</span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="mailto:christopher.staine@crowedunlevy.com" style="color: #1155cc; text-decoration: none;" target="_blank">christopher.staine@<wbr></wbr>crowedunlevy.com</a></span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="mailto:lysbeth.george@crowedunlevy.com" style="color: #1155cc; text-decoration: none;" target="_blank">lysbeth.george@crowedunlevy.<wbr></wbr>com</a> </span><span style="font-family: 'Times New Roman', serif;"> <u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">11<sup>th</sup> Circuit<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Dunn v. Advanced Medical Specialties, et. al</span></i></b><b><span style="font-family: 'Times New Roman', serif;">.,</span></b><i><span style="font-family: 'Times New Roman', serif;"> </span></i><b><span style="font-family: 'Times New Roman', serif;">2014 U.S. App. LEXIS 2433 (11<sup>th</sup> Cir. Feb. 10, 2014) <u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Two months prior to filing bankruptcy, the debtor sued her former employer in the District Court for alleged violations of the Americans With Disabilities Act, the Civil Rights Act of 1964 and the Equal Pay Act. However, the debtor failed to disclose the lawsuit as a contingent asset in her bankruptcy schedules. Following the entry of an order granting the debtor a discharge, the District Court entered summary judgment in favor of the former employer based on judicial estoppel. The United States Court of Appeals for the Eleventh Circuit affirmed the entry of summary judgment and the denial of the trustee’s motion to vacate under Rule 60(b)(4).<b><u></u><u></u></b></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Brown v. Gore</span></i></b><span style="font-family: 'Times New Roman', serif;">, <b>742 F.3d 1309 (11<sup>th</sup> Cir. Feb 14, 2014)<u></u><u></u></b></span></div>
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<span style="font-family: 'Times New Roman', serif;">The debtor filed a Chapter 13 plan that required monthly payments of $150.00 for three years. The Bankruptcy Court denied confirmation, finding that the plan was not proposed in good faith. Specifically, the Court found that the primary reason for filing 13 was to finance the payment of the debtor’s attorney’s fees. The United States Court of Appeals for the Eleventh Circuit affirmed the decision of the District Court, which had affirmed the Bankruptcy Court’s denial of confirmation.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Antonini v. Duran</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, U.S. App. LEXIS 2568 (11<sup>th</sup> Cir. Feb. 11, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">An individual and his company filed an involuntary petition under Chapter 7, alleging that the putative debtor was insolvent and owed them approximately $640,000.00. Following a two day bench trial, the Bankruptcy Court dismissed the Chapter 7 case and found that it had been filed in bad faith. Based on the finding of bad faith filing of the involuntary case, the Bankruptcy Court ordered the petitioning creditors to pay $185,000.00 in attorneys’ fees and $50,000.00 in punitive damages. The District Court found that the record was replete with evidence of bad faith and affirmed the order of the Bankruptcy Court. The United States Court of Appeals for the Eleventh Circuit affirmed the decision of the District Court.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Realan Investment Partners, LLP, et. al. v. Leigh Meininger, as Chapter 7 Trustee</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. Dist. LEXIS 16422 (M.D. Fla. Feb. 10, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">The Chapter 7 trustee for a number of affiliated companies, all of which had filed Chapter 11 cases that was converted to Chapter 7, filed several adversary proceedings in an effort to recover fraudulent transfers from the former owner of the debtors, the former owner’s family members, the estate of the former owner’s deceased wife and related entities. <u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Following the commencement of the adversary proceedings, the trustee entered into a settlement agreement pursuant to which the defendants agreed to pay $925,000.00 to the trustee conditioned, in part, on the trustee’s agreement to seek a bar order and channeling injunction that would permanently enjoin the trustee and the debtors’ creditors from pursuing any claims against the settling parties arising from, related to, based upon, or deriving from the business activities of the debtors.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The trustee filed a motion to approve the settlement as required by Bankruptcy Rule 9019. Two investors, each of which had invested a substantial amount of money in the debtors prior to bankruptcy, objected to the Bankruptcy Court’s approval of the settlement. The objecting parties asserted, in part, that the Bankruptcy Court lacked constitutional authority to enjoin third parties from bringing claims against the settling parties. The Bankruptcy Court overruled the objections and entered an order approving the settlement.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">On appeal, the objecting parties argued that the Bankruptcy Court lacked the constitutional authority to enter a bar order prohibiting third parties from bringing state law claims against the settling parties. The District Court rejected this argument, reasoning that <i>Stern v. Marshall</i>, 131 S. Ct. 2594 (2011) does not prevent a bankruptcy court from entering a bar order in approving a settlement agreement. The District Court concluded that <i>Stern </i>was limited to the holding that a bankruptcy court lacked statutory and constitutional authority to enter a final judgment on a state law counterclaim to a proof of claim that had been filed in a bankruptcy case.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">The District Court affirmed the Bankruptcy Court’s order approving the settlement.<u></u><u></u></span></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Millian v. Wells Fargo & Co., et. al.</span></i></b><b><span style="font-family: 'Times New Roman', serif;">, 2014 U.S. Dist. LEXIS 31520 (S.D. Fla. Feb. 18, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Following a payment default on a home loan mortgage, Wells Fargo Bank, N.A. filed a mortgage foreclosure case in state court. Prior to filing bankruptcy, the debtor raised lack of standing as a defense. The debtor filed a Chapter 7 bankruptcy case on the same day that the trial was to commence in state court. After filing bankruptcy, the debtor filed an adversary proceeding against Wells Fargo Bank, N.A. and several of its affiliate. The debtor once again raised the standing issue, as well as other defenses and claims. The Bankruptcy Court granted the motions to dismiss and abstain. On appeal, the District Court affirmed the order that granted the motions to dismiss and abstain.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
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<b><span style="font-family: 'Times New Roman', serif;">Lynn James Hinson<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">800 North Magnolia Avenue, Suite 1500<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Orlando, Florida 32803<u></u><u></u></span></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<span style="font-family: 'Times New Roman', serif;">407-841-1200 <b><sup>.</sup></b> Fax 407-423-1831</span><span style="font-family: 'Times New Roman', serif;"><u></u><u></u></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">DC Circuit<u></u><u></u></span></u></b></div>
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<b><i><span style="font-family: 'Times New Roman', serif;">Hope 7 Monroe Street Limited Partnership v. RIASO, LLC</span></i></b><b><span style="font-family: 'Times New Roman', serif;"> <i>(In re Hope 7)</i>, </span></b><b><span style="font-family: 'Times New Roman', serif;">2014 U.S. Dist. LEXIS 31520</span></b><b><span style="font-family: 'Times New Roman', serif;"> (DC Cir. Feb. 28, 2014)<u></u><u></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif;">While bankruptcy proceedings were ongoing, the debtor discovered information it alleged showed that its largest creditor and its agents had committed fraud and breached their fiduciary duty to the Debtor. The debtor filed a state court action against the creditor and agents on the basis of those allegations. Concurrently, the creditor filed a proof of claim in the bankruptcy proceedings. The debtor objected based on the alleged fraud, but the bankruptcy court overruled the objection and ordered claim be paid from the estate. The trustee proposed to sell the estates interest in the state court action to one of the creditors co-defendants as a compromise of the claims. The bankruptcy court approved the sale.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">Subsequently, the debtor brought a motion pursuant to FRCP 60(b) to vacate the orders overruling the claim objection and ordering payment of the creditors claim, as well as the order approving the sale of the legal claims. The bankruptcy court denied the debtors motion, and the district court affirmed. After its review the DC Circuit upheld the rulings of the two lower courts.<u></u><u></u></span></div>
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<span style="font-family: 'Times New Roman', serif;">In its ruling the DC Circuit first addressed whether or not the debtor had standing to bring appeal the bankruptcy courts order. Debtors generally lack standing because the debtor lacks an interest in the distribution of the estates property and because the bankruptcy proceedings absolve the debtor’s liability to creditors. The DC circuit noted however, that a debtor does have standing when success on appeal could result in a surplus in the estate that would revest in the debtor at the close of the bankruptcy. The DC Circuit determined that the debtor had standing to bring the appeal, but affirmed the lower courts’ rulings on the merits.<u></u><u></u></span></div>
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<i><span style="font-family: 'Times New Roman', serif;">Submitted by:<u></u><u></u></span></i></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<b><span style="font-family: 'Times New Roman', serif;">Matthew S. Sepuya<u></u><u></u></span></b></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<span style="font-family: 'Times New Roman', serif;">Greenfield Sullivan Draa & Harrington LLP<u></u><u></u></span></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<span style="font-family: 'Times New Roman', serif;">150 California Street, Ste 2200<u></u><u></u></span></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<span style="font-family: 'Times New Roman', serif;">San Francisco, CA 94111<u></u><u></u></span></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<span style="font-family: 'Times New Roman', serif;">(415) 283-1776<u></u><u></u></span></div>
<div class="MsoNormal" style="color: black; font-family: arial, sans-serif; font-size: small;">
<span style="font-family: 'Times New Roman', serif;"><a href="http://www.greenfieldsullivan.com/" style="color: #1155cc; text-decoration: none;" target="_blank"><span style="color: blue;">www.greenfieldsullivan.com</span></a></span></div>
</div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-61145461015505883272013-12-12T14:50:00.000-05:002013-12-12T14:50:14.887-05:00NH Supreme Court issues amendments to certain Court Rules.<div class="MsoNormal">
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<b>Subject:</b> [NHCOURTS] Supreme Court Order Posted<o:p></o:p></span></div>
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<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">The
Supreme Court issued an order today adopting amendments to court <br />
rules in the following areas:<o:p></o:p></span><br />
<br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">I.
Depositions in Civil Actions<o:p></o:p></span><br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">(This
amendment makes the rule governing depositions in civil cases <br />
consistent with a recent legislative amendment. RSA 517:4 has been <br />
amended, effective January 1, 2014, to permit a party to record a video<br />
deposition, provided the party indicates the intent to record the video<br />
deposition in the notice provided to the adverse party. See N.H. Laws<br />
2013 ch. 65.)<o:p></o:p></span><br />
<br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">II.
Character and Fitness Committee<o:p></o:p></span><br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">(This
amendment adds one additional attorney and one additional<br />
non-attorney to the New Hampshire Supreme Court Committee on Character<br />
and Fitness.)<o:p></o:p></span><br />
<br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">III.
Foreign Legal Consultants<o:p></o:p></span><br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">(These
amendments change cross-references in Supreme Court <br />
Rule 42D to other Supreme Court Rules.)<o:p></o:p></span><br />
<br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">IV.
Superior Court Rules<o:p></o:p></span><br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">(On
December 16, 2013, the Circuit Court - Family Division will become<br />
operational in Cheshire County. Domestic relations cases filed on or<br />
after December 16, 2013 will be filed in the Circuit Court - Family<br />
Division in Cheshire County and will be governed by the Circuit Court<br />
- Family Division Rules. Therefore, this amendment changes the title<br />
of the Rules of the Superior Court of the State of New Hampshire<br />
Applicable in Criminal Cases Filed in Superior Court and Domestic<br />
Relations Cases Filed in the Cheshire County Superior Court to make<br />
the rules applicable only in criminal cases.)<o:p></o:p></span><br />
<br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">The
effective date for the Superior Court rule amendment is December 16,<br />
2013. The remaining rule amendments are effective January 1, 2014.<br />
The order has been posted on the Judicial Branch website:<o:p></o:p></span><br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;"><a href="http://www.courts.state.nh.us/supreme/orders/index.htm">http://www.courts.state.nh.us/supreme/orders/index.htm</a><o:p></o:p></span><br />
<br />
<br />
<span style="font-family: Tahoma, sans-serif; font-size: 10pt;">For
information about subscribing or unsubscribing to this List Service<br />
please visit:<br />
<a href="http://www.courts.state.nh.us/sitewidelinks/listservice.htm">http://www.courts.state.nh.us/sitewidelinks/listservice.htm</a><br />
<br />
Brian Eddy<br />
Website Coordinator<br />
NH Judicial Branch<o:p></o:p></span>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-91716344061128582562013-11-30T09:22:00.001-05:002013-11-30T09:22:48.226-05:00NH District Court Rules with changes ready for 12/2/13 distribution.<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px;">Copies of the Court's Local Rules with amendments effective 12/1/13 </span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px;">are available in the clerk's office for $4.50, and will be available on the court's website on 12/2/13.</span><br />
<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px;"><br /></span>
<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px;">The NH District Court's web site is:</span><br />
<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px;"><br /></span>
<a href="http://www.nhd.uscourts.gov/ru/">http://www.nhd.uscourts.gov/ru/</a>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-76435246260400101512013-11-27T17:32:00.001-05:002013-11-27T17:32:39.155-05:00Case Law News from NACBA and their important work through Amicus Briefs in Consumer Bankruptcy Cases<div class="MsoNormal" style="background-color: white; color: #222222; font-family: arial; font-size: small;">
Amicus Project Update</div>
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November, 2013</div>
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<i><b>Inherited IRA's to be decided:</b></i></div>
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Cert. Granted</div>
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The Supreme Court has granted certiorari in the case of Clark v. Rameker (In re Clark), No. 13-299. In that case, the Seventh Circuit created a split in the circuits when it held that a debtor may not exempt her inherited IRA in bankruptcy. In re Clark, No. 12-1241 & 12-1255 (April 23, 2013). The Fifth Circuit had reached the opposite conclusion in Chilton v. Moser, 674 F.3d 486 (5th Cir. 2012). NCBRC will file an amicus brief on behalf of the NACBA membership in this important case.</div>
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<b><i>Fees upon frivolous appeal sought:</i></b></div>
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Debtor Moves for Fees on Frivolous Appeal. The debtor in In re Murray, No. 13-34 (B.A.P. 10th Cir.), has moved for fees and costs against the trustee for filing a frivolous appeal. The case involves the question of the constitutionality of Kansas’s bankruptcy specific exemption—an issue upon which the trustee has consistently lost in the bankruptcy court, In re Westby, 473 B.R. 392 (Bankr. D. Kan. 2012), the district court, In re Lea, 2013 W.L. 4431267 (D. Kan. 2013), and the BAP, In re Westby, 486 B.R. 509 (B.A.P. 10th Cir. 2013).Although the trustee filed an appeal of the Westby case to the Tenth Circuit, she later dismissed it, Williamson v. Westby (In re Westby), Case No. 13-3044 (10th Cir. 3/29/13), and, instead, sought another bite at the apple in the BAP with Murray. The trustee’s likelihood of success at the circuit level was further diminished when the Sixth Circuit upheld the constitutionality of state bankruptcy specific exemptions in In Re Schafer, 689 F.3d 601 (6th Cir. 2012), cert. den. sub nom. Richardson v. Schafer, 133 S. Ct. 1244 (2013). In the meantime, as a result of the trustee’s decision to pick away at individual cases in the lower courts rather than seek decisive resolution in the Circuit Court, some debtors have been forced, for financial reasons, to settle the issue at the outset thereby losing the benefit of the exemption. NCBRC was involved in Schafer and has been involved in a number of the cases coming out of the Kansas court on this issue, filing amicus briefs and assisting with debtor’s briefs.</div>
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<b><i>Carving out an equity exception to the debtor's fully encumbered homestead:</i></b></div>
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Fourth Circuit Allows Trustee/IRS Carve-Out Agreement In an unpublished, per curiam, opinion the Fourth Circuit found that the trustee could sell the debtors’ fully encumbered homestead despite the fact that the debtors were entitled to an exemption for the property. In re Reeves, No. 12-2127 (Nov. 20, 2013). The debtors’ residence was fully encumbered by a first mortgage lien and a tax lien. Under North Carolina law, the debtors claimed an exemption in their homestead in the amount of $60,000.00. The trustee objected to the exemption on the basis that the debtors had no equity in the property. After the bankruptcy court overruled the objection, the trustee moved to sell the property explaining that the IRS had agreed to “carve out” a portion of its share of the proceeds to benefit the bankruptcy estate. The debtors objected to the sale arguing that allowance of the exemption effectively removed the property from the estate. The bankruptcy court disagreed finding that the exemption was as to the debtors’ “interest” in the property rather than in the property itself. The district court affirmed. On appeal, the Fourth Circuit relied on Schwab v. Reilly, 130 S. Ct. 2652, 2661-63 (2010) for the distinction between an “asset” and the “interest” in that asset, finding that the exemption applied only to the latter and did not result in removal of the entire asset from the bankruptcy estate. The court went on to reject the debtors’ argument, which was more fully elucidated in NACBA’s amicus brief, that where an asset is fully encumbered the trustee must abandon it and a side agreement with a creditor to circumvent that rule is not a legitimate exercise of the trustee’s power. In a short discussion notable for its lack of in-depth analysis, the court found simply that the agreement between the IRS and the trustee “assigned equity” to the asset for the benefit of the estate. As an unpublished opinion this decision is not precedential.</div>
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<b><i>Extent of Lien Avoidance Posers:</i></b></div>
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Argued: In re Traverse, No. 13-9002 (1st Cir.) Issue: Whether upon avoidance of a lien the trustee gains the debtor’s power to sell the property for which the debtor has claimed a homestead exemption, or whether the trustee’s powers are limited to what the lienholder could have done. Argument date: October 10, 2013. NCBRC filed an amicus brief on behalf of the NACBA membership.</div>
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<i><b><br /></b></i></div>
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<i><b>Surcharging Homestead Exemption:</b></i></div>
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Set for Argument:</div>
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Law v. Seigel, No. 12-5196 (U.S.S.Ct.) Issue: Whether the debtor’s homestead exemption may be surcharged as a result of the debtor’s failure to comply with discovery. Argument date: January 13, 2014. NCBRC filed an amicus brief on behalf of the NACBA membership.</div>
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Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-38030907433420357332013-10-14T14:37:00.000-04:002013-10-14T14:37:02.749-04:00New Hampshire Superior Court Rules change October 1, 2013<br />
Here's the link to the new Superior Court rules which apply to all cases filed or pending on October 1, 2013:<br />
<br />
<a href="http://www.courts.state.nh.us/supreme/orders/05-22-2013-Order-Adopting-New-Superior-Court-Civil-Rules.pdf">http://www.courts.state.nh.us/supreme/orders/05-22-2013-Order-Adopting-New-Superior-Court-Civil-Rules.pdf</a><br />
<br />
All Superior Court Forms:<br />
<a href="http://www.courts.state.nh.us/superior/forms/formsnumeric.htm">http://www.courts.state.nh.us/superior/forms/formsnumeric.htm</a><br />
<br />
Complaint Form: <a href="http://www.courts.state.nh.us/forms/nhjb-2688-s.pdf">http://www.courts.state.nh.us/forms/nhjb-2688-s.pdf</a><br />
<br />
Complaint to Enjoin Foreclosure Form: <a href="http://www.courts.state.nh.us/forms/nhjb-2834-s.pdf">http://www.courts.state.nh.us/forms/nhjb-2834-s.pdf</a><br />
<br />Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-25722384241909367992013-10-07T11:16:00.006-04:002013-10-07T11:22:33.826-04:00NACBA advises that the Supreme Court will decide if the debtor's homestead exemption can by surcharged with costs incurred by the Ch. 7 trustee due to debtor's alleged misconduct, to resolve a split among the Circuits.<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="background: white; color: #222222; font-family: "Arial","sans-serif"; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">NACBA Defends Debtor's Homestead Exemption in
U.S. Supreme Court</span></b><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The NACBA membership filed an amicus
brief in the case of Law v. Seigel (In re Law), No. 12-5196 (Sept 3, 2013), in
defense of the debtor’s homestead exemption. In that case, the lower court,
ostensibly pursuant to its power under section 105(a), imposed the surcharge to
pay trustee fees resulting from litigation necessitated by debtor misconduct.
See Law v. Siegel (In re Law), 435 Fed. Appx. 697, 2011 WL 2181198 (9th Cir.
2011).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The brief argues that while section
105(a) grants equitable power to the court to effectuate the terms of the
Bankruptcy Code, it does not permit the court to contravene other sections of
the Code or bypass its otherwise applicable provisions. In sections 522(c) and
(k) Congress specified that exempt property cannot be used to pay pre-petition
debts or administrative expenses. In addition, in sections 522(o) and (q),
Congress specified conditions under which a homestead exemption may be
compromised as a result of debtor’s misconduct. Section 105(a) permits a court
to use its equitable power to “carry out the provisions” of the Code, not to
override or contradict them. The brief points out that the court has other
methods of sanctioning debtor misconduct. Section 727 contemplates denial or
revocation of discharge of specific debts in the face of misconduct. Rule 9011
permits imposition of traditional litigation sanctions against a wayward
debtor.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In the alternative, the brief seeks
to minimize the damage of a potentially unfavorable decision by asking the
Court to allow such equitable action by a lower court only under unusual
circumstances where: “(1) the debtor has engaged in misconduct that actually
injured one or more creditors by depriving them of estate assets to which they
were entitled; (2) the misconduct involved an intentional effort to conceal or
dissipate estate assets so as to keep them from creditors; (3) the surcharge is
no greater than necessary to remedy the harm to creditors caused by the
misconduct (i.e., is remedial rather than punitive); and (4) no other available
remedy is adequate.”<o:p></o:p></span></div>
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">The Supreme Court’s decision can be expected to
resolve the split between the first and ninth circuits, <i>see</i> <u>Malley v. Agin</u>, 693
F.3d 28, 30 (1st Cir. 2012);<u> Latman v. Burdette</u>, 366 F.3d 774, 785 & n.8
(9th Cir. 2004) (permitting surcharge), and the tenth circuit, <i>see</i> <u>In Re
Scrivner</u>, 535 F.3d 1258 (10th Cir.2008) (not permitting surcharge).</span><br />
<b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></b>
<b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";">The National Consumer Bankruptcy
Rights Center has been active in cases around the country – Read about these cases
by clicking on the links below:</span></b><br />
<div class="MsoNormal">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><a href="http://www.kintera.org/TR.asp?a=7dJELNOuEkJQKQNvC&s=eoKIJLNmHbIRKXMsFlF&m=eeLMIVPwGfLIJYJ" target="_blank"><span style="color: #1155cc;">Petition for Cert. Filed in
Inherited IRA Case</span></a></span></b><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><a href="http://www.kintera.org/TR.asp?a=7dJELNOuElJNKPNyC&s=eoKIJLNmHbIRKXMsFlF&m=eeLMIVPwGfLIJYJ" target="_blank"><i><span style="color: #1155cc;">Reeves </span></i></a>(4th)
and <a href="http://www.kintera.org/TR.asp?a=agIKKWPGKoJSK2NPE&s=eoKIJLNmHbIRKXMsFlF&m=eeLMIVPwGfLIJYJ" target="_blank"><i><span style="color: #1155cc;">Traverse </span></i></a>(1st)
-- Moving Forward</span></b><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br />
Please consider making a contribution to the <a href="http://www.kintera.org/TR.asp?a=aqLKIWPGLnIRI0MNF&s=eoKIJLNmHbIRKXMsFlF&m=eeLMIVPwGfLIJYJ" target="_blank"><span style="color: #1155cc;">National Consumer Bankruptcy Rights
Center</span></a> to advance this important work.</span>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-69314684378129248722013-09-22T08:11:00.002-04:002013-09-22T08:11:55.825-04:00Bankruptcy Cases of Interest in September 2013 from The Consumer Bankruptcy Abstracts & Research, and The National Consumer Bankruptcy Rights Center<div class="MsoNormal">
Cases in Review September, 2013<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
“Cases in Review” highlights recent cases that may be of particular interest to consumer bankruptcy practitioners. It is brought to you by Consumer Bankruptcy Abstracts & Research (www.cbar.pro) and the National Consumer Bankruptcy Rights Center (www.ncbrc.org).<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Authority of the court—Imposition of sanctions—On creditor’s attorney -<i> </i></b></div>
<div class="MsoNormal">
<b><i>Court can sanction creditor's attorney by requiring that all dischargee complaints comply with the rules</i>:</b> </div>
<div class="MsoNormal">
The Fifth Circuit Court of Appeals held that the bankruptcy court did not abuse its discretion in requiring a creditor’s attorney (formerly employed by Weinstein & Riley, P.S.) to (1) comply with Fed. R. Civ. Proc. 9(b) in filing nondischargeability complaints under Code § 523(a)(2)(A) and (2) file a copy of the bankruptcy court’s order in every adversary proceeding commenced by the attorney in the Southern District of Texas over the next year. The bankruptcy court found that the attorney had a practice of filing generic credit card nondischargeability complaints that did not comply with Rule 9(b). The Court of Appeals reasoned that nothing in the bankruptcy court's limited order prevented the attorney from practicing law or inconvenienced the attorney to such an extent that it in effect prevented him from the practice of law. The Court of Appeals therefore agreed with the district court's analysis that the bankruptcy court's order did not rise to the level of a suspension and was not quasicriminal in nature. In re Monteagudo, --- Fed. Appx. ----, 2013 WL 3753609 (5th Cir. July 18, 2013).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Chapter 7—Stripping unsecured lien - </b></div>
<div class="MsoNormal">
<i><b>11th Circuit Allows lien stripping second mortgage in Chapter 7 (pub. decision)</b></i>:</div>
<div class="MsoNormal">
The Eleventh Circuit Court of Appeals released an order in In re McNeal that contains two significant decisions. First, the court granted the debtor’s motion to publish its opinion, currently found at In re McNeal, 477 Fed. Appx. 562 (11th Cir. May 11, 2012), which held that, under existing circuit precedent, a Chapter 7 debtor may strip a wholly-unsecured lien. This will result in a fully-precedential opinion. Second, the court stated that, since the stay had been lifted in the appellee mortgage creditors’ bankruptcy cases (which are part of the Residential Capital bankruptcy), the appeal in the pending case was no longer stayed. This will allow the court to consider the creditors’ petition for rehearing en banc. The court said that no ruling would be made on that petition until at least 30 days after publication of the panel decision in the case. In re McNeal, Case No. 11-11352 (11th Cir. Aug. 2, 2013). </div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Chapter 13—Confirmation of plan—Calculation of projected disposable income - </b></div>
<div class="MsoNormal">
<b><i>Deducting Pension payments from PDI is permitted</i></b><b>: </b></div>
<div class="MsoNormal">
Taking the intermediate position on the issue, the bankruptcy court held that, in calculating projected disposable income, a Chapter 13 debtor is permitted to deduct voluntary contributions to an ERISA-qualified retirement plan that the debtor is making on the petition date. While the contributions are subject to a good-faith analysis, here the 47-year-old debtor’s commencing a $541.67 monthly contribution less than three months prior to filing her joint bankruptcy petition was not in bad faith, where the court found credible the debtor’s explanation that she was worried that Social Security would not be solvent when she reached retirement age. In re Jensen, --- B.R. ----, 2013 WL 3877818 (Bankr. D. Utah July 26, 2013).</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Chapter 13—Confirmation of plan—Good faith - </b> </div>
<div class="MsoNormal">
<b><i>Plan can pay 100% to unsecured over 60 months even if Debtor you could it in less months is permitted:</i></b></div>
<div class="MsoNormal">
Two more courts held that, where a Chapter 13 plan pays unsecured creditors in full, it is not bad faith under Code § 1325(a)(3) for the plan to do so over the debtor’s full applicable commitment period, even if the creditors could be paid more quickly if the debtor paid his or her full projected disposable income each month. In re Braswell, 2013 WL 3270752 (Bankr. D. Or. June 27, 2013); In re McGehan, --- B.R. ----, 2013 WL 4069524 (Bankr. D. Colo. July 19, 2013).<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Dischargeability—Court-ordered restitution - </b></div>
<div class="MsoNormal">
<i><b>Restitution was discharged where paid directly to victim:</b> </i></div>
<div class="MsoNormal">
Court-ordered restitution of $919,356 that the Chapter 7 debtors, who pled guilty to embezzlement from a vulnerable adult, were directed to pay did not fall within the discharge exception in Code § 523(a)(7) for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit that was not compensation for actual pecuniary loss. Although the debtors' restitution may have been initially payable to the probation department, the Michigan restitution statute required that it then be paid to the victim or her representative or estate, so that the ultimate destination of the restitution was not a governmental unit. Moreover, the amount of the restitution was the amount of damages suffered by the victim, so that the restitution was compensation for actual pecuniary loss. In re Rayes, --- B.R. ----, 2013 WL 3784159 (Bankr. E.D. Mich. July 16, 2013).<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Dischargeability—Student loan debts - </b></div>
<div class="MsoNormal">
<b><i>Hardship proven due to health reasons:</i></b></div>
<div class="MsoNormal">
Debtors established undue hardship under Code § 523(a)(8) in two recent cases, although both involved debtors with serious medical conditions. In In re Myhre, 2013 WL 3872509 (Bankr. W.D. Wis. July 25, 2013), the court discharged the student loan debt of a quadriplegic Chapter 7 debtor who was nonetheless able to work full-time and earn between $29,000 and $35,000 per year. And in In re O'Donohoe, 2013 WL 2905275 (Bankr. S.D. Tex. June 13, 2013) the court discharged the student loan debt of a Chapter 7 debtor who, despite having earned in excess of $150,000 per year for each of 2007, 2008 and 2009, had not worked since then, due to his multiple medical conditions (cancer, morbid obesity, severe depression, bipolar disorder, adult ADHD, obsessive compulsive disorder, high blood pressure, and sleep apnea) and the mental slowness that was a side effect of the medications required to treat these conditions.<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Judicial estoppel -</b></div>
<div class="MsoNormal">
<b><i>Re-open Ch. 7 case allowed due to mistake or inadvertence, no presumption of deceit:</i></b></div>
<div class="MsoNormal">
Believing that the terms “mistake” and “inadvertence” should be given their natural meanings in the context of the application of judicial estoppel, the Ninth Circuit Court of Appeals acknowledged that its approach was less stringent than that of several other circuits. Where, as here, the debtor reopened her bankruptcy proceedings, corrected her initial error, and allowed the bankruptcy court to re-process the bankruptcy case with the full and correct information, a presumption of deceit no longer was appropriate. Rather, the debtor should be allowed to establish that the cause of action on which she now sued was omitted from her prior bankruptcy schedules through mistake or inadvertence, rather than intention. Ah Quin v. County of Kauai Dept. of Transp., --- F.3d ----, 2013 WL 3814916 (9th Cir. July 24, 2013). <o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Means test—Expenses - <i>Don't list Tobacco</i>:</b> </div>
<div class="MsoNormal">
Taking a position that was nothing if not dogmatic, the bankruptcy court declared that “in the Eastern Division of the Northern District of Alabama, expenses for tobacco may never be taken as a deduction on Schedule J,” and this “will be a per se rule in this Court until the Eleventh Circuit or Supreme Court rule otherwise.” The court said that it had repeatedly sustained the Chapter 13 trustee's objections to deductions claimed for excessive phone, Internet and cable fees, pest control services, security monitoring, pet expenses, non-mandatory retirement payments, and vehicles for non-debtor family members. It was difficult to imagine, the court continued, that counsel believed tobacco expenses would be approved by the court or would not draw an objection from the trustee. In re Vest, 2013 WL 3781508 (Bankr. N.D. Ala. July 18, 2013).<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Proof of claim—Secured claim—Post-petition charges—Effect of Rule 3002.1:<i> </i></b></div>
<div class="MsoNormal">
<b><i>Prima Facie Validity does not apply to Post-petition Charges or POC Supplements</i></b><i> </i>:</div>
<div class="MsoNormal">
The Bankruptcy Code is not clear as to the burden of proof with respect to the court's determination under Bankruptcy Rule 3002.1(h) of whether a debtor has cured a prepetition default and paid all required postpetition amounts. Rule 3002.1 does provide that Rule 3001(f), which otherwise grants a presumption of prima facie validity to a proof of claim, does not apply to supplements to the claim, including postpetition fees, expenses, and charges. The court inferred from the absence of a presumption of prima facie validity that the claimant bore the burden of proof under Bankruptcy Rule 3002.1(h). In re Rodriguez, 2013 WL 3430872 (Bankr. S.D. Tex. July 8, 2013).<o:p></o:p></div>
<br />
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Use of appearance attorneys -<i> Not allowed due to lack of accountabililty:</i></b></div>
<div class="MsoNormal">
Concluding that the use of appearance attorneys posed such significant problems to the proper and effective administration of consumer debtor cases that their use must be barred, Chief Bankruptcy Judge Jeff Bohm ruled that appearance attorneys would no longer be permitted to appear in cases over which he presided. Explaining that one of the largest problems with appearance attorneys was the potential lack of accountability, the court said that appearance attorneys were rarely listed as an attorney of record or co-counsel in a case, and this could raise questions as to the legitimacy of their representation of debtors and their authority to speak for, or make admissions on behalf of, the debtor. Moreover, appearance attorneys helped promote lazy and poor lawyering, as there was evidence that some practitioners never met with their clients. Ultimately, use of appearance attorneys constituted improper representation for an attorney's client. The client did not hire the appearance attorney and, almost always, the client had little or no say as to whether the attorney they did hire would represent them at any given proceeding. Often, debtors were given no notice that their own attorney would not personally represent them at their meeting of creditors or at any hearing, and this was what happened in the case at hand. The court ruled that both Code § 105(a) and Bankruptcy Rule 9029(b) permitted the court to prohibit the further use of appearance attorneys. In re Bradley, ---B.R. ----, 2013 WL 3753559 (Bankr. S.D. Tex.July 16, 2013).</div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-45682819024358382492013-09-22T08:04:00.002-04:002013-09-22T08:07:48.950-04:00Bankruptcy Cases of Interest in September 2013 from The Consumer Bankruptcy Abstracts & Research, and The National Consumer Bankruptcy Rights Center<div class="MsoNormal">
Cases in Review September, 2013 <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
“Cases in Review” highlights recent cases that may be of
particular interest to consumer bankruptcy practitioners. It is brought to you
by Consumer Bankruptcy Abstracts & Research (www.cbar.pro) and the National
Consumer Bankruptcy Rights Center (www.ncbrc.org).<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Authority of the
court—Imposition of sanctions—On creditor’s attorney -<i> </i></b></div>
<div class="MsoNormal">
<b><i>Court can sanction creditor's attorney by requiring that all dischargee complaints comply with the rules</i>:</b> </div>
<div class="MsoNormal">
The Fifth Circuit
Court of Appeals held that the bankruptcy court did not abuse its discretion in
requiring a creditor’s attorney (formerly employed by Weinstein & Riley, P.S.)
to (1) comply with Fed. R. Civ. Proc. 9(b) in filing nondischargeability complaints
under Code § 523(a)(2)(A) and (2) file a copy of the bankruptcy court’s order
in every adversary proceeding commenced by the attorney in the Southern District
of Texas over the next year. The bankruptcy court found that the attorney had a
practice of filing generic credit card nondischargeability complaints that did
not comply with Rule 9(b). The Court of Appeals reasoned that nothing in the
bankruptcy court's limited order prevented the attorney from practicing law or
inconvenienced the attorney to such an extent that it in effect prevented him
from the practice of law. The Court of Appeals therefore agreed with the district
court's analysis that the bankruptcy court's order did not rise to the level of
a suspension and was not quasicriminal in nature. In re Monteagudo, --- Fed. Appx.
----, 2013 WL 3753609 (5th Cir. July 18, 2013). <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Chapter 7—Stripping
unsecured lien - </b></div>
<div class="MsoNormal">
<i><b>11th Circuit Allows lien stripping second mortgage in Chapter 7 (pub. decision)</b></i>:</div>
<div class="MsoNormal">
The Eleventh Circuit Court of Appeals released an order in
In re McNeal that contains two significant decisions. First, the court granted
the debtor’s motion to publish its opinion, currently found at In re McNeal,
477 Fed. Appx. 562 (11th Cir. May 11, 2012), which held that, under existing circuit
precedent, a Chapter 7 debtor may strip a wholly-unsecured lien. This will result
in a fully-precedential opinion. Second, the court stated that, since the stay
had been lifted in the appellee mortgage creditors’ bankruptcy cases (which are
part of the Residential Capital bankruptcy), the appeal in the pending case was
no longer stayed. This will allow the court to consider the creditors’ petition
for rehearing en banc. The court said that no ruling would be made on that
petition until at least 30 days after publication of the panel decision in the
case. In re McNeal, Case No. 11-11352 (11th Cir. Aug. 2, 2013). </div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Chapter
13—Confirmation of plan—Calculation of projected disposable income - </b></div>
<div class="MsoNormal">
<b><i>Deducting Pension payments from PDI is permitted</i></b><b>: </b></div>
<div class="MsoNormal">
Taking
the intermediate position on the issue, the bankruptcy court held that, in calculating projected disposable income,
a Chapter 13 debtor is permitted to deduct voluntary contributions to an
ERISA-qualified retirement plan that the debtor is making on the petition date.
While the contributions are subject to a good-faith analysis, here the
47-year-old debtor’s commencing a $541.67 monthly contribution less than three
months prior to filing her joint bankruptcy petition was not in bad faith,
where the court found credible the debtor’s explanation that she was worried that
Social Security would not be solvent when she reached retirement age. In re
Jensen, --- B.R. ----, 2013 WL 3877818 (Bankr. D. Utah July 26, 2013).</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Chapter
13—Confirmation of plan—Good faith - </b> </div>
<div class="MsoNormal">
<b><i>Plan can pay 100% to unsecured over 60 months even if Debtor you could it in less months is permitted:</i></b></div>
<div class="MsoNormal">
Two more courts held that, where a
Chapter 13 plan pays unsecured creditors in full, it is not bad faith under Code
§ 1325(a)(3) for the plan to do so over the debtor’s full applicable commitment
period, even if the creditors could be paid more quickly if the debtor paid his
or her full projected disposable income each month. In re Braswell, 2013 WL
3270752 (Bankr. D. Or. June 27, 2013); In re McGehan, --- B.R. ----, 2013 WL
4069524 (Bankr. D. Colo. July 19, 2013). <o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Dischargeability—Court-ordered
restitution - </b></div>
<div class="MsoNormal">
<i><b>Restitution was discharged where paid directly to victim:</b> </i></div>
<div class="MsoNormal">
Court-ordered restitution of $919,356 that the Chapter 7 debtors,
who pled guilty to embezzlement from a vulnerable adult, were directed to pay
did not fall within the discharge exception in Code § 523(a)(7) for a fine,
penalty, or forfeiture payable to and for the benefit of a governmental unit
that was not compensation for actual pecuniary loss. Although the debtors'
restitution may have been initially payable to the probation department, the
Michigan restitution statute required that it then be paid to the victim or her
representative or estate, so that the ultimate destination of the restitution
was not a governmental unit. Moreover, the amount of the restitution was the
amount of damages suffered by the victim, so that the restitution was
compensation for actual pecuniary loss. In re Rayes, --- B.R. ----, 2013 WL
3784159 (Bankr. E.D. Mich. July 16, 2013).<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Dischargeability—Student
loan debts - </b></div>
<div class="MsoNormal">
<b><i>Hardship proven due to health reasons:</i></b></div>
<div class="MsoNormal">
Debtors established undue hardship under Code § 523(a)(8) in two
recent cases, although both involved debtors with serious medical conditions.
In In re Myhre, 2013 WL 3872509 (Bankr. W.D. Wis. July 25, 2013), the court
discharged the student loan debt of a quadriplegic Chapter 7 debtor who was
nonetheless able to work full-time and earn between $29,000 and $35,000 per
year. And in In re O'Donohoe, 2013 WL
2905275 (Bankr. S.D. Tex. June 13, 2013) the court discharged the student loan
debt of a Chapter 7 debtor who, despite having earned in excess of $150,000 per
year for each of 2007, 2008 and 2009, had not worked since then, due to his
multiple medical conditions (cancer, morbid obesity, severe depression, bipolar
disorder, adult ADHD, obsessive compulsive disorder, high blood pressure, and
sleep apnea) and the mental slowness that was a side effect of the medications
required to treat these conditions.<o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Judicial estoppel -</b></div>
<div class="MsoNormal">
<b><i>Re-open Ch. 7 case allowed due to mistake or inadvertence, no presumption of deceit:</i></b></div>
<div class="MsoNormal">
Believing that the terms “mistake” and “inadvertence” should be given their
natural meanings in the context of the application of judicial estoppel, the
Ninth Circuit Court of Appeals acknowledged that its approach was less stringent
than that of several other circuits. Where, as here, the debtor reopened her bankruptcy
proceedings, corrected her initial error, and allowed the bankruptcy court to
re-process the bankruptcy case with the full and correct information, a
presumption of deceit no longer was appropriate. Rather, the debtor should be allowed
to establish that the cause of action on which she now sued was omitted from her
prior bankruptcy schedules through mistake or inadvertence, rather than intention.
Ah Quin v. County of Kauai Dept. of Transp., --- F.3d ----, 2013 WL 3814916 (9th
Cir. July 24, 2013). <o:p></o:p></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
<b>Means test—Expenses - <i>Don't list Tobacco</i>:</b> </div>
<div class="MsoNormal">
Taking a position that was nothing if not dogmatic, the bankruptcy court declared
that “in the Eastern Division of the Northern District of Alabama, expenses for
tobacco may never be taken as a deduction on Schedule J,” and this “will be a
per se rule in this Court until the Eleventh Circuit or Supreme Court rule
otherwise.” The court said that it had repeatedly sustained the Chapter 13 trustee's
objections to deductions claimed for excessive phone, Internet and cable fees,
pest control services, security monitoring, pet expenses, non-mandatory retirement
payments, and vehicles for non-debtor family members. It was difficult to imagine,
the court continued, that counsel believed tobacco expenses would be approved
by the court or would not draw an objection from the trustee. In re Vest, 2013
WL 3781508 (Bankr. N.D. Ala. July 18, 2013). <o:p></o:p></div>
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<b>Proof of claim—Secured
claim—Post-petition charges—Effect of Rule 3002.1:<i> </i></b></div>
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<b><i>Prima Facie Validity does not apply to Post-petition Charges or POC Supplements</i></b><i> </i>:</div>
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The Bankruptcy Code is not
clear as to the burden of proof with respect to the court's determination under
Bankruptcy Rule 3002.1(h) of whether a debtor has cured a prepetition default
and paid all required postpetition amounts. Rule 3002.1 does provide that Rule
3001(f), which otherwise grants a presumption of prima facie validity to a
proof of claim, does not apply to supplements to the claim, including postpetition
fees, expenses, and charges. The court inferred from the absence of a presumption
of prima facie validity that the claimant bore the burden of proof under Bankruptcy
Rule 3002.1(h). In re Rodriguez, 2013 WL 3430872 (Bankr. S.D. Tex. July 8, 2013).
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<b>Use of appearance
attorneys -<i> Not allowed due to lack of accountabililty:</i></b></div>
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Concluding that the use of appearance attorneys posed such significant
problems to the proper and effective administration of consumer debtor cases
that their use must be barred, Chief Bankruptcy Judge Jeff Bohm ruled that
appearance attorneys would no longer be permitted to appear in cases over which
he presided. Explaining that one of the largest problems with appearance
attorneys was the potential lack of accountability, the court said that
appearance attorneys were rarely listed as an attorney of record or co-counsel
in a case, and this could raise questions as to the legitimacy of their
representation of debtors and their authority to speak for, or make admissions
on behalf of, the debtor. Moreover, appearance attorneys helped promote lazy
and poor lawyering, as there was evidence that some practitioners never met
with their clients. Ultimately, use of appearance attorneys constituted
improper representation for an attorney's client. The client did not hire the appearance
attorney and, almost always, the client had little or no say as to whether the
attorney they did hire would represent them at any given proceeding. Often,
debtors were given no notice that their own attorney would not personally
represent them at their meeting of creditors or at any hearing, and this was what
happened in the case at hand. The court ruled that both Code § 105(a) and
Bankruptcy Rule 9029(b) permitted the court to prohibit the further use of appearance
attorneys. In re Bradley, ---B.R. ----, 2013 WL 3753559 (Bankr. S.D. Tex.July
16, 2013).<o:p></o:p></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-65049999397222237582013-09-01T07:13:00.000-04:002013-09-01T07:13:33.000-04:00Bankruptcy Case News from NACBA and the National Consumer Bankruptcy Rights Center August 2013<div style="background-color: gainsboro; color: #222222; font-family: arial, sans-serif; font-size: 13px;">
<span style="font-size: 10pt;"><strong>T</strong></span><span style="font-size: 10pt;"><strong>he National Consumer Bankruptcy Rights Center has been active in cases around the country – Read about these cases by clicking on the links below:</strong></span></div>
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<span style="font-size: 10pt;"><u><strong>Kansas EITC Exemption Constitutional</strong></u></span><br /><span style="font-size: 10pt;">Despite relentless attacks by the bankruptcy trustees Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, has once again been deemed constitutional. <a href="http://www.kintera.org/TR.asp?a=fvJTI6NOJkLZIaM4G&s=jtJSL0MGKgK1KcOMKqH&m=juJVJbMRKiIWIiK" style="color: #1155cc;" target="_blank">Nazar v. Lea (In re Lea)</a>, No. 12-1297 (D. Kans. Aug. 16, 2013), consolidated with Parks v. Hudson (In re Hudson), No. 12-1298. The exemption benefits low income families with dependent children by treating the excess of EITC credit over taxes owed as an overpayment of taxes and refunding the difference. Like all the courts addressing the Kansas statute so far, the district court rejected the trustees' argument that the exemption statute violates the Uniformity and the Supremacy Clauses of the Constitution.</span></div>
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<span style="font-size: 10pt;">There is no violation of the Uniformity Clause for the simple reason that that Clause restricts the power of Congress and is not applicable to state action. See In re Kulp, 949 F.2d 1106, 1109 n. 9 (10th Cir. 1991). See also Richardson v. Schafer (In re Schafer), 689 F.3d 601 (6th Cir. 2012), cert. denied, No. 12-643 </span><span style="font-size: 10pt;">(Feb. 19, 2013). Relying on section 522 of the Bankruptcy Code which expressly permits states to use their own exemptions rather than the federal exemption scheme, the court quickly dispensed with the notion that the exemption statute offends the Supremacy Clause by express or field preemption. Against the backdrop of a presumption of constitutionality, the court went on to reject the trustees’ argument that the exemption statute actually conflicts with several provisions of the federal Bankruptcy Code.</span></div>
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<span style="font-size: 10pt;">NACBA filed amicus briefs in these cases and other cases attacking the Kansas exemption statute. Notwithstanding consistent losses on these issues, the Kansas trustees have taken two cases raising the identical arguments to the Tenth Circuit BAP. In re Beach, No. 13-37, and In re Murray, No. 13-34.</span></div>
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<span style="font-size: 12pt;"><strong>Amicus Briefs Filed:</strong></span></div>
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<span style="font-size: 12pt;"></span><span style="font-size: 10pt;"><u><strong>Estate Property Upon Conversion to Chapter 7</strong></u></span><br /><span style="font-size: 10pt;">The NACBA membership has filed an amicus brief in the case of <a href="http://www.kintera.org/TR.asp?a=8eLFILOmEdKLKQPDF&s=jtJSL0MGKgK1KcOMKqH&m=juJVJbMRKiIWIiK" style="color: #1155cc;" target="_blank">Viegelahn v. Harris (In re Harris)</a>, No. 13-50374 (5th Cir. August 20, 2013) seeking affirmance of the lower courts’ opinions. There, the debtor filed a chapter 13 petition, but after a good faith attempt to fulfill his obligations under the plan, he converted to chapter 7. The trustee sought to distribute debtor’s wages collected pursuant to the plan but not yet distributed at the time of conversion.</span></div>
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<span style="font-size: 10pt;">In its brief, NACBA argues that the trustee seeks to turn back the clock on an issue resolved by Congress in 1994 when it added section 348(f) to the Bankruptcy Code. That section provides that when a case is converted from chapter 13 to chapter 7, the “property of the estate” in the new chapter 7 case consists of the debtor’s property as of the date of the original petition. Only in the case of bad faith conversions is the property of the estate determined as of the date of conversion. In enacting section 348(f), Congress resolved a split in the circuits on this issue and since that time circuit courts have uniformly found that undistributed post-petition property belongs to the debtor upon conversion. See, e.g., In re Michael, 699 F.3d 305 (3d Cir. 2012) In re Stamm, 222 F.3d 216, 217-18 (5th Cir. 2000) In re Young, 66 F.3d 376, 378 (1st Cir. 1995).</span></div>
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<span style="font-size: 10pt;">The brief argues that the trustee’s “third option” of treating property as neither belonging to the estate, nor belonging to the debtor, but as having “vested” in the creditors upon confirmation of the chapter 13 plan is unsupported by statutory interpretation. Section 348(f) resolves the issue in favor of incentivizing debtors to attempt to repay creditors without the fear of negative repercussions if those good faith efforts fail.</span></div>
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<span style="font-size: 10pt;"><strong><u>Section 109(e) Debt Limits</u></strong></span><br /><span style="font-size: 10pt;">NACBA filed an amicus brief in the Third Circuit case of <a href="http://www.kintera.org/TR.asp?a=bhJLJUPyGgJRL0OQH&s=jtJSL0MGKgK1KcOMKqH&m=juJVJbMRKiIWIiK" style="color: #1155cc;" target="_blank">In re Scotto-DiClemente</a>, No. 12-3336. That case involves the question of how underwater mortgages are counted toward the section 109(e) debt limits when the chapter 13 debtor’s personal liability on the mortgages was discharged in a previous chapter 7 bankruptcy.Six months after obtaining his chapter 7 discharge the debtor filed a chapter 13 petition seeking to cure the arrearage on his first mortgage, strip the underwater mortgages, and save his residence from foreclosure. The court granted the trustee’s motion to dismiss, finding that the debtor’s unsecured debts based on the underwater mortgages exceeded section 109(e)’s debt limits. In re Scotto‐DiClemente, 463 B.R. 308, 314 (Bank. N.J. 2012) (decision on debtor’s motion for reconsideration). The district court affirmed.</span></div>
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<span style="font-size: 10pt;">NACBA’s brief makes the argument that the courts below improperly conflated a “debt” and “claim.” Under the text of the Code and the reasoning in Johnson v. Home State Bank, 501 U.S. 78 (1991), the chapter 7 discharge left the bank with an in rem “claim” against the property securing the liens, while eliminating the debtor’s in personam liability. Therefore, while the “claim” remained, no unsecured “debt” of the debtor existed to be used in the section 109(e) unsecured debt calculation. Additionally, stripping off wholly unsecured liens in chapter 13 does not convert those liens to unsecured debt where the debtor’s personal liability has already been discharged in a previous chapter 7. </span><br /><span style="font-size: 10pt;">Thanks to Peter Goldberger for authoring NACBA’s brief.</span></div>
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<strong><u><span style="font-size: 10pt;"><br /></span></u></strong></div>
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<strong><u><span style="font-size: 10pt;">Petition for Rehearing on State Law Exemption of Personal Injury Claim:</span></u></strong><span style="font-size: 10pt;">The debtor filed a petition for rehearing en banc in the case of <a href="http://www.kintera.org/TR.asp?a=fvKTK6NOIkIZJdN7F&s=jtJSL0MGKgK1KcOMKqH&m=juJVJbMRKiIWIiK" style="color: #1155cc;" target="_blank">In re Abdul-Rahim</a>. In that case, the Eighth Circuit held that the Missouri opt-out statute does not permit exemptions that are based upon state common law. In re Abdul-Rahim, No. 12-3448 (8th Cir. July 12, 2013). There, the debtors sought to exempt their unliquidated personal injury claim from their bankruptcy estate. NACBA filed an amicus brief in that case distinguishing the case relied on by the Eighth Circuit and arguing that state law defines property rights in bankruptcy and Missouri courts have consistently held that unliquidated personal injury claims are exempt property for purposes of bankruptcy. In its decision, the Eighth Circuit panel stated that “unless In re Benn is overruled en banc or by the Supreme Court, it remains binding precedent, and is directly applicable to the issues in this case.”</span></div>
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<span style="font-size: 12pt;"><strong>Arguments Scheduled:</strong></span><br /><span style="font-size: 10pt;">In re Reeves, No. 12-2127 (4th Cir.)</span><br /><span style="font-size: 10pt;">Issue: Whether trustee has an obligation to liquidate asset that is security for tax lien to pay administrative fees and interest owed to tax creditor where creditor has not sought relief from stay. Date of argument: September 19, 2013. NACBA filed an amicus brief in this case.</span></div>
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<span style="font-size: 10pt;">In re Hensen, No. 11-16019 (9th Cir.)</span><br /><span style="font-size: 10pt;">Issue: Whether possession is required for debtor’s obligation to turnover value of non-exempt funds. Date of argument: October 8, 2013. NACBA filed an amicus brief in this case.</span></div>
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<span style="font-size: 10pt;">Please consider making a contribution to the <a href="http://www.kintera.org/TR.asp?a=8eIFKLOmHdLLLTMGE&s=jtJSL0MGKgK1KcOMKqH&m=juJVJbMRKiIWIiK" style="color: #1155cc;" target="_blank">National Consumer Bankruptcy Rights Center</a> to advance this important work.</span></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-28959693678678820712013-08-12T20:41:00.001-04:002013-08-12T20:41:45.325-04:00Bankruptcy Case Law Updates from the National Consumer Bankruptcy Rights Center<ul style="background-color: white; border: 0px; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 20px; list-style: none; margin: 0px; padding: 0px;">
<li class="hentry p1 post publish author-ncbrc category-blog category-lien-stripping-blog tag-lien-stripping y2013 m08 d05 h15" id="post-1851" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><h1 class="entry-title" style="border: 0px; color: #0066b3; font-size: 18px; margin: 0px; padding: 0px;">
<a href="http://www.ncbrc.org/blog/2013/08/05/eleventh-circuit-gearing-up-to-revisit-chapter-7-lien-strip/" rel="bookmark" style="border: 0px; color: #0066b3; margin: 0px; padding: 0px; text-decoration: none;" title="Permalink to Eleventh Circuit Gearing Up to Revisit Chapter 7 Lien Strip">Eleventh Circuit Gearing Up to Revisit Chapter 7 Lien Strip</a></h1>
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Posted by NCBRC - August 5th, 2013</div>
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Will the Eleventh Circuit continue to buck the trend by allowing lien strips in chapter 7? That is the question that will likely be answered in the case of <i style="border: 0px; margin: 0px; padding: 0px;">In re Sinkfield</i>, No. 13-12141. On July 30, the circuit court summarily affirmed the lower courts’ finding that, pursuant to <i style="border: 0px; margin: 0px; padding: 0px;">In re McNeal</i>, No. 11-11352 (11th Cir. May 11, 2013), chapter 7 debtors may strip wholly unsecured liens under section 506(d). You will recall that the Court in <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup v. Timm</i>, 502 U.S. 410 (1992), found that under the historical principle that a lien survives bankruptcy unaffected, and a reading of sections 506(a) and (d) under which “allowed secured claim” is given different meanings, debtors may not strip-down a partially secured lien in chapter 7. In addressing a case in which the debtor sought to strip a wholly unsecured lien, however, the court in <i style="border: 0px; margin: 0px; padding: 0px;">McNeal</i> found that <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i> was inapplicable and that its earlier precedent, <i style="border: 0px; margin: 0px; padding: 0px;">Folendore v. United States Small Bus. Admin.</i>, 862 F.2d 1537 (11th Cir. 1989), permitting such strip-offs under section 506(d), was still good law. On August 2, the <i style="border: 0px; margin: 0px; padding: 0px;">McNeal</i> court agreed to publish its previously unpublished opinion to that effect. In granting summary affirmance of the lower court in <i style="border: 0px; margin: 0px; padding: 0px;">Sinkfield</i>, the circuit court specifically stated that its purpose was to allow the parties to seek en banc review.</div>
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On the same topic, the Seventh Circuit recently found that, under <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i>, neither section 506(a) standing alone, nor in conjunction with section 506(d), permits lien stripping of a wholly unsecured lien in chapter 7.<i style="border: 0px; margin: 0px; padding: 0px;"> Palomar v. First American Bank (In re Palomar),</i> No. 12-3492 (7th Cir. July 11, 2013). <i style="border: 0px; margin: 0px; padding: 0px;">See also Ryan v. Homecomings Fin. Network , </i>253 F.3d 778 (4th Cir. 2001);<i style="border: 0px; margin: 0px; padding: 0px;"> Talbert v. City Mortg. Serv., </i>344 F.3d 555 (6th Cir. 2003);<i style="border: 0px; margin: 0px; padding: 0px;"> Wachovia Mortg. v. Smoot</i>, 478 B.R. 555 (E.D.N.Y. 2012) (section 506 may not be used to strip off wholly unsecured lien in chapter 7).</div>
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<li class="hentry p2 post publish author-ncbrc category-blog tag-109g2 y2013 m07 d31 h21 alt" id="post-1845" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><div class="entry-content" style="border: 0px; margin: 0px 0px 20px; padding: 0px;">
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Dismissal under Section 109(g)(2)</h1>
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Posted by NCBRC - July 31, 2013</div>
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<i style="border: 0px; margin: 0px; padding: 0px;">Rivera v. Matos (In re Rivera),</i> No. 12-87 (B.A.P. 1st Cir. June 26, 2013), involved application of section 109(g)(2) which provides that no individual may be a debtor under this title “who has been a debtor in a case pending under this title at any time in the preceding 180 days if—(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title.” The facts were not good for the debtor. He filed his first chapter 13 bankruptcy on the eve of foreclosure but when he failed to respond to the mortgagee’s motion for relief from stay, the court lifted the stay thereby permitting the creditor to pursue his state foreclosure rights. One week before the scheduled foreclosure, Debtor moved to dismiss his bankruptcy for the express purpose of re-filing in order to prevent the foreclosure. The day before the scheduled foreclosure, the court granted the motion to dismiss. The debtor filed a new chapter 13 bankruptcy petition hours later. The creditor moved to dismiss the petition on the basis of section 109(g)(2)’s proscription against serial filings and on the basis of alleged bad faith. The court granted the motion solely pursuant to section 109(g)(2).</div>
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The BAP agreed that the case was properly dismissed under section 109(g)(2) and that it was unnecessary to make a determination as to bad faith. In so holding, the court discussed the subtleties of section 109(g)(2) noting that courts are divided on its application. In <i style="border: 0px; margin: 0px; padding: 0px;">In re Durham</i>, 461 B.R. 139, 142 (Bankr. D. Mass. 2011), the court delineated three approaches to section 109: the mandatory approach, under which the court must dismiss a case that meets the criteria set forth in section 109(g)(2),<i style="border: 0px; margin: 0px; padding: 0px;">see, e.g., In re Andersson</i>, 209 B.R. 76, 78 (6th Cir. BAP 1997); the discretionary approach, under which the court may take into consideration the debtor’s motives and whether the creditor has demonstrated bad behavior, <i style="border: 0px; margin: 0px; padding: 0px;">see, e.g., Leafty v. Aussie Sonoran Capital, </i>479 B.R. 545 (B.A.P. 9th Cir. 2012) (section 109(g)(2) dismissal discretionary);<i style="border: 0px; margin: 0px; padding: 0px;"></i></div>
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<i style="border: 0px; margin: 0px; padding: 0px;">In re Richter</i>, 2010 WL 4272915, at *3 (Bankr. N.D. Iowa 2010); and the causal approach, under which the case will be dismissed only where there is a connection between the filing of the motion for relief from stay and the debtor’s voluntary dismissal. <i style="border: 0px; margin: 0px; padding: 0px;">See</i> <i style="border: 0px; margin: 0px; padding: 0px;">In re Payton,</i> 481 B.R. 460 (Bankr. N.D. Ill. 2012) (finding that the most reasonable interpretation of “following” in section 109(g)(2) is “as a result of”). In<i style="border: 0px; margin: 0px; padding: 0px;">Payton</i>, the court reasoned that the causal approach harmonizes with congressional intent to prevent debtors from filing serial bankruptcies and dismissing in order to avoid the consequences of court-ordered relief from stay. <i style="border: 0px; margin: 0px; padding: 0px;">See In re Riekena,</i> 456 B.R. 365, 368 (Bankr.C.D.Ill.2011) (“It is widely acknowledged that Congress enacted section 109(g)(2) for the purpose of curbing abusive repetitive filings by debtors attempting to nullify a stay relief order entered in a prior case by obtaining a new automatic stay upon refiling.”); <i style="border: 0px; margin: 0px; padding: 0px;">In re Beal</i>, 347 B.R. 87 (E.D. Wisc. 2006) (finding that dismissal pursuant to section 109(g)(2) is inappropriate where the motion for relief from stay was denied).</div>
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While some courts in the First Circuit have adopted the causal approach, <i style="border: 0px; margin: 0px; padding: 0px;">see, e.g. Durham</i>, 461 B.R. 139; <i style="border: 0px; margin: 0px; padding: 0px;">In re Lopez Ramos</i>, 212 B.R. 29, 30 (Bankr. D.P.R. 1997), the<i style="border: 0px; margin: 0px; padding: 0px;">Rivera</i> court found that it did not have to make a choice as the case would be subject to dismissal based on any of the three approaches. Because the debtor explicitly informed the court that he sought dismissal of the earlier case as a result of the court’s granting of the motion for relief from stay and the pending foreclosure he admitted the causal connection. Moreover, there was no suggestion of bad faith on the part of the creditor and further delay of the foreclosure resulting from the second bankruptcy petition would prejudice the creditor.</div>
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The court was also not faced with the question of whether the automatic stay is in effect until such time as it is determined whether the debtor is ineligible, or whether section 362(b)(21)(A), which provides that the automatic stay does not come into play when the debtor is ineligible under section 109(g), is self-executing. <i style="border: 0px; margin: 0px; padding: 0px;">See Anjos v. Bank of America</i>, No. 12-11553 (Bankr. D. Mass. Nov. 5, 2012) (interpreting section 109(g)(1) and finding that the automatic stay is in effect until such time as debtor’s ineligibility is determined). <i style="border: 0px; margin: 0px; padding: 0px;">See also Durham,</i> 461 B.R. at 141 (“Thus until the court rules on eligibility, the filing of a petition by an individual possibly ineligible under § 109(g) effectively commences a bankruptcy case.”).</div>
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<li class="hentry p3 post publish author-ncbrc category-blog category-lien-stripping-blog tag-lien-stripping y2013 m07 d29 h17" id="post-1835" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><h1 class="entry-title" style="border: 0px; color: #0066b3; font-size: 18px; margin: 0px; padding: 0px;">
No Lien Strip Permitted in Chapter 7 under Section 506</h1>
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Posted by NCBRC - July 29, 2013</div>
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In <i style="border: 0px; margin: 0px; padding: 0px;">In re Palomar </i>the chapter 7 debtors filed an adversary proceeding seeking to strip off a wholly unsecured junior lien on their residence. The bank had not filed a claim in the bankruptcy. The court found that the debtors could not strip the lien and the district court affirmed. The Seventh Circuit found that neither section 506(a) standing alone, nor in conjunction with section 506(d), permits such lien stripping.<i style="border: 0px; margin: 0px; padding: 0px;"> Palomar v. First American Bank (In re Palomar),</i> No. 12-3492 (7th Cir. July 11, 2013).<span id="more-1835" style="border: 0px; margin: 0px; padding: 0px;"></span></div>
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The Seventh Circuit began with the finding that, under the reasoning set forth in<i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup v. Timm</i>, 502 U.S. 410 (1992), 506(d) does not permit strip-off of a lien that is allowed even though that lien may be valueless under section 506(a). Because, in<em style="border: 0px; margin: 0px; padding: 0px;">Palomar</em>, the bank had not filed a claim, there was no issue as to whether the claim was “allowed” for purposes of application of section 506(d), therefore, the lien could not be stripped pursuant to that section. <i style="border: 0px; margin: 0px; padding: 0px;">See also</i> <i style="border: 0px; margin: 0px; padding: 0px;">Ryan v. Homecomings Financial Network</i>, 253 F.3d 778, 781-82 (4th Cir. 2001) (chapter 7 debtor may not strip-off wholly unsecured lien pursuant to section 506(d)); <i style="border: 0px; margin: 0px; padding: 0px;">Talbert v. City Mortg. Serv.</i>, 344 F.3d 555 (6th Cir. 2003) (same); <i style="border: 0px; margin: 0px; padding: 0px;">Laskin v. First Nat’l Bank of Keystone</i>, 222 B.R. 872 (B.A.P. 9th Cir. 1998) (same). <i style="border: 0px; margin: 0px; padding: 0px;">But see</i> <i style="border: 0px; margin: 0px; padding: 0px;">In re McNeal, </i>477 Fed. Appx. 562 (11th Cir. 2012) (under Eleventh Circuit precedent chapter 7 debtor may strip wholly unsecured lien pursuant to section 506(d)).</div>
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The court turned to whether section 506(a) would serve the purpose sought by the debtors and found that it would did not. “The point of section 506(a) is not to wipe out liens but to recognize that if a creditor is owed more than the current value of his lien, he can by filing a claim in bankruptcy (rather than bypassing bankruptcy and foreclosing his lien) obtain, if he’s lucky, some of the debt owed him that he could not obtain by foreclosure because his lien is worth less than the debt.” <i style="border: 0px; margin: 0px; padding: 0px;">Citing</i> <i style="border: 0px; margin: 0px; padding: 0px;">In re Tarnow</i>, 749 F.3d 464, 465-66 (7th Cir. 1984).</div>
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Though, as was found by the <i style="border: 0px; margin: 0px; padding: 0px;">Palomar</i> court, the trend is toward interpreting <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i>as prohibiting strip-offs of wholly unsecured liens in chapter 7, the Eleventh Circuit rejected that finding in its unpublished opinion in <i style="border: 0px; margin: 0px; padding: 0px;">In re McNeal, </i>477 Fed. Appx. 562 (11th Cir. 2012). There, the court found that <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i> should be confined to its factual borders which dealt only with a partially secured lien. When the issue involves a wholly unsecured lien, albeit one that is allowed under section 502, <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i> does not control. Rather, the court in <i style="border: 0px; margin: 0px; padding: 0px;">McNeal</i> relied on <i style="border: 0px; margin: 0px; padding: 0px;">Folendore v. United States Small Bus. Admin</i>., 862 F.2d 1537 (11th Cir. 1989), which held that the plain meaning of sections 506(a) and (d) rendered a wholly unsecured lien in chapter 7 void.</div>
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<li class="hentry p4 post publish author-ncbrc category-blog tag-trustee-power-2 y2013 m07 d26 h14 alt" id="post-1831" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><h1 class="entry-title" style="border: 0px; color: #0066b3; font-size: 18px; margin: 0px; padding: 0px;">
<a href="http://www.ncbrc.org/blog/2013/07/26/trustee-steps-into-shoes-of-lienholder-upon-avoidance-of-lien/" rel="bookmark" style="border: 0px; color: #0066b3; margin: 0px; padding: 0px; text-decoration: none;" title="Permalink to Trustee Steps into Shoes of Lienholder upon Avoidance of Lien">Trustee Steps into Shoes of Lienholder upon Avoidance of Lien</a></h1>
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Posted by NCBRC - July 26th, 2013</div>
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NCBRC filed an amicus brief on behalf of the NACBA membership in the case of <i style="border: 0px; margin: 0px; padding: 0px;">In re Traverse</i>, 13-9002 (1st Cir. July 10, 2013). In that case, when the chapter 7 debtor entered into bankruptcy, she sought to exempt her home from the estate and continue making her mortgage payments. It was undisputed that the debtor was not in default on her mortgages. The trustee, however, successfully avoided one of the liens as unperfected and sought to sell the debtor’s residence for the benefit of creditors. The lower courts found that, having avoided the lien, the trustee stood in the shoes of the debtor and had the power to sell the property.</div>
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In its amicus brief before the First Circuit, NACBA argues that application of Bankruptcy Code sections 704, 541(a), 551, and 544, demonstrates that upon avoidance and preservation of a lien the trustee stands in the shoes of the former lienholder, not the debtor. Therefore, the trustee did not gain the power to sell the property except to the extent that the lienholder would have had that power. <i style="border: 0px; margin: 0px; padding: 0px;">See </i><i style="border: 0px; margin: 0px; padding: 0px;">In re Trout, </i>609 F.3d 1106, 1110 (10th Cir. 2010) (“under § 551 the trustee steps into the shoes of the former lienholder, with the same rights in the collateralized property that the original lienholder enjoyed.”). Because the debtor was current on her payments, under state law, there was no default to trigger the right to foreclose.</div>
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Thanks to Ray DiGuiseppe for authoring NACBA’s brief.</div>
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NACBA Files Amicus on Applicable Commitment Period</h1>
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Posted by NCBRC - July 24, 2013</div>
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NCBRC filed an amicus brief on behalf of the NACBA membership in the case of <i style="border: 0px; margin: 0px; padding: 0px;">In re Pliler,</i> No. 13-1445 (4th Cir. June 20, 2013). NACBA’s brief argues that the Bankruptcy Court erred when it held that section 1325(b)(4)(B) created a minimum plan length of sixty months for above-median debtors, and that the disposable income formula set forth by Congress and reflected on Form 22C could be abandoned if it was inconsistent with income and expenses as reflected on Schedules I and J.<span id="more-1814" style="border: 0px; margin: 0px; padding: 0px;"></span></div>
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With respect to the applicable commitment period, the lower court in <i style="border: 0px; margin: 0px; padding: 0px;">Pliler</i> erroneously adopted the “temporal approach” which treats that period as a mandatory temporal obligation that the debtor must serve in the plan. In its brief NACBA argues that the correct interpretation of the applicable commitment period supports a “monetary approach,” under which “projected disposable income” is calculated by multiplying the number of months in the debtor’s “applicable commitment period” by the debtor’s “disposable income” to produce the minimum dollar amount that must be paid to unsecured creditors. Once that amount is paid, the debtor has fulfilled his or her obligations and may be discharged without regard to whether the debtor completed the plan prior to the 5 year period. This approach has advantages for all concerned. Creditors get their money sooner, thereby lessening the risk of the debtor’s failure to complete the plan, the bankruptcy moves more quickly through the system thereby relieving judicial costs, and the debtor can benefit sooner from the fresh start he or she has earned.</div>
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Furthermore, from a statutory construction standpoint, if section 1325(b)(4) establishes a freestanding plan length even in the absence of objection from the trustee or unsecured creditor, section 1325(b)(1) would be rendered superfluous, as that section only refers to the applicable commitment period upon such objection. This is an untenable result of the “temporal approach” applied by the lower court.</div>
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NACBA’s position is supported by <i style="border: 0px; margin: 0px; padding: 0px;">Hamilton v. Lanning,</i>506 U.S. __, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010), in which the Court found that once income and expenses are adjusted by “known or virtually certain changes,” the resulting amount should be multiplied by 36 or 60 months to arrive at the “projected disposable income.” This is in harmony with pre-BAPCPA treatment of the issue which <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i> endorsed.</div>
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The brief argues that the contrary decisions out of the Sixth and Eleventh Circuits, <i style="border: 0px; margin: 0px; padding: 0px;">Baud v. Carroll, </i>634 F.3d 327 (6th Cir. 2011); <i style="border: 0px; margin: 0px; padding: 0px;">Whaley v. Tennyson, </i>611 F.3d 873 (11th Cir. 2010), were wrongly decided.</div>
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Finally, the brief argues that the bankruptcy court erred in finding that it could jettison the results of the means test in favor of calculating an amount the debtor is able to pay based on schedules I and J, thereby rendering the means test—one of the most significant BAPCPA amendments—superfluous.</div>
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Thanks to Norma Hammes for authoring NACBA’s brief.</div>
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Eighth Circuit Rejects State Common-Law Exemptions</h1>
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Posted by NCBRC - July 22, 2013</div>
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The Eighth Circuit found that the Missouri opt-out statute does not permit exemptions that are based upon state common law. <i style="border: 0px; margin: 0px; padding: 0px;">In re Abdul-Rahim,</i> 12-3448 (8th Cir. July 12, 2013). In that case, the debtors sought to exempt their unliquidated personal injury claim from their bankruptcy estate. The bankruptcy court rejected the exemption because it originated under state common law rather than by statutory enactment. Missouri’s opt-out statute, section 513.427, provides that Missouri debtors “shall be permitted to exempt from property of the [bankruptcy] estate any property that is exempt from attachment and execution under the law of the state of Missouri.” In finding that the state exemptions referred to in that section did not include common law exemptions, the court relied on, and in fact felt compelled to follow, <i style="border: 0px; margin: 0px; padding: 0px;">In re Benn</i>, 491 F.3d 811 (8th Cir. 2007), which held that, under Missouri law, the tax refunds that the debtor sought to exempt were property of the bankruptcy estate and were not exemptible.<span id="more-1810" style="border: 0px; margin: 0px; padding: 0px;"></span></div>
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NACBA filed an amicus brief in this case arguing that the <i style="border: 0px; margin: 0px; padding: 0px;">Benn</i> decision merely determined that anticipated tax refunds were property of the bankruptcy estate and that Missouri’s opt-out statute did not create exemptions that did not otherwise exist under other state law. In finding that the opt-out statute did not create exemptions, the court in <i style="border: 0px; margin: 0px; padding: 0px;">Benn</i> stated: “The statute simply provides that where another Missouri <i style="border: 0px; margin: 0px; padding: 0px;">statute</i>specifies that certain property is exempt from attachment and execution, then a debtor may exempt that property from the bankruptcy estate.” 491 F.3d at 814. Despite the fact that <i style="border: 0px; margin: 0px; padding: 0px;">Benn</i> did not deal with a common law exemption, the court in<i style="border: 0px; margin: 0px; padding: 0px;">Abdul-Rahim</i> found that <i style="border: 0px; margin: 0px; padding: 0px;">Benn’s</i> reference to a Missouri <i style="border: 0px; margin: 0px; padding: 0px;">statute</i>, defined a rule that exemptions under Missouri common law could not be used in bankruptcy.</div>
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This decision flies in the face of well-established precedent that state law as determined by state legislature and courts, defines property rights in bankruptcy. As pointed out by NACBA in this case, Missouri courts have consistently held that unliquidated personal injury claims are exempt property for purposes of bankruptcy. “Allowing debtors to exempt personal injury claims is consistent with policies underlying both bankruptcy and tort law and the fact that the exemption at issue was based in common law is irrelevant. Nothing in section 522(b)(3) or the history of the 1978 Bankruptcy Code suggests that only “statutory” exemption are permitted in states that have opted-out of the federal exemption scheme. The Eighth Circuit’s dictum in which suggests all state exemptions must be statutory, is not consistent with the law of Missouri or the plain language of section 522(b)(3).”</div>
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Nonetheless, the <i style="border: 0px; margin: 0px; padding: 0px;">Abdul-Rahim </i>court felt that the language of <i style="border: 0px; margin: 0px; padding: 0px;">Benn</i> was controlling and that “unless In re Benn is overruled en banc or by the Supreme Court, it remains binding precedent, and is directly applicable to the issues in this case.”</div>
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<li class="hentry p7 post publish author-ncbrc category-blog untagged y2013 m07 d17 h21" id="post-1794" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><h1 class="entry-title" style="border: 0px; color: #0066b3; font-size: 18px; margin: 0px; padding: 0px;">
<a href="http://www.ncbrc.org/blog/2013/07/17/two-new-cases-support-majority-in-ch-20-lien-stripping/" rel="bookmark" style="border: 0px; color: #0066b3; margin: 0px; padding: 0px; text-decoration: none;" title="Permalink to Two New Cases Support Majority in Ch.20 Lien Stripping">Two New Cases Support Majority in Ch.20 Lien Stripping</a></h1>
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Posted by NCBRC - July 17th, 2013</div>
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While the issue of lien stripping in no discharge chapter 13′s continues to work its way through the appellate courts, two bankruptcy courts have recently weighed in and sided with the majority, which permits lien stripping even when a discharge is unavailable. The courts in <em style="border: 0px; margin: 0px; padding: 0px;"><a href="http://www.ncbrc.org/wp-content/uploads/WapshareOpinion.pdf" style="border: 0px; color: #0066b3; margin: 0px; padding: 0px; text-decoration: none;">In re Wapshare</a></em>, 492 B.R. 211 (S.D. N.Y. 2013) and <a href="http://www.ncbrc.org/wp-content/uploads/DolinakOpinion.pdf" style="border: 0px; color: #0066b3; margin: 0px; padding: 0px; text-decoration: none;"><em style="border: 0px; margin: 0px; padding: 0px;">In re Dolinak</em>,</a> 2013 WL 3294277 (Bankr. D.N.H. June 28, 2013), both concluded that the lack of a discharge did no preclude lien avoidance of undersecured junior mortgages, but rather that permanent lien avoidance is conditioned upon completion of payments under the debtor’s confirmed plan. Finding that the junior mortgagees did not have “allowed secured claims” both courts also rejected the argument that 1325(a)(5)(B) required debtors to pay in full the debt on the junior mortgage or obtain a discharge.</div>
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<li class="hentry p8 post publish author-ncbrc category-blog tag-ride-through y2013 m07 d12 h17 alt" id="post-1779" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><div class="entry-content" style="border: 0px; margin: 0px 0px 20px; padding: 0px;">
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Court Finds Ride-Through Not Available with respect to Real Property</h1>
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Posted by NCBRC - July 12, 2013</div>
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In <i style="border: 0px; margin: 0px; padding: 0px;">In re Jeanfreau</i>, No. 13-50015 (Bankr. S.D. Miss. June 12, 2013), the mortgagee moved to compel compliance with section 521(a)(2), and to delay discharge of the debtor’s chapter 7 bankruptcy due to the debtor’s failure to reaffirm the mortgage on her home. Ms. Jeanfreau was current on her payments under the mortgage and had equity in the home. On her section 521(a)(2) “statement of intention,” she indicated that she intended to retain the property but did not elect to either “redeem” or “reaffirm” the debt. Instead she checked “other” and noted that she intended to maintain regular payments on the mortgage outside of bankruptcy without reaffirming.<span id="more-1779" style="border: 0px; margin: 0px; padding: 0px;"></span></div>
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In finding that ride-through was not available to the debtor, the court relied on precedent set by the 1996 decision in <i style="border: 0px; margin: 0px; padding: 0px;">Johnson v. Sun Finance Co. (In re Johnson),</i>89 F.3d 249 (5th Cir.), which, in turn, agreed with <i style="border: 0px; margin: 0px; padding: 0px;">Taylor v. AGE Federal Credit Union (In re Taylor), </i>3 F.3d 1512 (11th Cir. 1993). Both <i style="border: 0px; margin: 0px; padding: 0px;">Johnson</i> and <i style="border: 0px; margin: 0px; padding: 0px;">Taylor</i> involved debts secured by personal property. The <i style="border: 0px; margin: 0px; padding: 0px;">Johnson</i> court recognized that circuits were split on the issue of the availability of ride-through as a fourth option outside of those provided by section 521 (surrender, redeem or reaffirm). <i style="border: 0px; margin: 0px; padding: 0px;">Accord In re Covel</i>, 474 B.R. 702 (Bankr. W.D. Ark. 2012) (listing pre-BAPCPA circuit cases representing both sides of the issue). Many of those pre-BAPCPA decisions rested on interpretation of the phrase “if applicable” in section 521. <i style="border: 0px; margin: 0px; padding: 0px;">See, e.g.,</i> <i style="border: 0px; margin: 0px; padding: 0px;">McClellan Fed. Credit Union v. Parker (In re Parker),</i> 139 F.3d 668 (9th Cir. 1998); <i style="border: 0px; margin: 0px; padding: 0px;">Home Owners Funding Corp. of Am. v. Belanger (In Re Belanger)</i>, 962 F.2d 345, 347-49 (4th Cir.1992). The<i style="border: 0px; margin: 0px; padding: 0px;">Johnson</i> court, however, concluded that the mandatory language, “the debtor shall file with the clerk a statement of his intention,” in the pre-BAPCPA section 521 precluded the fourth, unwritten, option.</div>
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The <i style="border: 0px; margin: 0px; padding: 0px;">Jeanfreau</i> court then turned to the impact of the BAPCPA amendments on the<em style="border: 0px; margin: 0px; padding: 0px;">Johnson</em> decision. Walking through some of the relevant new provisions, the court noted that section 521(a)(6) specifically provides that a debtor may not retain possession of personal property unless the debtor has selected one of the three options in section 521(a)(2)(A), and the hanging paragraph to section 521(a)(2)(B) provides that nothing in (A) or (B) alters the debtor’s rights except as provided for in section 362(h) which, in turn, provides that the automatic stay is terminated with respect to personal property in the event that the debtor fails to file a timely statement of intention as required by section 521. Based on these changes to the Code, courts have generally found that ride through is no longer available where a debt is secured by personal property. <i style="border: 0px; margin: 0px; padding: 0px;">See, e.g.,</i> <i style="border: 0px; margin: 0px; padding: 0px;">DaimlerChrysler Fin. Serv. Amer. v. Jones</i> <i style="border: 0px; margin: 0px; padding: 0px;">(In re Jones)</i>, 591 F.3d 308 (4th Cir. 2010); <i style="border: 0px; margin: 0px; padding: 0px;">Dumont v. Ford Motor Credit Co. (In re Dumont),</i> 581 F.3d 1107 (9th Cir. 2009); <i style="border: 0px; margin: 0px; padding: 0px;">In re Harris,</i> 421 B.R. 597 (Bankr. S.D. Ga. 2010) (BAPCPA clearly eliminated ride through for personal property); <i style="border: 0px; margin: 0px; padding: 0px;">In re Linderman</i>, 435 B.R. 715, 716-17 (Bankr. M.D. Fla. 2009).</div>
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Despite the fact that the property at issue in <i style="border: 0px; margin: 0px; padding: 0px;">Jeanfreau</i> was real property rather than personal property, the court found that because the BAPCPA amendments did not change the mandatory language relied on in <i style="border: 0px; margin: 0px; padding: 0px;">Johnson</i>, they did not abrogate that court’s holding and did not eliminate the precedential mandate established by that case. <i style="border: 0px; margin: 0px; padding: 0px;">See also</i><i style="border: 0px; margin: 0px; padding: 0px;"> In re Harris</i>, 421 B.R. 597 (Bankr. S.D. Ga. 2010) (finding that BAPCPA clearly eliminated ride through for personal property and did not change the reasoning in <i style="border: 0px; margin: 0px; padding: 0px;">Taylor</i> which demands that ride through is also unavailable where real property is involved).</div>
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Though, as found by the <em style="border: 0px; margin: 0px; padding: 0px;">Jeanfreau</em> court, the language of <i style="border: 0px; margin: 0px; padding: 0px;">Johnson</i> and <i style="border: 0px; margin: 0px; padding: 0px;">Taylor</i> may be broad enough to encompass real property, the fact that Congress specifically circumscribed only personal property, arguably supports a finding that ride-through is available where real property is concerned. <i style="border: 0px; margin: 0px; padding: 0px;">In re Covel</i>, 474 B.R. 702, 708 (Bankr. W.D. Ark. 2012) (“By not making corresponding changes concerning real property, Congress appears to tacitly recognize a ride through option for real property.”). <i style="border: 0px; margin: 0px; padding: 0px;">See also </i><i style="border: 0px; margin: 0px; padding: 0px;">In re Lopez, </i>440 B.R. 447, 448 (Bankr. E.D. Va. 2010) (denying debtor’s motion to approve reaffirmation agreement because it was not in debtor’s best interest and “Congress changed, but did not entirely eliminate, the ride-through provisions that existed before the 2005 amendments in the Bankruptcy Abuse Prevention and Consumer Protection Act. In re Donald, 343 B.R. 524 (Bankr.E.D.N.C.2006). It did not eliminate the ride-through for debts secured by real property. In re Waller, 394 B.R. 111 (Bankr.D.S.C.2008); In re Wilson, 372 B.R. 816 (Bankr.D.S.C.2007); In re Bennet, 2006 WL 1540842 (Bankr.M.D.N.C.2006).”); <i style="border: 0px; margin: 0px; padding: 0px;">In re Caraballo,</i> 386 B.R. 398, 402 (Bankr. D. Conn.2008).</div>
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Ms. Jeanfreau filed a notice of appeal in this case on June 20. Where the bankruptcy court felt bound by precedent, it will be interesting to follow this case on appeal.</div>
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<li class="hentry p9 post publish author-ncbrc category-blog category-lien-stripping-blog untagged y2013 m07 d09 h15" id="post-1774" style="border-top-color: rgb(204, 204, 204); border-top-style: solid; border-width: 1px 0px 0px; margin: 0px 0px 20px; padding: 20px 0px 0px;"><h1 class="entry-title" style="border: 0px; color: #0066b3; font-size: 18px; margin: 0px; padding: 0px;">
Dewsnup Rears its Ugly Head in Seventh Circuit Chapter 13 Case</h1>
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Posted by NCBRC - July 9, 2013</div>
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In <i style="border: 0px; margin: 0px; padding: 0px;">Ryan v. U.S.A</i>., No. 12-3398 (7th Cir. July 8, 2013), the IRS had a tax lien on debtor’s property as security for delinquent taxes of more than $136,000.00. At the time debtor filed his chapter 13 petition the value of his estate property totaled approximately $1,600.00. He moved the court to value the IRS’s lien under section 506(a), to treat the secured portion of the lien in the bankruptcy, and to strip the unsecured portion under section 506(d). The bankruptcy court agreed with the IRS that section 506(d) does not authorize a court to strip a wholly unsecured lien.</div>
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The Seventh Circuit granted the debtor’s petition for direct appeal and affirmed.<span id="more-1774" style="border: 0px; margin: 0px; padding: 0px;"></span></div>
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Section 506(a) provides that “’[a]n allowed claim . . is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property.” Section 506(d) provides that “[t]o the extent that lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.” Like many debtors, Ryan interpreted these provisions as creating a two-step process under which a lien is valued under section 506(a) and the unsecured portion stripped under section 506(d). Also, like many debtors, Ryan found himself pressed up against the brick wall put up by the Supreme Court in the case of <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup v. Timms</i>, 502 U.S. 410 (1992), where, in a cringe-worthy opinion, the Court found “that §§ 506(a) and 506(d) did not have to be read together, and that the term ‘allowed secured claim’ in § 506(d) was not defined by reference to § 506(a).” <i style="border: 0px; margin: 0px; padding: 0px;">Ryan</i>, at * 3.</div>
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In <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i> the Court interpreted section 506(d)’s “allowed secured claim” as a claim which is first allowed, and second, secured within the meaning of state law rather than by the valuation performed under section 506(a).<i style="border: 0px; margin: 0px; padding: 0px;"> Dewsnup </i>went on to find that section 506(d) does not permit a lien to be stripped down to its secured value in chapter 7. Courts have extended this finding to preclude strip-offs of wholly unsecured liens in chapter 7. <i style="border: 0px; margin: 0px; padding: 0px;"> See </i><i style="border: 0px; margin: 0px; padding: 0px;">Wachovia Mortgage v. Smoot</i>, 478 B.R. 555 (E.D. N.Y. 2012) (joining majority of courts in finding that <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i> precludes strip off of wholly unsecured lien).</div>
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Ryan attempted to distinguish <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup</i> as involving a chapter 7 bankruptcy while his case is in chapter 13. The court found, however, that section 103(a), which provides that chapter 5 applies equally to chapters 7 and 13 precluded that distinction and that section 506(d) cannot be interpreted differently in chapter 13 than it is in chapter 7 merely in an effort to maximize the underlying benefits of chapter 13 bankruptcy where there is no statutory language to support such an interpretation.</div>
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This decision mirrors the recent conclusion by the Tenth Circuit in <i style="border: 0px; margin: 0px; padding: 0px;">In re Woolsey</i>, 696 F.3d 1266, 1273 (2012), in which that court rejected the debtor’s attempt to strip a lien under the authority of section 506(d) finding that the mechanism for stripping must be found elsewhere in the Code, such as in section 1322(b).<i style="border: 0px; margin: 0px; padding: 0px;"> See also</i> <i style="border: 0px; margin: 0px; padding: 0px;">Brinson v. U.S.A</i>., 485 B.R. 890 (Bankr. N.D. Ill. 2013) (chapter 13 debtor cannot strip unsecured lien based solely upon section 506(d)); <i style="border: 0px; margin: 0px; padding: 0px;">Cusato v. Springleaf Financial,</i> 485 B.R. 824 (Bankr. E.D. Pa. 2013) (506(d) does not provide necessary mechanism for strip-off of wholly unsecured lien in chapter 13). <i style="border: 0px; margin: 0px; padding: 0px;">But see</i> <i style="border: 0px; margin: 0px; padding: 0px;">National Capital Management v. Gammage-Lewis,</i> No. 12-2286 (4th Cir. June 6, 2013) (finding that Rule 7001(2) provides the mechanism for stripping off a disallowed claim under section 506(d)).<br />
The <i style="border: 0px; margin: 0px; padding: 0px;">Ryan</i> court concluded that “We agree with <i style="border: 0px; margin: 0px; padding: 0px;">Woolsey</i>, and join it in holding that the Court’s interpretation of § 506(d) in <i style="border: 0px; margin: 0px; padding: 0px;">Dewsnup </i>applies in Chapter 13 cases as well.”</div>
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Court Erroneously Applies Lanning to Find Presumption of Abuse in Chapter 7</h1>
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Posted by NCBRC - July 4, 2013</div>
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The district court for the Eastern District of North Carolina was asked to revisit its previous decision that a chapter 7 debtor may take secured payment deductions on property he intends to surrender. <i style="border: 0px; margin: 0px; padding: 0px;">Krawczyk v. Lynch (In re Krawczyk),</i> No. 12-643 (E.D. N.C. June 17, 2013). The bankruptcy court had concluded that intervening Supreme Court and Fourth Circuit decisions rendered that finding incorrect. <i style="border: 0px; margin: 0px; padding: 0px;">In re Krawczyk</i>, No. 11-0956-8-JRL, 2012 WL 3069437 * 5 (Bankr. E.D. N.C. July 27, 2012) (relying on <i style="border: 0px; margin: 0px; padding: 0px;">Hamilton v. Lanning</i>, 130 S. Ct. 2464 (2010); <i style="border: 0px; margin: 0px; padding: 0px;">Ransom v. FIA Card Services</i>, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011); <i style="border: 0px; margin: 0px; padding: 0px;">In re Quigley</i>, 673 F.3d 269 (4th Cir. 2012)). The district court agreed that the debtor could not take the deductions and that, therefore, the petition was presumptively abusive under section 707(b)(2)(A).<span id="more-1769" style="border: 0px; margin: 0px; padding: 0px;"></span></div>
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The court began with a look at section 707(b)(2)(A) which provides that a chapter 7 petition is presumptively abusive when calculation of the means test reveals current monthly income in excess of a statutory minimum. Under the means test, calculation of current monthly income permits a deduction for ‘[t]he debtor’s average monthly payments on account of secured debts,’ which ‘shall be calculated as . . . the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the filing of the petition. . . . divided by 60.’ 11 U.S.C. § 707(b)(2)(A)(iii).” In this case, when the debtor calculated his income with the deduction for his secured debts his petition did not trigger the presumptive abuse provision.</div>
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Nonetheless, the court agreed with the trustee’s position, finding that under <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i>,<i style="border: 0px; margin: 0px; padding: 0px;">Ransom</i> and <i style="border: 0px; margin: 0px; padding: 0px;">Quigley</i>, the debtor’s intent to surrender collateral altered the means test calculation of current monthly income. It rejected the debtor’s argument distinguishing those cases on the basis that they concern chapter 13, finding that, because the means test is the basis for the calculation whether the bankruptcy is chapter 7 or chapter 13, the reasoning is identical in either situation.</div>
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In so holding,the court performed various contortions beginning with a strained reading of the section quoted above that allows certain deductions in the monthly income calculation. The court first examined the word “scheduled” finding that it is amenable to two plausible interpretations: 1) specified to be paid under the terms of the security agreement, or 2) scheduled as expenses in the debtor’s bankruptcy schedules. If the proper meaning is the latter, the court reasoned, a debtor who has not made payments on the loan and does not intend to in the future, will not schedule the expense on the bankruptcy Schedule J and may not take the deduction. The court next found ambiguity in the phrase “on account of secured debts.” The court found this phrase susceptible to meaning: 1) on account of debts created with a security interest but subject to change – the “snapshot” view, or 2) on account of debts which will continue to be secured during the bankruptcy – the “forward-looking” view.</div>
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Having found ambiguity, the court went on to resolve the issue by reference to <i style="border: 0px; margin: 0px; padding: 0px;">In re Quigley</i>, 673 F.3d 269 (4th Cir. 2012), where the circuit court applied a forward-looking approach to decide that a chapter 13 debtor could not calculate projected disposable income with a deduction for secured payments on property he intended to surrender. The <i style="border: 0px; margin: 0px; padding: 0px;">Quigley</i> opinion was supported by <i style="border: 0px; margin: 0px; padding: 0px;">Hamilton v. Lanning</i>, 130 S. Ct. 2464 (2010) (projected disposable income calculation may take into account changes that are virtually certain to occur), and <i style="border: 0px; margin: 0px; padding: 0px;">Ransom v. FIA Card Services, N.A</i>., 131 S.Ct. 716 (2011) (debtor may not take expense deduction for payments on surrendered vehicle).</div>
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It was in the interpretation of the lessons of <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i>, <i style="border: 0px; margin: 0px; padding: 0px;">Ransom</i> and <i style="border: 0px; margin: 0px; padding: 0px;">Quigley</i>, all three of which dealt with chapter 13 plans, that the district court went off course. The means test is an objective first step in the bankruptcy process based on the state of debtor’s financial affairs as of the petition date. <i style="border: 0px; margin: 0px; padding: 0px;">See In re Rivers</i>, 466 B.R. 558 (Bankr. M.D. Fla. 2012) (citing <i style="border: 0px; margin: 0px; padding: 0px;">Ransom</i>). “[A] plain, ordinary reading of the subsection supports the bankruptcy court’s finding that it applies to payments that the debtor is under contract to make.” <i style="border: 0px; margin: 0px; padding: 0px;">Lynch v. Haenke (In re Lynch),</i> 395 B.R. 346, 349 (E.D. N.C. 2008). A finding based on the means test that the petition is not presumptively abusive under section 707(b)(2) does not preclude a finding of bad faith, however. Section 707(b)(3) permits a court to inquire into the good faith of the petitioner based on the totality of the circumstances, “including debtor’s income and expenses after the filing of the petition.” <i style="border: 0px; margin: 0px; padding: 0px;">Id</i>. at 560. Therefore, it is neither necessary nor appropriate to manipulate the outcome of the means test to account for the intended surrender of collateral.</div>
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This reasoning finds support in the very cases the court in <i style="border: 0px; margin: 0px; padding: 0px;">Krawczyk</i> relied on for the opposite proposition. Unlike the court here, the <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i> Court did not recalculate “current monthly income” as determined by the means test. Rather, the <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i> Court decided that “projected disposable income” would not be based on that calculation alone when changes to current monthly income were known or virtually certain to occur. The <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i> Court did not have to perform the same sleight of hand with respect to the language of section 707(b)(2)(A)(iii) because that Court did not require recalculation of current monthly income for its ultimate decision. Specifically, <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i>answered the question of whether the “projected disposable income” calculation—a calculation that does not come into play in chapter 7—always had to be based on the current monthly income in the means test, or whether it could take into account changes to the means test calculation that were “virtually certain” to occur. Notably, the <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i> Court did not find that anticipated changes to income altered the means test calculation of current monthly income.</div>
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The issue is also not answered by <i style="border: 0px; margin: 0px; padding: 0px;">Ransom</i> where the Court examined a different provision of the means test relating to deduction of vehicle ownership costs for a car that was fully paid off. Calculation of that deduction is explicitly dependent upon IRS Standards which define the deduction in such a way that it covers only expenses related to a car loan or lease. Since the debtor had neither, the ownership deduction was deemed inapplicable within the meaning of the means test. The Court noted that the means test provided for a separate deduction based on operating expenses which was not dependent on the existence of debt.</div>
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The means test is a “snapshot” of the debtor’s financial situation at the time of filing. Therefore, a debtor’s intent to surrender does not come into play at that juncture. This finding is harmonious with the recent Supreme Court decisions in <i style="border: 0px; margin: 0px; padding: 0px;">Lanning</i> and<i style="border: 0px; margin: 0px; padding: 0px;">Ransom</i>, and obviates the need for strained reading of section 707, without precluding a later finding of abuse if the totality of circumstances warrants such a finding.</div>
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Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-68604682660277188882013-07-23T15:45:00.002-04:002013-07-23T15:45:45.908-04:00April 2013 Case Law updates from NACBA related to Bankruptcy.<div class="MsoNormal" style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px; margin: 0in 0in 10pt;">
<b><span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Amicus Brief Filed in Eighth Circuit Exemption Case<u></u><u></u></span></span></b></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">On April 3, 2013, the Eighth Circuit Court of Appeals granted NACBA’s motion for leave to file an amicus brief in </span></span><a href="http://www.ncbrc.org/wp-content/uploads/Abdul-Rahim-NACBA-brief.pdf" style="color: #1155cc;" target="_blank"><span style="font-family: Verdana, sans-serif;"><span style="color: blue; font-size: small;">In re Abdul-Rahim</span></span></a><span style="font-size: small;"><span style="font-family: Verdana, sans-serif;">, No. 12-3448. The brief addresses the issue of whether the debtors may exempt an unliquidated personal injury claim in their bankruptcy case. NACBA argued that the question is one of state law and that under Missouri law courts have repeatedly held that such a claim is exempt in bankruptcy. Allowing debtors to exempt personal injury claims is consistent with policies underlying both bankruptcy and tort law and the fact that the exemption at issue was based in common law is irrelevant. Nothing in section 522(b)(3) or the history of the 1978 Bankruptcy Code suggests that only “statutory” exemption</span><span style="font-family: Verdana, sans-serif;"> </span><span style="font-family: Verdana, sans-serif;">are permitted in states that have opted-out of the federal exemption scheme. The Eighth Circuit’s dictum in <i>In re Benn</i>, 491 F.3d 811 (8th Cir. 2007), which suggests all state exemptions must be statutory, is not consistent with the law of Missouri or the plain language of section 522(b)(3).<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">The case was argued on April 10, and according to one NACBA member in attendance, the argument went well. Judge Beam sprung a very recent Supreme Court case on the parties, <i>Kirtsaeng v. John Wiley & Sons</i>, No.11-697 (S.Ct. March 19, 2013<i>), rev’g and rem’g John Wiley & Sons v. Kirtsaeng, </i>654 F.3d 210 (2d Cir. 2011), from which he quoted the following language: “A relevant canon of statutory interpretation favors a nongeographical reading. “[W]hen a statute covers an issue previously governed by the common law,” we must presume that “Congress intended to retain the substance of the common law.” Samantar v. Yousuf, 560 U. S. ___, ___, n. 13 (2010) (slip op., at 14, n. 13). See also Isbrandtsen Co. v. Johnson, 343 U. S. 779, 783 (1952) (“Statutes which invade the common law . . . are to be read with a presumption favoring the retention of long established and familiar principles, except when a statutory purpose to the contrary is evident”).” <i>Kirtsaeng </i>at *17.<u></u><u></u></span></span></div>
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<b><span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Post-Confirmation Funds Returned to Debtor after Conversion to Chapter 7<u></u><u></u></span></span></b></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">In a case that illustrates the power of NCBRC briefs to create good law around the country by getting involved in select cases on appeal, the bankruptcy court for the Western District of Texas ordered turnover of funds that t<u></u> <u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u><u></u>he trustee had distributed to creditors post-conversion. Relying in large part on the Third Circuit case of <i>In re Michael</i>, 699 F.3d 305 (2012), in which NACBA participated as amicus, the district court affirmed. <i>Veigelahn v. Harris </i></span></span><a href="http://www.ncbrc.org/wp-content/uploads/Harris-opinion.pdf" style="color: #1155cc;" target="_blank"><span style="font-family: Verdana, sans-serif;"><span style="color: blue; font-size: small;">(In re Harris), </span></span></a><span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">No. 12-540 (W.D. Tex. March 22, 2013).<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Key to the decision was section 348(f) which provides that when a case is converted in good faith from chapter 13 to chapter 7 the property of the estate is determined as of the original petition date. Because the funds at issue had been garnished from debtor’s wages post-confirmation, they were not part of the debtor’s estate at the original filing of the chapter 13 petition and, therefore, under section 348 would not be part of the chapter 7 estate upon conversion. <u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Quoting <i>Michael</i>, the court found that the duties of the trustee delineated in section 1326 did not vest any rights in the creditors:<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">When the debtor transfers funds to the Chapter 13 trustee . . . under a confirmed plan . . . the funds become part of the estate, and the debtor retains a vested interest in them. Though creditors have a right to those payments based on the confirmed plan, the debtor does not lose his vested interest until the trustee affirmatively transfers the funds to creditors. Also, § 1326(a)(2) and (c) only address the obligation of the trustee to distribute payments in accordance with a confirmed plan; they do not vest creditors with any property rights.<u></u><u></u></span></span></div>
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<span style="font-size: small;"><i><span style="font-family: Verdana, sans-serif;">Michael</span></i><span style="font-family: Verdana, sans-serif;">, 699 F.3d at 313.<u></u><u></u></span></span></div>
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<b><span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Argued:<u></u><u></u></span></span></b></div>
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<span style="font-size: small;"><i><span style="font-family: Verdana, sans-serif;">In re Ranta</span></i><span style="font-family: Verdana, sans-serif;">, No. 12-2017 (4th Cir.)<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Issue: Whether social security income may be considered in PDI.<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Argument date: March 20, 2013<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">NCBRC filed an amicus brief on behalf of NACBA.<u></u><u></u></span></span></div>
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<span style="font-size: small;"><i><span style="font-family: Verdana, sans-serif;">In re Abdul-Rahim</span></i><span style="font-family: Verdana, sans-serif;">, No. (1st Cir.)<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Issue: Whether an unliquidated personal injury claim may be exempted in bankruptcy.<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Argument date: April 10, 2013<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">NCBRC filed an amicus brief on behalf of NACBA.<u></u><u></u></span></span></div>
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<b><span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Petition for rehearing en banc<u></u><u></u></span></span></b></div>
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<span style="font-size: small;"><i><span style="font-family: Verdana, sans-serif;">In re Welsh,</span></i><span style="font-family: Verdana, sans-serif;"> No. 12-60009 (9th Cir.)<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Issue: Whether social security income may be considered in PDI and whether court may look at necessity of items securing debts for which payments have been deducted from PDI.<u></u><u></u></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Result: The Ninth Circuit affirmed the decision of the BAP on March 25, 2013, in favor of the debtor. The trustee petitioned for rehearing on April 8.<u></u><u></u></span></span></div>
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Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-33241341110379175692013-07-11T12:57:00.000-04:002013-07-11T12:57:38.223-04:00Case law updates from NACBA<div class="MsoNormal" style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 13px; margin: 0in 0in 0pt;">
<b><span style="font-family: Verdana, sans-serif; font-size: 11pt;">Creditor Must Return Repossessed Vehicle upon Bankruptcy Filing<u></u><u></u></span></b></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">The Second Circuit upheld sanctions against vehicle loan creditor, SEFCU, for refusing to return debtor’s repossessed vehicle without a court order and adequate protection.</span><span style="font-family: Verdana, sans-serif;"><a href="http://www.ncbrc.org/wp-content/uploads/Weber-2d-may-2013-stay-violation.pdf" style="color: #1155cc;" target="_blank"><i><span style="font-size: 11pt;"><span style="color: blue;">Weber v. SEFCU</span></span></i></a></span><span style="font-family: Verdana, sans-serif; font-size: 11pt;">, No. 12-1632 (May 8, 2013). SEFCU had lawfully repossessed the debtor’s pick-up truck pursuant to the loan agreement but when the debtor filed for bankruptcy SEFCU refused to return the car. The bankruptcy court determined that SEFCU’s actions did not violate the automatic stay. The district court reversed. <i>Weber v. SEFCU</i>, 477 B.R. 308 (N.D.N.Y. 2012).<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">On appeal, the Second Circuit walked through the relevant statutory provisions beginning with section 541(a)(1) which provides that upon the filing of the petition, the bankruptcy estate consists of “all [debtor’s] legal or equitable interests in property.” Under New York law, a debtor retains an equitable interest in repossessed property due to his right to redeem, and “under <i>United States v. Whiting Pools, Inc.</i>, 462 U.S. 198 (1983), the filing of Weber’s bankruptcy petition transformed the equitable interest into a possessory interest held by Weber’s estate.” Section 542’s mandatory turnover obligation, in conjunction with section 1306(b)’s provision that the debtor retains possession of chapter 13 estate property, required SEFCU to return the vehicle to the debtor without further action.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">The court rejected SEFCU’s argument that it did not “exercise control” over the vehicle in violation of section 362. In so holding, the court found that <i>Manufacturers & Traders Trust Co. v. Alberto (In re Alberto)</i>, 271 B.R. 223 (N.D. N.Y. 2001), which held that the repossessed property did not become part of the estate until such affirmative step was taken, was erroneously decided. Additionally, SEFCU’s reliance on <i>Alberto</i> did not make its actions any less “willful” within the meaning of section 362. Willfulness requires only knowledge of the bankruptcy and intentional actions that amount to an unlawful exercise of control.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">NCBRC filed an amicus brief on behalf of NACBA.<u></u><u></u></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 11pt;">Inherited IRA Exemption Issue Unsettled by Seventh Circuit<u></u><u></u></span></b></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">In a departure from the majority of courts, the Seventh Circuit found that debtors cannot exempt inherited IRAs. </span><span style="font-family: Verdana, sans-serif;"><a href="http://www.ncbrc.org/wp-content/uploads/Clark-opinion.pdf" style="color: #1155cc;" target="_blank"><i><span style="font-size: 11pt;"><span style="color: blue;">In re Clark</span></span></i></a></span><span style="font-family: Verdana, sans-serif; font-size: 11pt;">, No. 12-1241 & 12-1255 (April 23, 2013). Section 522(b)(3)(C) permits debtors to exempt“[r]etirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.” In <i>Clark</i>, the debtor’s mother had an IRA which, upon her death, was transferred to the debtor into one of the tax exempt accounts specified by the Code. As the Fifth Circuit, the BAPs for the Eighth and Ninth Circuits, and many lower courts have found, such accounts may be exempted in bankruptcy. <i>See, e.g., Chilton v. Moser, </i>674 F.3d 486 (5th Cir. 2012);<i> Mullen v. Hamlin</i>, 465 B.R 863 (B.A.P. 9th Cir. 2012); <i>Doeling </i>v<i>. Nessa</i>, 426 B.R. 312 (B.A.P. 8th Cir. 2010).<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">The Seventh Circuit, however, found otherwise. The court’s decision turned on its interpretation of “retirement funds” which it found were no longer “retirement” once they transferred to the debtor’s account. In so holding, the court noted that the <i>debtor</i> did not contribute the funds in contemplation of retirement and that inherited IRAs receive different treatment under the Tax Code. The court expressed its distaste for the outcome that would have resulted from permitting the exemption, saying: “To treat this account as exempt under § 522(b)(3)(C) would be to shelter from creditors a pot of money that can be freely used for current consumption.”<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">NCBRC filed an amicus brief in this case on behalf of the NACBA membership arguing that the plain language of the Code sets forth only two requirements for the exemption to apply: 1) that the funds in the account represent retirement funds when contributed, and 2) that upon the death of the owner the funds be transferred to a tax exempt account specified in the exemption statute. The majority of appellate courts have agreed with this analysis.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">On May 6, 2013, the debtor filed a petition for rehearing <i>en banc</i>.<u></u><u></u></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 11pt;">Fourth Circuit Permits Chapter 20 Lien Strip<u></u><u></u></span></b></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">The Fourth Circuit is the first circuit court to find that a debtor may strip a wholly unsecured lien in chapter 13 where no discharge is available. </span><span style="font-family: Verdana, sans-serif;"><a href="http://www.kintera.org/atf/cf/%7B424D36E5-56C7-4496-8D5B-ABD453A0312E%7D/DAVISOPINION.PDF" style="color: #1155cc;" target="_blank"><i><span style="font-size: 11pt;"><span style="color: blue;">In re Davis</span></span></i></a></span><span style="font-family: Verdana, sans-serif; font-size: 11pt;">, No. 12-1184 (May 10, 2013).<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">Applying the standards applicable in any chapter 13 bankruptcy, both the bankruptcy and district courts held that strip-off was appropriate.<i> </i>The Fourth Circuit agreed finding that the unavailability of discharge does not alter the analysis used when considering whether the debtor is entitled to a lien strip and that, where a lien is deemed valueless under section 506, it may be stripped through the mechanism provided by section 1322(b). Section 1325(a)(5), which provides that a lien survives until it is either paid in full or the debtor is discharged, does not alter this analysis because that section applies only to allowed secured claims, and wholly unsecured liens are not “secured.” The court found that the strip-off becomes permanent upon completion of the plan.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">One judge dissented on the grounds that the definition of “allowed secured claim” in section 1325(a)(5), applies to liens that are valueless under section 506(a), and, further, that allowing strip-off in chapter 20 treats the secured creditor less favorably than unsecured creditors. However, as noted by the majority, the difference in treatment between secured and unsecured creditors is a function of the different treatment of <i>in rem</i> and <i>in personam</i> claims in bankruptcy and is, therefore, incidental to the question of lien stripping in chapter 20.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">This issue is currently under consideration in the Ninth, <i>Litton Loan v. Blendheim</i>, No. 13-35354, and Eleventh Circuits, <i>Wells Fargo v. Scantling</i>, No. 13-10558, where the lower courts each found that the lien strip was not contingent on the availability of discharge. While NACBA did not participate in this case, NACBA has been involved in this issue at the lower court levels raising the same arguments that were relied on by the Fourth Circuit.<i>See, e.g., In re Fair</i>, No. 10-1128 (E.D. Wisc. April 19, 2011).<u></u><u></u></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 11pt;">Ninth Circuit Denies Petition for Rehearing en Banc</span></b><span style="font-family: Verdana, sans-serif; font-size: 11pt;"><u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">The Ninth Circuit has denied the trustee’s request for en banc rehearing in <i>In re Welsh,</i></span><span style="font-family: Verdana, sans-serif; font-size: 11pt;"> No. 12-60009 (9th Cir.). On March 25, 2013, the court affirmed the district court’s finding that social security income may not be considered in PDI nor may a court assess the necessity of items securing debts for which payments have been deducted from PDI. The trustee sought a rehearing on <span class="aBn" data-term="goog_1269572418" style="border-bottom-color: rgb(204, 204, 204); border-bottom-style: dashed; border-bottom-width: 1px; position: relative; top: -2px; z-index: 0;" tabindex="0"><span class="aQJ" style="position: relative; top: 2px; z-index: -1;">April 8</span></span>, and the court denied the petition on May 13, 2013. With respect to the decision on the merits of the appeal NCBRC filed an amicus brief on behalf of NACBA.<u></u><u></u></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 11pt;">Argued<u></u><u></u></span></b></div>
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<i><span style="font-family: Verdana, sans-serif; font-size: 11pt;">In re Schieffer</span></i><span style="font-family: Verdana, sans-serif; font-size: 11pt;">, No. 12-1974 (C.D. Cal.)<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">Issue: Whether court erred in dismissing chapter 13 case after it granted Wells Fargo's motion for loan modification but the trustee never sought plan modification and debtor defaulted on modified mortgage but was compliant with unmodified plan terms.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">Argument date: April 15, 2013<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">NCBRC assisted with the debtor’s brief.<u></u><u></u></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 11pt;">To make a request for assistance from the amicus committee contact Lisa Sharon at </span><span style="font-family: Verdana, sans-serif; font-size: 11pt;"><a href="mailto:amicus.admin@nacba.org" style="color: #1155cc;" target="_blank">amicus.admin@nacba.org</a></span><span style="font-family: Verdana, sans-serif; font-size: 11pt;">.</span></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-91057265667372432852013-07-02T13:00:00.001-04:002013-07-15T15:58:55.908-04:00Save Your Home from Foreclosure: Fannie Mae and Freddie Mac offer streamlined home loan modifications to home owners, effective July 1, 2013 - August 1, 2015<br />
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<span style="font-family: Arial, Helvetica, sans-serif;">The Federal Housing Finance Agency ("FHFA") announced that, effective July 1, 2013, Fannie Mae and Freddie Mac mortgages will offer a new, simplified loan modification initiative to minimize losses and to help troubled borrowers avoid foreclosure and stay in their homes. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Beginning July 1, servicers will be<i> required</i> to offer eligible borrowers who are at least 90 days delinquent on their mortgages an easy way to lower their monthly payments and modify their mortgages without requiring financial or hardship documentation. It is called the "Streamlined Modification Initiative". After making the three trial payments, the mortgage should be permanently modified with the lower payment. The lower payments would be due to a lower interest rate and/or longer mortgage term, rather than a reduction to mortgage principal. The homeowner <i>must</i> timely make each of the three trial- modification payments.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The program begins July 1, 2013 and ends August 1, 2015.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The loan must be owned or guaranteed by Fannie Mae or Freddie Mac. Homeowners must be 90 days to 24- months (and no more) delinquent in mortgage payments, and have a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 %. That means you must have a first mortgage where the balance you owe is 80% or more of the value of your home and you must have taken out this mortgage at least twelve months ago, and be somewhere between 3 months and 24 months behind in your monthly mortgage payments.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Loans that have been modified at least two time previously are<i> not</i> eligible. </span><span style="font-family: Times, Times New Roman, serif;"><o:p></o:p></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span><span style="font-family: Arial, Helvetica, sans-serif;">For further information, dial 211 and ask to be placed with a Housing counselor. Why? The State of New Hampshire provides to its residents, at NO COST, the ability to work with a housing counselor to process a loan modification application. Again, simply dial 211 and ask to be placed with a housing counselor to apply for a loan modification at <i>no cost to you!</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">You can click here to see if your loan is owned or guaranteed by Fannie Mae or Freddie Mac.</span><span style="font-size: medium;"><o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">Fannie Mae look up: <o:p></o:p></span></div>
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<span style="font-size: 13.5pt;"><a href="https://www.knowyouroptions.com/loanlookup">https://www.knowyouroptions.com/loanlookup</a><o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">Freddie Mac look up:<a href="https://ww3.freddiemac.com/corporate/?intcmp=LLT-HPimage">https://ww3.freddiemac.com/corporate/?intcmp=LLT-HPimage</a><o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">For more information, click on the news releases below issued by the Federal Housing and Finance Agency:<o:p></o:p></span></div>
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<span style="font-size: 13.5pt;"><a href="http://www.fhfa.gov/webfiles/25068/StreamlinedModInit32713Final.pdf">http://www.fhfa.gov/webfiles/25068/StreamlinedModInit32713Final.pdf</a><o:p></o:p></span></div>
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<span style="font-size: 13.5pt;"><a href="http://www.fhfa.gov/webfiles/25341/1q2013FPRrelease.pdf">http://www.fhfa.gov/webfiles/25341/1q2013FPRrelease.pdf</a><o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">Fannie Mae info: <a href="https://www.fanniemae.com/content/announcement/svc1305.pdf">https://www.fanniemae.com/content/announcement/svc1305.pdf</a><o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">Freddie Mac Info: <a href="http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1305.pdf">http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1305.pdf</a></span></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-70752251533539611002013-07-02T12:16:00.000-04:002013-07-02T12:16:31.711-04:00Supreme Court in Marx v. General Revenue Corp.: Award of Costs and Fees under FDCPA and Costs under Fed.R.Civ.P. 54(d)(1)Petitioner Marx filed suit, alleging that General Revenue Corporation (GRC) violated the Fair Debt Collection Practices Act (FDCPA) by harassing and falsely threatening her in order to collect on a debt.<br />
The District Court ruled against Marx and awarded GRC costs pursuant to Federal Rule of Civil Procedure (FRCP) 54(d)(1), which gives district courts discretion to award costs to prevailing defendants<br />
“[u]nless a federal statute . . . provides otherwise.” Marx sought to vacate the award, arguing that the court’s discretion under Rule 54(d)(1) was displaced by 15 U. S. C. §1692k(a)(3), which provides, in pertinent part, that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” The District Court rejected Marx’s argument. The Tenth Circuit affirmed, in pertinent part, agreeing that costs are allowed under the Rule and concluding that nothing in the statute’s text, history, or purpose indicates that it was meant to displace the Rule.<br />
Held: Section §1692k(a)(3) is not contrary to, and, thus, does not displace a district court’s discretion to award costs under, Rule 54(d)(1).<br />
<br />
(a) Rule 54(d)(1) gives courts discretion to award costs to prevailing parties, but this discretion can be displaced by a federal statute or FRCP that “provides otherwise,” i.e., is “contrary” to Rule 54(d)(1).<br />
Contrary to the argument of Marx and the United States, as amicus, language of the original 1937 version of the Rule does not suggest that any “express provision” for costs should displace Rule 54(d)(1),<br />
regardless of whether it is contrary to the Rule.<br />
<br />
(b) Section 1692k(a)(3)’s language and context demonstrate that the provision is not contrary to Rule<br />
54(d)(1).<br />
<br />
GRC argues that since §1692k(a)(3) does not address whether costs may be awarded in an FDCPA case brought in good faith, it does not set forth a standard that is contrary to the Rule and therefore does not displace the presumption that a court has discretion to award costs. Marx and the United States concede that the statute does not expressly limit a court’s discretion to award costs under the Rule, but argue that it does so by negative implication. They claim that unless §1692k(a)(3) sets forth the exclusive basis on which to award costs, the phrase “and costs” would be superfluous with Rule 54(d)(1). And the United States also argues that §1692k(a)(3)’s more specific cost statute displaces Rule 54(d)(1)’s more general rule.<br />
<br />
The argument of Marx and the United States depends critically on whether §1692k(a)(3)’s allowance of costs creates a negative implication that costs are unavailable in any other circumstances. The expressio unius canon that they invoke does not apply “unless it is fair to suppose that Congress considered the unnamed possibility and meant to say no to it,” Barnhart v. Peabody Coal Co., 537 U. S. 149, 168, and can be overcome by “contrary indications that adopting a particular rule or statute was probably not meant to signal any exclusion,” United States v. Vonn, 535 U. S. 55, 65. Here, context indicates that Congress did not intend §1692k(a)(3) to foreclose courts from awarding costs under the Rule.<br />
<br />
First, under the American Rule, each litigant generally pays his own attorney’s fees, but the Court has long recognized that federal courts have inherent power to award attorney’s fees in a narrow set of circumstances, e.g., when a party brings an action in bad faith. The statute is thus best read as codifying a court’s pre-existing authority to award both attorney’s fees and costs.<br />
<br />
Next, §1692k(a)(3)’s second sentence must be understood in light of its first, which provides an award of attorney’s fees and costs,but to prevailing plaintiffs. By adding “and costs” to the second sentence, Congress foreclosed the argument that defendants can only recover attorney’s fees when plaintiffs bring an action in bad faith and removed any doubt that defendants may recover costs as well as attorney’s fees in such cases.<br />
<br />
Finally, §1692k(a)(3)’s language sharply contrasts with that of other statutes in which Congress has placed<br />
conditions on awarding costs to prevailing defendants. See, e.g., 28 U. S. C. §1928. Pp. 9–12.<br />
<br />
Even assuming that their surplusage argument is correct, the canon against surplusage is not absolute. First, the canon “assists only where a competing interpretation gives effect to every clause and word of a statute.” Microsoft Corp. v. i4i Ltd. Partnership, 564 U. S. ___, ___. Here, no interpretation of §1692k(a)(3) gives effect to every word. Second, redundancy is not unusual in statutes addressing costs. See, e.g., 12 U. S. C. §2607(d)(5). Finally, the canon is strongest when an interpretation would render superfluous another<br />
part of the same statutory scheme. Because §1692k(a)(3) is not part<br />
of Rule 54(d)(1), the force of this canon is diminished.<br />
<br />
Lastly, contrary to the United States’ claim that specific costshifting standards displace general ones, the context of the statute indicates that Congress was simply confirming the background presumption that courts may award to defendants attorney’s fees and costs when the plaintiff brings an action in bad faith. Because Marx did not bring this suit in bad faith, the specific provision is not applicable.<br />
668 F. 3d 1174, affirmed.<br />
<br />
THOMAS, J., delivered the opinion of the Court, in which ROBERTS,<br />
C. J., and SCALIA, KENNEDY, GINSBURG, BREYER, and ALITO, JJ., joined.<br />
SOTOMAYOR, J., filed a dissenting opinion, in which KAGAN, J., joined.<br />
click here for full opinion:<br />
<br />
<a href="http://www.supremecourt.gov/opinions/12pdf/11-1175_4fc5.pdf">http://www.supremecourt.gov/opinions/12pdf/11-1175_4fc5.pdf</a>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-79662311536106611342013-06-26T11:09:00.001-04:002013-06-26T11:19:44.836-04:00DOMA ruled unconstitutional on June 26, 2013The Supreme Court ruled DOMA unconstitutional. <br />
<br />
This leaves open the door for same-sex couples to obtain federal benefits if their state recognizes gay marriage.<br />
<br />
Here is the complete opinion:<br />
<br />
<a href="http://www.supremecourt.gov/opinions/12pdf/12-307_g2bh.pdf">http://www.supremecourt.gov/opinions/12pdf/12-307_g2bh.pdf</a>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-11002530642246544652013-06-25T18:09:00.000-04:002013-06-25T18:09:11.386-04:00First Circuit Bankruptcy Appellate Panel Opinions May 2013<div style="background-color: white; color: #222222;">
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<i><b><span style="font-family: Times, Times New Roman, serif;">Dismissal for debtor's failure to provide financial information affirmed, with no notice or hearing required under Section 521(i)(1):</span></b></i></div>
<div style="background-color: white; color: #222222;">
<span style="font-family: Times, Times New Roman, serif;"><u>Soto and Rivera v. Doral Bank</u>, </span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: transparent; font-weight: bold; text-align: center;">BAP NO. PR 12-075 </span>(1st Cir. BAP May 8, 2013)(Before Judges Haines, Feeney, and Hoffman, Opinion by Hoffman).</span></div>
<div style="background-color: white; color: #222222;">
<span style="font-family: Times, Times New Roman, serif;">Dismissal of Chapter 13 case upheld for debtor's failure to provide pay advice and tax returns. An 11 U.S.C. Section 521(i)(1) dismissal may not require notice and hearing.</span></div>
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<span style="font-family: Times, Times New Roman, serif;">click here for full opinion:</span></div>
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<span style="font-family: Times, Times New Roman, serif;"><a href="http://www.bap1.uscourts.gov/cgi-bin/bpgetopn.pl?OPINION=12-075P" style="color: #1155cc;" target="_blank">http://www.bap1.uscourts.gov/<wbr></wbr>cgi-bin/bpgetopn.pl?OPINION=<wbr></wbr>12-075P</a></span></div>
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<i><b><span style="font-family: Times, Times New Roman, serif;">Appeal dismissed as moot due to underlying bankruptcy case being dismissed:</span></b></i></div>
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<span style="font-family: Times, Times New Roman, serif;"><u>Soto and Rivera v. Doral Bank</u>, </span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: transparent; font-weight: bold; text-align: center;">BAP NO. PR 12-053 </span>(1st Cir. BAP May 8, 2013)(Before Judges Haines, Feeney, and Hoffman, Per curiam). Debtors appealed the bankruptcy court's order granting stay relief to Doral Bank, which appeal is dismissed as moot in light of the above dismissal being affirmed, as no effective relief could be granted.</span></div>
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<span style="font-family: Times, Times New Roman, serif;">click here for full opinion:</span></div>
<div style="background-color: white; color: #222222;">
<span style="font-family: Times, Times New Roman, serif;"><a href="http://www.bap1.uscourts.gov/cgi-bin/bpgetopn.pl?OPINION=12-053U" style="color: #1155cc;" target="_blank">http://www.bap1.uscourts.gov/<wbr></wbr>cgi-bin/bpgetopn.pl?OPINION=<wbr></wbr>12-053U</a></span></div>
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<b><i><span style="font-family: Times, Times New Roman, serif;"><br /></span></i></b></div>
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<b><i><span style="font-family: Times, Times New Roman, serif;">Appeal dismissed due to lack of standing: Debtor was not a person aggrieved to appeal the Ch. 7 trustee's sale of estate property and potential for surplus to the Debtor was speculative:</span></i></b></div>
<div style="background-color: white; color: #222222;">
<span style="font-family: Times, Times New Roman, serif;"><u>Gentile v. Digiacomo</u>, Ch. 7 Trustee,</span></div>
<div style="background-color: white; color: #222222;">
<span style="font-family: Times, Times New Roman, serif;"><span style="font-weight: bold; text-align: center;">BAP NO. MB 12-071</span> <span style="background-color: transparent; font-size: 16px; text-align: center;">(1st Cir. BAP May 20, 2013)(B</span><span style="background-color: transparent;">efore Ju</span><span style="background-color: transparent;">dges </span><span style="background-color: transparent; font-size: 16px; text-align: center;">Lamoutte, Kornreich, and Cabán, Opinion by Kornreich, Dissent by Lamoutte).</span></span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: transparent; font-size: 16px; text-align: center;"><span style="color: #222222;">Standing to appeal a bankruptcy court's sale order requires a party to be a person aggrieved, per </span><u style="color: #222222;">Spenlinhauer v. O'Donnell</u><span style="color: #222222;">, 261 F. 3d 113, 117 (1st Cir. 2001). Since title to property of the estate no longer rest with the debtor, he normally lacks the pecuniary interest in the trustee' disposition of that property unless nullification of the sale will likely to result in an overall surplus in the chapter 7 estate to which the debtor would be entitled once the case is closed The debtors unsuccessfully asserting standing to appeal based up a contingent, speculative pecuniary interest in an estate surplus which the application of </span><u style="color: #222222;">Spenlinhauer </u><span style="color: #222222;">would not allow. Debtor voluntarily filed Chapter 7 and did not seek to compel abandonment of the property at issue, nor seek a dismissal nor wait for the state court action to conclude before filing.</span></span></span></div>
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<span style="background-color: transparent; font-size: 16px; text-align: center;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
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<span style="font-family: Times, Times New Roman, serif;">click here for full opinion:</span></div>
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<span style="font-family: Times, Times New Roman, serif;"><a href="http://www.bap1.uscourts.gov/cgi-bin/bpgetopn.pl?OPINION=12-071P" style="color: #1155cc;" target="_blank">http://www.bap1.uscourts.gov/<wbr></wbr>cgi-bin/bpgetopn.pl?OPINION=<wbr></wbr>12-071P</a></span></div>
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<i><b><span style="font-family: Times, Times New Roman, serif;">Denial of confirmation affirmed regarding "hybrid" or bifurcated treatment of secured creditor's claim on residence:</span></b></i></div>
<div style="background-color: white; color: #222222;">
<span style="font-family: Times, Times New Roman, serif;"><u>Bullard v. Hyde Park Savings Bank</u>,</span></div>
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<div>
<span style="font-family: Times, Times New Roman, serif;"><span style="font-weight: bold; text-align: center;">BAP NO. MB 12-054</span> <span style="background-color: transparent; text-align: center;">(1st Cir. BAP May 20, 2013)(B</span><span style="background-color: transparent;">efore Ju</span><span style="background-color: transparent;">dges Haines, Tester and Godoy</span><span style="background-color: transparent; text-align: center;">).</span></span></div>
<div>
<span style="background-color: transparent; text-align: center;"><span style="font-family: Times, Times New Roman, serif;">[NACBA submitted an amicus brief].</span></span></div>
<div>
<span style="background-color: transparent; text-align: center;"><span style="font-family: Times, Times New Roman, serif;">Debtor proposed a "hybrid" plan treatment of the bank's mortgage on his home. Bullard asserted that since his residence included another unit in which he did not reside, the mortgage was not secured solely by the debtor's residence and subject to modification. Bullard planned to reduce the principal to the value of the home and paid over a term longer than the five-year plan; and, treat the balance as unsecured claim with pennies on the dollar. The debtor sought to use both the "modification" provision of Section1322(b)(2) and the "cure and maintain" provision of 1322(b)(5).</span></span><br />
<span style="background-color: transparent; text-align: center;"><span style="font-family: Times, Times New Roman, serif;">The bank objected.</span></span></div>
<div>
<span style="background-color: transparent; text-align: center;"><span style="font-family: Times, Times New Roman, serif;">The BAP opined that Section 1328(a)(1) establishes that as long as a plan employs Section 1322(b)(5), it can <i>only</i> be confirmed over the creditor's objection via section 1325(a)(5)(B)(i)(I)(aa). And since that section states the debt, <i>as determined by nonbankrutpcy law</i>, must be paid, a debtor man not use <i>and</i> bifurcate the applicable claim via Section 506(a). To do so would render Section 1325(a)(5)(B)(i)(I) ineffective.</span></span></div>
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<span style="font-family: Times, Times New Roman, serif;">Click here for full opinion:</span></div>
<div style="background-color: white; color: #222222;">
<a href="http://www.bap1.uscourts.gov/cgi-bin/bpgetopn.pl?OPINION=12-054P" style="color: #1155cc;" target="_blank"><span style="font-family: Times, Times New Roman, serif;">http://www.bap1.uscourts.gov/<wbr></wbr>cgi-bin/bpgetopn.pl?OPINION=<wbr></wbr>12-054P</span></a></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-51758205103310684152013-06-12T06:04:00.000-04:002013-06-12T06:04:11.333-04:00Recent Bankruptcy Cases from Around the Circuits Posted by NACBA.<div class="MsoNormal">
Cases in Review<o:p></o:p></div>
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June, 2013<o:p></o:p><br />
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“Cases in Review” highlights recent cases that may be of
particular interest to consumer bankruptcy practitioners. It is brought
to you by Consumer Bankruptcy Abstracts & Research (www.cbar.pro)
and</div>
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<o:p></o:p></div>
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the <st1:place w:st="on"><st1:placename w:st="on">National</st1:placename>
<st1:placename w:st="on">Consumer</st1:placename> <st1:placename w:st="on">Bankruptcy</st1:placename>
<st1:placename w:st="on">Rights</st1:placename> <st1:placetype w:st="on">Center</st1:placetype></st1:place>
(www.ncbrc.org). </div>
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Chapter 13—Confirmation of plan—Treatment of unsecured claims—Unfair
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discrimination—Consumer codebtor claim:<br />
Effectively adopting
the bankruptcy court’s position that consumer codebtor claims for debts
incurred for the debtor’s benefit are excluded from unfair discrimination analysis
under Code § 1322(b)(1), the Bankruptcy Appellate Panel embraced a three-part test that
requires an examination of (1) whether the claim truly is a codebtor consumer claim;
(2) whether the codebtor undertook the underlying liability for the debtor's benefit
or vice-versa; and (3) whether the plan satisfies the other requirements for plan
confirmation, particularly the good faith requirement under § 1325(a)(3). Here, the bankruptcy
court properly determined that the Chapter 13 debtors’ classification scheme was
proposed in good faith and satisfied plan confirmation requirements, where the debtors’
plan paid an unsecured consumer codebtor claim of $25,462, which was incurred for
the debtor husband’s benefit and guaranteed by the debtor wife’s mother, in full,
while paying other unsecured creditors an estimated dividend of 4.51%.<b> In re <st1:city w:st="on">Martinez</st1:city> Rivera, --- B.R.
----, </b><b>2013 WL 1406209 (B.A.P. 1st Cir. April 5, 2013).</b></div>
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Chapter 13—Stripping unsecured lien—Necessity of discharge:<br />
In the <st1:street w:st="on">first Court </st1:street>of Appeals decision on the issue, the Fourth Circuit Court
of Appeals, in a 2-1 panel decision, held that a Chapter 13 debtor ineligible for a
discharge may strip a whollyunsecured lien. A completely valueless lien is
classified as an unsecured claim under Code § 506(a), the court said, and Code § 1322 expressly permits modification of the rights of unsecured creditors.
BAPCPA did not amend sections 506 or 1322(b), so the analysis permitting lien-stripping in “Chapter 20” cases is
no different than that in any other Chapter 13 case. A requirement that a claim secured by
a worthless lien be considered an “allowed secured claim” for the purpose of
Code § 1325(a)(5) would be inconsistent with Nobelman v. American Sav. Bank, 508 <st1:country-region w:st="on">U.S.</st1:country-region> 324, 113
S.Ct. 2106, 124 L.Ed. 2d 228 (1993), which valued a claim under section 506
before analyzing whether section 1322 barred its modification. While the court did
not take lightly the Chapter 13 trustee's assertion that permitting lien-stripping in
Chapter 20 cases created an end run around the bar to such relief in Chapter 7 cases enacted in
Dewsnup v. Timm, 502 <st1:country-region w:st="on">U.S. </st1:country-region>410, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), the trustee's
premise ignored the equally reasonable view that Congress intended to leave intact the
normal Chapter 13 lien stripping regime where a debtor could otherwise satisfy
the requirements for filing a Chapter 20 case.<b> In re <st1:city w:st="on">Davis</st1:city>,
--- F.3d ----, 2013 WL 1926407 (4th Cir. May 10, 2013).</b></div>
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Dischargeability of debt—For defalcation by fiduciary under
Code § 523(a)(4)—Scienter requirement: Observing that “[t]he lower
courts have long disagreed about whether ‘defalcation’ includes a scienter
requirement and, if so, what kind of scienter it requires,” the Supreme Court, in a
unanimous decision by Justice Breyer, held that “defalcation,” for the purpose of the
discharge exception found at Code § 523(a)(4), includes a culpable state of mind
requirement involving knowledge of, or gross recklessness in respect to, the improper nature
of the relevant fiduciary behavior. Noting that, in Neal v. Clark, 95 <st1:country-region w:st="on">U.S.</st1:country-region> 704, 24
L.Ed. 586 (1878), the Court had construed “fraud” as meaning “positive fraud, or fraud
in fact, involving moral turpitude or intentional wrong, … and not implied fraud, or
fraud in law, which may exist without the imputation of bad faith or immorality,”
the Court concluded that the statutory term “defalcation” should be treated similarly.<b>
Bullock v. BankChampaign, N.A., 2013 WL 1942393 (<st1:place w:st="on">U.S.</st1:place> May 13, 2013).</b></div>
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Dischargeability of debt—Student loan debt: In an important
win for debtors, the <o:p></o:p></div>
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Seventh Circuit Court of Appeals rejected the district
court’s conclusion that the <o:p></o:p></div>
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debtor’s failure to apply for the William D. Ford Income–Based
Repayment Plan <o:p></o:p></div>
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showed a lack of good faith under the Brunner test. Code §
523(a)(8) requires proof of <o:p></o:p></div>
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“undue hardship,” the court said, and it was important not
to allow judicial glosses to supersede
the statute itself. Here, the evidence showed that the debtor could not pay <o:p></o:p></div>
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the debt now or in the foreseeable future. She was living
with her 75-year-old mother<o:p></o:p></div>
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in a rural community where few jobs were available; mother
and daughter between <o:p></o:p></div>
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them had only a few hundred dollars (from governmental
programs) every month. <o:p></o:p></div>
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She was too poor to move in search of better employment
prospects elsewhere, and <o:p></o:p></div>
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her car, which was more than a decade old, needed repairs.
She lacked Internet access, <o:p></o:p></div>
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which coupled with the lack of transportation hampered a
search for work. The <o:p></o:p></div>
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debtor was 53 years old and had not held a job since 1986,
when she left the work <o:p></o:p></div>
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force to raise a family. She did not earn more than $12,000
a year in her working <o:p></o:p></div>
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career (between 1978 and 1986).<b> Krieger v. Educational
Credit Management Corp., --- F.3d ----, 2013 WL 1442305 (7th Cir. April 10,
2013).</b></div>
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Dischargeability of debt—Student loan debt: Reversing the
bankruptcy court, the BAP held that the 64-year-old unemployed Chapter 7 debtor
satisfied the good faith prong of the Brunner test, and that discharge of the
debtor’s $95,000 student loan debt on the ground of undue hardship was warranted, although the
debtor had made no voluntary payments on the loans and she had not applied for
the Income-Based Repayment Plan, where the debtor’s only income was Social
Security of $774 per month, which was less than her expenses; the debtor suffered
from several chronic medical conditions, including a thyroid condition, diabetes,
macular degeneration, cataracts, high cholesterol, and depression; the debtor made
good faith efforts to obtain employment, maximize income, and minimize expenses;
and the debtor did not come to bankruptcy court seeking discharge until many
years after the loans were in repayment status. An important concurring opinion argues
that the Brunner test “is too narrow, no longer reflects reality, and should be
revised by the Ninth Circuit when it has the opportunity to do so. Put simply, in this
era, bankruptcy courts should be free to consider the totality of a debtor's circumstances
in deciding whether a discharge of student loan debt for undue hardship is
warranted.”<b> In re Roth, --- B.R. ---</b><b>-, 2013 WL 1623839 (B.A.P. 9th Cir. April 16, 2013).</b></div>
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Proof of claim—Secured claim—Existence of security interest:
Two courts disagreed over whether the language in Best Buy’s credit
application and cardholder agreement, both of which grant Best Buy a security interest
in “the goods purchased” with the customer’s Best Buy credit card, is sufficient under
UCC § 9-108 to create an enforceable security interest in goods purchased with the
card.<b> Compare In re Cunningham, --- B.R. ----, 2013 WL 1429683 (Bankr. D. <st1:state w:st="on">Kan.</st1:state> April 8, 2013)
(security interest does not exist) with In re Murphy, 2013 WL 1856337
(Bankr. D. <st1:state w:st="on">Kan.</st1:state>
May 2, 2013) (security interest does exist).</b></div>
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Property of the estate—Exemptions—Objection to
exemption—Timeliness: Under Bankruptcy Rule 2003(e), as amended effective December
1, 2011, the only method for adjourning a meeting of creditors is by
announcing the continued date and time at the meeting to be continued, coupled with the
prompt filing of that announcement on the case docket. Here, the meeting of
creditors was held on November 6, 2012; no adjournment to a specific date and time
was announced at the meeting; and nothing in that regard was filed in the case
docket. Therefore, the meeting “concluded” on November 6, 2012; the deadline for
filing an objection to the debtor's exemptions was December 6, 2012; and the Chapter 7
trustee's objection</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
filed on December 28, 2012 was untimely. <b>In re Vierstra, ---
B.R. ----, 2013 WL 1401494 (Bankr. D. <st1:state w:st="on">Mass.</st1:state>
April 8, 2013).</b></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Property of the estate—Exemptions—Of retirement account
under Code § <o:p></o:p></div>
<div class="MsoNormal">
522(b)(3)(C): Breaking a long winning streak for debtors on
this issue, the Seventh Circuit Court of Appeals held that a non-spousal inherited individual retirement account does not represent “retirement funds” in the hands
of the debtor who inherited the IRA and therefore is not exempt under Code §
522(b)(3)(C) and § 522 (d)(12), both of which exempt “retirement funds to the
extent that those funds are in a fund or account that is exempt from taxation under
sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.”
Under 26 U.S.C. §402(c)(11)(A), a non-spousal inherited IRA (i.e., an IRA
inherited from a person other than the debtor’s spouse) must begin distributing its assets
within a year of the original owner's death. Payout must be completed in as
little as five years (though the</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
time can be longer for some accounts). In other words, an
inherited IRA is a timelimited tax-deferral vehicle, but not a place to hold
wealth for use after the new owner's retirement. Finding this an “easy” decision, the
court disagreed with In re Chilton, 674 F.3d 486 (5th Cir. 2012) and In re Nessa, 426
B.R. 312 (B.A.P. 8th Cir.2010). Acknowledging that this decision created a circuit
conflict, the court said that it “circulated the opinion before release to all judges in
active service. None of the judges requested a hearing en banc.” <b>In re <st1:place w:st="on">Clark</st1:place>,
--- F.3d ----, 2013 WL 1729600 (7th </b><b>Cir. April 23, 2013).</b></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Property of the estate—Exemptions—Under state law: Two more
courts upheld the <st1:state w:st="on">Kansas</st1:state>
bankruptcy-specific exemption of the right to receive a federal and state earned income tax credit. In these cases, the Chapter 7
trustee, rather than attacking the constitutionality of the state statute, contended that,
under Code § 544(a)(2), the trustee, “as lien creditor and as successor to certain
creditors and purchasers,” could gain access to an earned income tax credit in the debtor’s
hands because an individual outside bankruptcy is not allowed to exempt the credit. The
court replied, however, that while under § 544(a)(2) the trustee may stand in the
shoes of a creditor to claim that creditor's hypothetical priority in property of the
estate, exempt property is not property of the estate, so § 544(a)(2) is simply inapplicable.
<b>In re Murray, 2013 WL 1795676 (Bankr. D. <st1:state w:st="on">Kan.</st1:state>
April 29, 2013); In re Beach, 2013 WL 1795598 (Bankr. D. <st1:state w:st="on">Kan.</st1:state>
April 29, 2013).</b></div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Violation of stay—Failure to return repossessed vehicle: The
Second Circuit Court of Appeals held that a secured motor vehicle
creditor's refusal to return a vehicle, lawfully repossessed prepetition, to the debtor
promptly upon learning of the debtor’s Chapter 13 bankruptcy filing constitutes an
unlawful exercise of control over the property of the debtor’s bankruptcy estate in violation
of the automatic stay. Under <st1:state w:st="on">New York</st1:state>
law, the debtor retained at least an equitable interest in the vehicle notwithstanding its repossession, and <st1:country-region w:st="on">U.S.</st1:country-region> v. Whiting Pools, Inc., 462 <st1:country-region w:st="on">U.S.</st1:country-region> 198, 103
S.Ct. 2309, 76 L.Ed.2d 515 (1983) teaches that, upon the debtor’s filing of his
bankruptcy petition, the debtor’s equitable interest under state law
gave the bankruptcy estate a possessory right in the secured property, as property that
the trustee could use under Code § 363.
Under Code § 542, that right took precedence over the creditor’s state law right
of possession of the collateral. <b>In re Weber, --- F.3d ----, 2013 WL 1891371.</b></div>
<div class="MsoNormal">
<o:p></o:p></div>
<br />
<div class="MsoNormal">
(2nd Cir. May 8, 2013)</div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-16097265736080094462013-06-11T07:44:00.002-04:002013-06-11T07:45:41.690-04:00May 2013 NH Bankruptcy Decisions: Late Filed POC Denied (In re Petuck) with Bar Date Strictly Construed in Ch. 13.<br />
<u>In re Petuck</u>, 2013 BNH 003 (Bankr. D.N.H. 2013)(May 17, 2013, J. Michael Deasy, Bankruptcy Judge).<br />
<br />
Debtors’ Motion to Reconsider denial to file a late POC on behalf of the creditor was denied. Cause and excusable neglect were not found to allow the deadline to be extended. The time frames to file a POC in a Chapter 13 are in essence strictly construed.<br />
<br />
Further, a motion to reconsider does not exist, but rather the debtors had the option to file either a motion to alter/amend judgment [Rule 59(e)] or motion for relief from judgment [Rule 60(b)], for which each has its own time frames and proofs. If a motion is served within [fourteen] days of the rendition of judgment, the motion ordinarily will fall under Rule 59(e). If the motion is served after that time, it falls under Rule 60(b). Debtors' motion was filed within fourteen days and considered then a motion to alter or amend the Order under Bankruptcy Rule 9023, which makes Rule 59 applicable. To succeed on a Rule 59(e) motion, a moving party must establish a manifest error of law or fact or must present newly discovered evidence. Here, the Debtors allege an error of law as the grounds for relief.<br />
<br />
The Motion makes two arguments. First, that the Debtors did not seek to enlarge the time to file a proof of claim under Bankruptcy Rule 3002(c) (time for filing claims by creditors or equity security holders), but rather under Bankruptcy Rule 3004 (time for filing claims by debtors or trustees). The Debtors argue that Bankruptcy Rule 9006(b)(3) does not restrict the Court’s authority to extend the Bankruptcy Rule 3004 deadline by way of 9006(b)(1), the general rule on extending deadlines. Second, the Debtors argue that their failure to file a claim within Bankruptcy Rule 3004's deadline was a result of excusable neglect.<br />
<br />
Debtors filed a chapter 13 plan and intended to cure the mortgagee's arrearage through the plan. Mortgagee did not file POC by the bar date of 1/13/13. Bankruptcy Rule 3004, the deadline for the Debtors or Trustee to file a proof of claim was 2/13/12 and Debtors did not do. Debtors filed the Enlargement Motion, requesting that the Court extend the then-expired deadline to file a proof of claim to March 20, 2013, which the court denied. The Enlargement Motion states that Debtors’ counsel neglected to file a proof of claim by the deadline because the deadline “was not entered into [counsel’s] calendar.” The Motion states that Debtors’ counsel “believed that the creditor would file a proof of claim as is customary for a secured creditor. Further, the [D]ebtors were in active loan modification negotiations with the creditor and it was believed that an agreement would be reached.” Finally, the Motion states that the Debtors “requested approval from the court to file a proof of claim as soon as it became apparent that the creditor had failed to do so.” The Motion argues that there will be no delay to the proceedings if the Order is vacated and the Enlargement Motion is granted.<br />
<br />
Bankruptcy Rule 9006(b)(1) grants the Court general discretion to extend deadlines under the Bankruptcy Code and Bankruptcy Rules subject to certain conditions and limitations. Under Bankruptcy Rule 9006(b)(1), if a deadline has expired without extension, the Court can extend the deadline if the moving party can show that its failure to act was the result of excusable neglect, subject to certain limitations on extending deadlines enumerated in subsections (b)(2) and (b)(3). The deadline under Bankruptcy Rule 3004 had expired before the Motion was filed.<br />
<br />
Bankruptcy Rule 9006(b)(3) states that the Court may extend the deadline under Bankruptcy Rule 3002(c), i.e., the time for filing a proof of claim, only to the extent and under the conditions stated in Bankruptcy Rule 3002(c). Bankruptcy Rule 3002(c) states the general rule that a proof of claim must be filed within 90 days after the first date set for the first meeting of creditors. Subsections (1) through (6) of Bankruptcy Rule 3002(c) state certain limited instances in which the Court may extend the general deadline. The Debtors did not allege or argue that any of the enumerated exceptions to the general deadline applied to the Extension Motion, and excusable neglect is not a ground for an extension of the filing deadline under Bankruptcy Rule 3002(c).<br />
<br />
In the Motion, the Debtors argue that they were not seeking to extend the deadline under Bankruptcy Rule 3002(c), but rather under Bankruptcy Rule 3004. They contend that because Bankruptcy Rule 3004 is not enumerated in Bankruptcy Rule 9006(b)(2) or (b)(3), the Court may grant an extension upon a showing of excusable neglect. The Court is satisfied that after the expiration of the deadline under Bankruptcy Rule 3004 it may “for cause shown” and upon a finding of excusable neglect extend the deadline. Bankruptcy Rule 9006(b)(1). See In re Sykes, 451 B.R. 852, 862 (Bankr. S.D. Ill. 2011); In re Schuster, 428 B.R. 833, 837 (Bankr. E.D. Wisc. 2010). In this case, because the deadline the Debtors are seeking to extend has expired without extension, the Court may only extend the deadline upon a showing of both cause and excusable neglect.<br />
<br />
Bankruptcy Rule 9006(b)(1) merely allows a court to extend an expired deadline upon a showing of excusable neglect; it does not require it. Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 399 (1993). A determination of excusable neglect is at base an equitable determination, which takes account of “all relevant circumstances surrounding a party’s omission”. Id. at 395 (emphasis added). Some of the relevant factors to consider include:<br />
“the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.<br />
<br />
Here, the length of the delay was considerable. The deadline for FNMA to file a proof of claim expired on January 14, 2013 without the creditor having filed a claim. This should have put the Debtors on alert that they had until February 13, 2013, pursuant to Bankruptcy Rule 3004, to file a claim on FNMA’s behalf. However, that deadline came and went without a claim or a motion to extend the deadline being filed. Only on March 13, 2013, a full month after the deadline passed and on the eve of the confirmation hearing on the Debtors’ Plan, did the Debtors seek to extend the deadline. The Debtors state that they requested an extension of the deadline “as soon as it became apparent” that FNMA had failed to file a claim. However, Bankruptcy Rule 3004 provides a thirty day time period for the Debtors to determine if a claim has been filed and, if not, to file a claim for the creditor. The Motion is, in essence, asking the Court to double the period of time for the Debtors to act under Bankruptcy Rule 3004. Such relief might be available upon a showing of cause and excusable neglect.<br />
<br />
According to the Debtors, the reasons for the delay included: 1) failure to enter the deadline into counsel’s calendar; 2) a belief that FNMA would file a proof of claim; and 3) existence of ongoing loan modification negotiations between the Debtors and FNMA. These reasons for delay do not establish cause for an extension.<br />
<br />
The policy behind the strict deadline for filing of proofs of claim in chapter 13 proceedings is in material part based on the goal of prompt confirmation of a plan, the allowance of claims and commencement of distributions to creditors holding allowed claims. Unreasonable delay in the confirmation of a plan and the allowance of claims is detrimental to the interests of all creditors and the ultimate fresh start for debtors. The deadlines for the filing of claims in a chapter 13 proceeding have been established to avoid delays which would be prejudicial to creditors, as well as debtors.<br />
<br />
The adoption of the Debtors’ arguments would, in effect, eliminate the deadlines placed on the timely filing and prompt resolution of claims in chapter 13 proceedings. Such a result requires a high standard for the “cause” to permit such a deviation. In this case, the Motion makes clear that both the Debtors and the creditor were in communication about this claim and simply failed to timely file a proof of claim. No external factors, mistake, or circumstances beyond the control of the parties has been alleged, much less established. Accordingly, the Court does not find cause under Bankruptcy Rule 9006(b)(1) to extend the date.<br />
<br />
The only excusable neglect offered is a failure to calendar the deadline. However, for the reasons discussed in the preceding section on cause, there may be neglect, but it is not excusable.<br />
<br />
The totality of the circumstances of the case and the interests of efficient judicial administration of this chapter 13 proceeding weigh in favor of not extending the deadline under Bankruptcy Rule 3004 under the standards established by Bankruptcy Rule 9006(b)(1).<br />
<br />
Click here for full decision:<br />
<a href="http://www.nhb.uscourts.gov/Opinions/Judge_Deasy/2013BNH003-Petuck.pdf" style="background-color: white; color: #1155cc; font-family: arial, sans-serif; font-size: 13px;" target="_blank">http://www.nhb.uscourts.gov/<wbr></wbr>Opinions/Judge_Deasy/<wbr></wbr>2013BNH003-Petuck.pdf</a>Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-31934098080527338212013-06-07T07:03:00.000-04:002013-06-07T07:14:36.317-04:00"Defalcation" in context of bankruptcy discharge defined by the Supreme Court in Bullock v. Bankchampaign, N.A. May 13, 2013<br />
Click here for the full decision:<br />
<br />
<a href="http://www.supremecourt.gov/opinions/12pdf/11-1518_97be.pdf">http://www.supremecourt.gov/opinions/12pdf/11-1518_97be.pdf</a><br />
<br />
Petitioner’s father established a trust for the benefit of petitioner and his siblings, and made petitioner the (nonprofessional) trustee. The trust’s sole asset was the father’s life insurance policy. Petitioner borrowed funds from the trust three times; all borrowed funds were repaid with interest. His siblings obtained a judgment against him in state court for breach of fiduciary duty, though the court found no apparent malicious motive. The court imposed constructive trusts on certain of petitioner’s interests—including his interest in the original trust—in order to secure petitioner’s payment of the judgment, with respondent serving as trustee for all of the trusts. Petitioner filed for bankruptcy. Respondent opposed discharge of petitioner’s state court-imposed debts to the trust, and the Bankruptcy Court granted respondent summary judgment, holding that petitioner’s debts were not dischargeable pursuant to 11 U. S. C. §523(a)(4), which provides that an individual cannot obtain a bankruptcy discharge from a debt“for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” The Federal District Court and the Eleventh Circuit affirmed. The latter court reasoned that “defalcation requires a known breach of fiduciary duty, such that the conduct can be characterized as objectively reckless.”<br />
Held: The term “defalcation” in the Bankruptcy Code includes a culpable state of mind requirement involving knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior.<br />
<br />
(a) While “defalcation” has been an exception to discharge in a bankruptcy statute since 1867, legal authorities have long disagreed about its meaning. Broad definitions of the term in modern and older<br />
dictionaries are unhelpful, and courts of appeals have disagreed about what mental state must accompany defalcation’s definition.<br />
<br />
(b) In Neal v. Clark, 95 U. S. 704, this Court interpreted the term “fraud” in the Bankruptcy Code’s exceptions to discharge to mean “positive fraud, or fraud in fact, involving moral turpitude or intentional wrong, as does embezzlement; and not implied fraud, or fraud in law, which may exist without the imputation of bad faith or immorality.” Id., at 709. The term “defalcation” should be treated similarly. Thus, where the conduct at issue does not involve bad faith, moral turpitude, or other immoral conduct, “defalcation” requires an intentional wrong. An intentional wrong includes not only conduct that the fiduciary knows is improper but also reckless conduct of the kind that the criminal law often treats as the equivalent. Where actual knowledge of wrongdoing is lacking, conduct is considered as equivalent if, as set forth in the Model Penal Code, the fiduciary “consciously disregards,” or is willfully blind to, “a substantial and unjustifiable risk” that his conduct will violate a fiduciary duty.<br />
<br />
(c) Several considerations support this interpretation.<br />
<br />
First, statutory context strongly favors it. The canon noscitur a sociis argues for interpreting “defalcation” as similar to its linguistic neighbors “embezzlement,” “larceny,” and “fraud,” which all require a showing of wrongful or felonious intent. See, e.g., Neal, supra, at 709.<br />
<br />
Second, the interpretation does not make the word identical to its statutory neighbors. “Embezzlement” requires conversion, “larceny” requires taking and carrying away another’s property, and “fraud” typically<br />
requires a false statement or omission; while “defalcation” can encompass a breach of fiduciary obligation that involves neither conversion, nor taking and carrying away another’s property, nor falsity. <br />
<br />
Third, the interpretation is consistent with the longstanding principle that “exceptions to discharge ‘should be confined to those plainly expressed.’ ” Kawaauhau v. Geiger, 523 U. S. 57, 62.<br />
It is also consistent with statutory exceptions to discharge that Congress normally confines to circumstances where strong, special policy considerations,such as the presence of fault, argue for preserving the debt, thereby benefiting, for example, a typically more honest creditor. See, e.g., 11 U. S. C. §523(a)(2)(A).<br />
<br />
Fourth, some Circuits have interpreted the statute similarly for many years without administrative or other difficulties. Finally, it is important to have a uniform interpretation of federal law, the choices are limited, and neither the parties nor the Government has presented strong considerations favoring a different<br />
<br />
Vacated and remanded.<br />
BREYER, J., delivered the opinion for a unanimous Court.<br />
<br />Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-33891591143373458052013-03-31T18:21:00.000-04:002013-03-31T18:21:54.167-04:00Challenge to foreclosure dismissed due to res judicata.<br />
<div>
<b><u>Merrick v. CitiMortgage, Inc.</u>, 2013 DNH 027 (DNH 2013)</b></div>
<div>
<b>March 5, 2013, Opinion by Judge Steven J. McAuliffe</b></div>
<div>
<b><br /></b></div>
<div>
District Court dismissed (granting mortgagee's 12(b)(6) motion) the <i>pro se </i>litigants' challenge to the mortgagee's foreclosure, finding the issues were already decided in the underlying bankruptcy case.</div>
<div>
<b><br /></b></div>
<div>
<i>Pro se</i> litigants (Mr. and Mrs. Merrick) challenged CitiMortgage's right to foreclose, averring that CitiMortgage had not demonstrated to their satisfaction that they held the mortgage, and thus able to foreclose. CitMortgage removed the case from state to federal court, and moved to dismiss on the grounds of <i>res judicata, </i>arguing that the issue had already been litigated and decided by the Bankruptcy Court in the Merricks' Chapter 13 case. The Merricks' bankruptcy case and related adversary proceeding against CitiMortgage had been dismissed by the bankruptcy court for, <i>inter alia</i>, the Merricks' delay and failure to comply with court orders.</div>
<div>
<br /></div>
<div>
The essential elements of res judicata are: "(1) a final judgment on the
merits in an earlier action; (2) an identity of parties or privies in the
two suits; and (3) an identity of the cause of action in both the earlier
and later suits." <u>FDIC v. Shearson-American Express, Inc.</u>, 996 F.2d 493, 497
(1st Cir. 1993). Here, each of those essential elements is present. First, As noted above, the bankruptcy court dismissed Mr. Merrick's <br />
bankruptcy
petition for cause and subsequently dismissed his adversary complaint as
well. Neither order contains any language suggesting that the dismissal was
without prejudice to Mr. Merrick's refiling his claim <br />
against CitiMortgage. The
order dismissing his adversary complaint was, then, an adjudication on the
merits of that claim. See Fed. R. Bank. P. 7041(b) ("If the plaintiff fails
to prosecute or to comply with these rules or a court order, a defendant may
move to dismiss the action . . . Unless the dismissal order states
otherwise, a dismissal under this subdivision. . . . operates as an
adjudication on the merits."). <i>See also</i> Fed. R. <br />
Civ. P. 41((b). </div>
<div>
<br /></div>
<div>
Secondly, regarding the Identity of Parties or Privies: CitiMortgage is the defendant in both the present
action and the previously-dismissed adversary proceeding in the bankruptcy
court. The only <br />
difference in parties in the two actions is that Mrs.
Merrick is also a plaintiff in this proceeding. As the court of appeals has
noted, when the plaintiffs "are nominally different[,] . . . the question
reduces to whether the plaintiffs, though not identical, are sufficiently in
privity to satisfy this element." <u>In re Colonial Mortgage Bankers Corp.</u>, 324
F.3d 12, 17 (1st Cir. 2003). They are. Although she was not a named
plaintiff in her husband's adversary complaint against Citi Mortgage, Mrs. Merrick's
interests were adequately represented in the bankruptcy proceeding insofar
as: (1) her interests and those of her husband were virtually identical with
regard to the claim against Citi and Mr. Merrick's efforts to prevent the
foreclosure upon the couple's home; and (2) she would have benefited to the
same extent as her husband, if he had prevailed on his claims against Citi
in the bankruptcy court. In fact, Mr. Merrick tacitly acknowledged his
wife's interest in the adversary proceeding when he signed his adversary
complaint against Citi as the "authorized representative for John &
Joanne Merrick." Accordingly, the second element of res judicata - identity of parties or privies - is satisfied. <i>See, e.g.</i>, <u>Eubanks v. FDIC</u>, 977 F.2d 166, 170
(5th Cir. 1992) (holding that wife's interests were sufficiently
well-represented in husband's bankruptcy proceeding to give it res judicata effect against her); Cuauhtli v. Chase Home Fin. LLC, 308 Fed. Appx. 772, 773 (5th Cir. 2009) (holding that husband and wife were in privity, such that wife's prior suit challenging legality of foreclosure proceedings precluded subsequent similar claims by her husband); In re Rhoads, 2012 WL 603652 (9th Cir. BAP 2012) (finding privity between a husband and wife with regard to claims arising out of the foreclosure of jointly owned
property); Hintz v. JP Morgan Chase Bank, N.A., 2011 WL 579339, *7 (D.
Minn.,2011) ("The First Lawsuit involved the same parties, or their
privities, as the current lawsuit. Here, Mr. Hintz, one of the two
Plaintiffs in this case, was the plaintiff in the state lawsuit. As a joint
owner of the Property, Ms. Hintz, the second Plaintiff in this case, was in
privity with Mr. Hintz. Two parties who have similar interests in the same
realty are in privity.") (citation and internal punctuation omitted).
<br />
<br />
Third, regarding the Identity of the Cause of Action:Finally, there can be little
doubt that the claim the Merricks' advance against Citi in this proceeding is
identical to the one Mr. Merrick pursued against Citi in his adversary
proceeding. Both actions involve allegations of Citi's lack of "standing" to
enforce the judicial <br />
sale provisions of the mortgage deed; both actions rely
on allegations that Citi lacks a "proof of claim" that would allegedly
demonstrate its legal authority to foreclose the mortgage; and both actions
allege that <br />
Citi is not the current holder in due course of the mortgage
deed, with power/authority to enforce it. Compare Adversary Complaint
(document no. 4-3) with Motion to Order a Temporary Restraining Order
(document no. 1-1). <br />
<br />
click here for the full opinion: <a href="http://www.nhd.uscourts.gov/Isys/isysquery/8866ef3b-ac79-4bfc-a9fd-3b340b26f627/1/doc/">Click here: ISYS:web 8</a></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com1tag:blogger.com,1999:blog-3245411734954853276.post-55139345026820909972013-03-31T17:18:00.003-04:002013-03-31T17:18:52.197-04:00Stopping foreclosure of your home.<br />
<div style="background-color: white;">
In New Hampshire, most home mortgages have a "power of sale" clause. A "power of sale" clause means that the lender can take your home without taking you to court if you are behind in your home mortgage payments. Because of this "power of sale" clause allowed in New Hampshire home mortgages, New Hampshire is called a "non-judicial" foreclosure state.</div>
<div style="background-color: white;">
<br /></div>
<div style="background-color: white;">
A non-judicial foreclosure in New Hampshire can happen very quickly.</div>
<div style="background-color: white;">
<br /></div>
<div style="background-color: white;">
Take a look at the following time line from the HomeHelp web site to understand the process that shows you can lose your home in less than 120 days if you do nothing.</div>
<div style="background-color: white;">
click here: <a href="http://www.homehelpnh.org/timeline.htm" style="color: #1155cc;" target="_blank" title="http://www.homehelpnh.org/timeline.htm">http://www.homehelpnh.<wbr></wbr>org/timeline.htm</a></div>
<div style="background-color: white;">
<b><br /></b><b><u>Here are the steps to losing your home</u>:</b></div>
<div style="background-color: white;">
1. Default: Meaning, you are not current in your home mortgage payments. If you do not cure the default, you will soon receive an acceleration letter from the "mortgagee" (a "mortgagee" is the person or entity holding your mortgage and you, the borrower, are the "mortgagor") telling you that you need to pay the past due amounts within a certain time frame.</div>
<div style="background-color: white;">
2. You may also incur late fees, penalties and the lender's costs and fees for the mortgagee's attorney for being in default - so being late in your mortgage payments may cause you to incur these $$$ additional charges.</div>
<div style="background-color: white;">
3. After the acceleration lender, if you have not brought all of your mortgage payments, cost, fees and late charges current, the mortgagee is permitted to schedule a foreclosure sale of your home. The mortgagee must send you a notice of foreclosure sale at least 25 days before the foreclosure sale.</div>
<div style="background-color: white;">
4. Mortgagee advertises once a week for three weeks before the foreclosure sale to publish the date and time that your foreclosure sale is going to take place.</div>
<div style="background-color: white;">
5. Day of the Foreclosure sale: An auctioneer on behalf of the mortgagee shows up on your front lawn on the day of the foreclosure sale and auctions off your home. Up to the point of foreclosure sale, you can "reinstate" by paying back the lender all the past due payments, costs, fees, late fees and penalties - again, it is not just paying back the late mortgage payments.</div>
<div style="background-color: white;">
6. Whoever buys your home at the foreclosure sale has 60 days to record the foreclosure deed. The mortgagee may buy your home at a foreclosure sale auction in addition to a third-party.</div>
<div style="background-color: white;">
7. After the foreclosure sale deed is recorded, the new owner (often the mortgagee) will proceed to the process of eviction of the homeowner.</div>
<div style="background-color: white;">
<u><br /></u><u><b>How do I stop foreclosure?</b></u></div>
<div style="background-color: white;">
1. <u>Lender consents</u>: Ask the mortgagee to adjourn the foreclosure sale and give them a reasons to do so - such as you have a mortgage loan modification pending, or you have a sale pending of your home that will repay the loan. With respect to a loan modification, remember you can get FREE help in the State of NH from a Housing Counselor (click on our article regarding Housing Counselors which gives you the names and addresses of a free housing counselor near you). If the mortgagee agrees to adjourn the foreclosure sale, it is very wise to get this in writing. Or, you can pay the lender all of the back payments, late fees, penalties etc., that have accrued up to the date of the foreclosure sale, also called "curing the arrearages" - and then you can go back to making your normal monthly mortgage payments on time - but you normally only have until the time the foreclosure sale takes place to "cure the arrearages".</div>
<div style="background-color: white;">
2. <u>TRO</u>: You may be able to seek a temporary restraining order, also called an "injunction", in the state court to temporarily stop the foreclosure sale, but you need to give the judge a reason to stop the foreclosure sale and you need to do this before the foreclosure sale. You must file for the TRO <u>before</u> the foreclosure sale. </div>
<div style="background-color: white;">
3. <u>Bankruptcy</u>: File a petition in bankruptcy which automatically stops the foreclosure proceedings. In a Chapter 13 bankruptcy proceeding, you can have up to 60 months (5 years) to cure the back payments you owe to the lender and keep your home, as long as you can make the normal monthly payments going forward. A Chapter 7 bankruptcy will also automatically stop the foreclosure sale as well; however, once the Chapter 7 case is over, the mortgagee can reschedule the foreclosure sale.</div>
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Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-1885596585644676542013-03-26T18:40:00.002-04:002013-03-26T18:46:36.066-04:00Social Security Income is not included in Chapter 13 Plan (great news from NACBA)<span style="font-family: inherit;"><br /></span>
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<span style="font-family: inherit; font-size: small;"><b> </b>The National Consumer Bankruptcy Rights Center (NCBRC), NACBA’s 501(c)(3) offshoot, scored an important win in the Ninth Circuit yesterday. In, <b>In re Welsh, 2013 U.S. App. LEXIS 5880 (9th Cir. 2013), </b>that court of appeals joined the Fifth and Tenth Circuits in holding that it was not bad faith for a debtor to decline to devote social security income to paying unsecured creditors in a chapter 13 plan. The court rejected the trustee’s argument that this allowed the debtor to have money left over that could be used to pay creditors, stating that:<u></u><u></u><u></u></span></div>
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<span style="color: #333333;"><span style="font-family: inherit; font-size: small;">Congress chose to remove from the bankruptcy court's discretion the determination of what is or is not "reasonably necessary.” It substituted a calculation that allows debtors to deduct payments on secured debts in determining disposable income. That policy choice may seem unpalatable either to some judges or to unsecured creditors. Nevertheless, that is the explicit choice that Congress has made. We are not at liberty to overrule that choice.<u></u><u></u></span></span></div>
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<span style="color: #333333;"><span style="font-family: inherit; font-size: small;">In fact, the court followed the Eighth Circuit in holding that the issue of how much creditors are paid should not even be a part of the good faith analysis, now that Congress has adopted the disposable income test.<u></u><u></u></span></span></div>
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<span style="color: #333333;"><span style="font-family: inherit; font-size: small;"> Equally as important, the court rejected the trustee’s argument that the debtors should not be permitted to continue to pay for “luxury” secured debts (on two ATVs and an Airstream trailer) “at the expense” of their unsecured creditors. Again, the court found that the statutory language is clear:<u></u><u></u></span></span></div>
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: inherit;">The calculation of "disposable income" under the BAPCPA requires debtors to subtract their payments to secured creditors from their current monthly income. In enacting the BAPCPA, Congress did not see fit to limit or qualify the kinds of secured payments that are subtracted from current monthly income to reach a disposable income figure. Given the very detailed means test that Congress adopted, we cannot conclude that this omission was the result of oversight. Moreover, even if it were, we would not be justified in imposing such a limitation under "the guise of interpreting 'good faith.’”</span><span style="font-family: arial, sans-serif; font-size: x-small;"><u></u><u></u></span></span></span><br />
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<b style="color: black; font-family: 'Times New Roman'; font-size: medium;"><i><br /></i></b></div>
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<b style="color: black; font-family: 'Times New Roman'; font-size: medium;"><i>click here for the full text of the Welsh Opinion </i></b></div>
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<b><i>from the web site of the 9th Cirucit Court of Appeals:</i></b></div>
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<a href="http://cdn.ca9.uscourts.gov/datastore/opinions/2013/03/25/12-60009%20web%20revised.pdf">Click here: http://cdn.ca9.uscourts.gov/datastore/opinions/2013/03/25/12-60009%20web%20revised.pdf</a></div>
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Cambria;"><i>The brief for NCBRC was written by Geoff Walsh of the National Consumer Law Center.</i></span></span></span></div>
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<i><br /></i></div>
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Cambria;"><i>Henry Sommer, NACBA President Emeritus; Chair, Amicus Committee.</i></span></span></span></div>
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<span style="color: #333333;"><span style="font-size: small;"><span style="font-family: Cambria;"><br /></span></span></span></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-91111738479898567202013-03-19T08:17:00.000-04:002013-03-19T08:17:58.795-04:00Recent Bankruptcy Cases from around the Circuits: Jan - March 2013.<br />
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NACBA is the national Association of Consumer Bankruptcy
Attorneys, for which I am a member. They
provide “Cases in Review”, which highlights recent cases that may be of
particular interest to consumer
bankruptcy practitioners. It is brought
to you by Consumer Bankruptcy Abstracts & Research (www.cbar.pro) and the
National Consumer Bankruptcy Rights Center (www.ncbrc.org). </div>
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<b><i>Settlement proceeds are not included as part of plan funding as they
are not part of the projected disposable income:<o:p></o:p></i></b></div>
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<u>Connor v. Carroll</u>, --- Fed. Appx. ----, 2013 WL
150150 (6th Cir. Jan. 15, 2013). </div>
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Chapter 13—Confirmation of plan—Calculation of projected
disposable income: The proceeds of the settlement of a prepetition personal
injury claim, received post-petition by the Chapter 13 debtors, did not
constitute projected disposable income of the debtors as the proceeds were not
known or virtually certain at the time of confirmation of their plan.
Accordingly, the debtors did not have to remit the proceeds to the Chapter 13
trustee for distribution to unsecured creditors. </div>
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<b>Paying tax sale
purchaser’s claim:<o:p></o:p></b></div>
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<u>In re Romious</u>, --- B.R. ----, 2013 WL 221432 (Bankr.
N.D. Ill. Jan. 18, 2013). Chapter 13—Confirmation of plan—Treatment of secured
claims—Propriety of inclusion in plan: A Chapter 13 plan may modify a tax sale
purchaser’s secured claim by paying it in installments over the term of the
plan, so long as the redemption period has not expired prior to the debtor’s
bankruptcy filing. </div>
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<b><i>Contract rights come within the purview of the anti-discrimination
statute, applying here to IRS OIC:<o:p></o:p></i></b></div>
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<u>In re Mead</u>, 2013 WL 64758 (Bankr. E.D. N.C. Jan. 4,
2013). </div>
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Discrimination against debtor: In a case that appears to be
the first of its kind, the bankruptcy court held that an interpretation of the
Chapter 13 debtors’ offer in compromise, which the IRS had accepted
prepetition, as voiding the offer in compromise upon the debtors’ bankruptcy
filing would constitute discrimination against the debtors in violation of Code
§ 525(a). Although abrogation of contract </div>
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rights is not explicitly listed in the prohibited
discriminatory acts mentioned in § 525(a), the legislative history of the
section makes it clear that the list is not meant to be exhaustive, and the
court concluded that contract rights clearly come within the purview of §
525(a). Accordingly, the court would interpret the offer in compromise in a
manner not violating § 525(a); under this interpretation, the offer in
compromise remained in effect, and the IRS could file a proof of claim only for
the amount due under the agreement, as well as for amounts due for tax years
not covered by the offer in compromise.</div>
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<b><i>State did not discriminate as “employment” did not apply regarding
interim appointment to position otherwise elected:<o:p></o:p></i></b></div>
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<u>Chasensky v. Walker</u>, 2013 WL 160273 (E.D. Wis. Jan.
14, 2013). </div>
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Discrimination against debtor: In an action in which a
debtor in a pending bankruptcy case claimed that the governor of Wisconsin
violated Code § 525(a) by failing to appoint her to an interim position of
county register of deeds after he discovered that she had filed a bankruptcy
petition, the court held that the word “employment” in Code § 525(a) does not
encompass an interim appointment by a state governor to an otherwise elected
position. Accordingly, the court granted
the United States’ motion for a rehearing of the decision in Chasensky v.
Walker, 2012 WL 1287659 (E.D. Wis. April 16, 2012), which held that the states
had not waived their sovereign immunity as to the appointment powers of a
state's duly-elected governor. Applying the doctrine of constitutional
avoidance, the court instead decided the </div>
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viability of the debtor’s claim as a matter of statutory
interpretation .</div>
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<br /></div>
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<b><i>“house hold” = “economic unit”:<o:p></o:p></i></b></div>
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<u>In re Reinsch,</u> 2013 WL 256734 (Bankr. D. Neb. Jan.
23, 2013). </div>
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Means test—Household size: Agreeing with In re Robinson, 449
B.R. 473 (Bankr. E.D. Va. 2011), the court said that the term “household” as
used in Code § 1325(b) includes the debtor and the persons who operate in the
aggregate with the debtor as an “economic unit.” Thus, here, the above-median Chapter
13 debtor could calculate her expenses under the means test by using a
household size of three, rather than two, even though this included the
debtor’s oldest child, a 20–year–old full-time college </div>
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student attending a school out of state. The debtor
testified that her daughter returned home during school breaks and on some
weekends and that the debtor provided substantial financial support to her,
including college expenses, food, clothing, car insurance, and cellular phone.
It seemed clear that the oldest daughter was, at this time, a part of the
household economic unit. </div>
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<b><i>Nonfiling spouse’s social security benefits not included in debtor’s
current monthly income:<o:p></o:p></i></b></div>
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<u>In re Scott,</u> 2013 WL 140461 (Bankr. M.D. Ga. Jan. 11,
2013). Contribution by nondebtor: In one of the few decisions to explicitly
address this issue, the court found In re Miller, 445 B.R. 504 (Bankr. D. S.C.
2011) more persuasive than In re Olguin, 429 B.R. 346 (Bankr. D. Colo. 2010)
and held that Social Security benefits received by a person other than the debtor,
such as the debtor’s nonfiling spouse, are not included in the debtor’s current
monthly income defined in Code § 101(10A) even where the person’s other income
is included in the debtor’s current monthly income under § 101(10A)(B) as paid
“on a regular basis for the household expenses of the debtor or the debtor's
dependents.” Accordingly, in a Chapter 13 case these Social Security benefits
are not included in the debtor’s “projected disposable income.” </div>
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<b><i>Means Test: Distinguishing between joint and individual expenses for
the nonfiling spouse in current monthly income:<o:p></o:p></i></b></div>
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<u>In re Toxvard</u>,
--- B.R. ----, 2013 WL 122508 (Bankr. D. Colo. Jan. 9, 2013). Contributions on
a regular basis by a nondebtor are included in a debtor’s “current monthly
income” under Code § 101(10A)(B) only where the contribution is for (1)
“household expenses,” (2) “of the debtor or the debtor's dependents.” Here, all of the expenses paid by the debtor’s
nonfiling husband were “household expenses,” so that the determinative issue
was whether each expense was an expense “of the debtor” (there being no
dependents in the household). Accordingly, if a household expense was the debtor's
sole expense, then the debtor needed to include her husband’s entire payment of
the expense in the calculation of her current monthly income. If a household
expense was the husband’s sole expense, then the debtor could deduct the entire
expense from her calculation. If a household expense was a joint obligation, then
the debtor needed to include the husband’s payment of the expense in her calculation,
but only to the extent the husband’s payment satisfied the debtor's share of
the obligation. Absent evidence to the contrary, this amount would be 50
percent of the total expense. </div>
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<b><i>Kansas state exemption on earned income credits does not violate the
Uniformity Clause:<o:p></o:p></i></b></div>
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<u>In re Westby,</u>
--- B.R. ----, 2013 WL 415599 (B.A.P. 10th Cir. Feb. 4, 2013). </div>
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Affirming <u>In re Westby,</u> 473 B.R. 392 (Bankr. D. Kan.
April 4, 2012), the Bankruptcy Appellate Panel held that a new Kansas statute,
Kan. Stat. Ann. § 60-2315, that permits a debtor in bankruptcy, but not a
general debtor, to exempt the right to receive a federal and state earned
income tax credit does not violate either the Uniformity Cause, or the
Supremacy Clause, of the U.S. Constitution. The BAP said that it agreed with
the bankruptcy court’s detailed analysis and reasoning and found it unnecessary
to duplicate that court’s extensive efforts. The BAP also noted that, subsequent
to the bankruptcy court’s decision, the Sixth Circuit Court of Appeals, in In
re Shafer, 689 F.3d 601 (6th Cir. 2012), upheld the constitutionality of a
Michigan bankruptcy-only homestead exemption statute. </div>
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<b><i>Wells Fargo class certification for signing affidavits without personal
knlwedge or failing to be notarized in the presence of the notary:<o:p></o:p></i></b></div>
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<u> In re Brannan</u>,
--- B.R. ----, 2013 WL 85158 (Bankr. S.D. Ala. Jan. 8, 2013). </div>
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Although the court in its earlier opinion, In re Brannan,
2011 WL 5331601 (Bankr. S.D. Ala. Nov. 7, 2011), declined to certify a class in
a proposed class action, the court concluded that the plaintiffs had now
demonstrated that the prerequisites for the certification of two classes in a proposed
class action were satisfied. The class action asserts that Wells Fargo committed
fraud on the court through its practices in generating affidavits filed in connection
with motions for relief from stay. Specifically, the action asserts that (1) persons
signing affidavits did not, in fact, possess personal knowledge of the facts stated
in the affidavits, as the affidavits represented; and (2) the person signing
the affidavits did not actually sign them in the presence of a notary public,
as represented in the affidavits. These allegations, if established, warranted
relief, the court concluded, both under Code § 105(a) and under the court’s
inherent authority to punish contempt of the court. </div>
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<b><i>Can’t force secured creditor to foreclose, thus no discharge violation:<o:p></o:p></i></b></div>
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<u>In re Canning</u>,
--- F.3d ---, 2013 WL 388060 (1st Cir. Feb. 1, 2013).</div>
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The refusal by the Chapter 7 debtors’ mortgage creditor to
accede to the debtors’ demand that the creditor either foreclose the mortgage
on their residence, which the debtors had surrendered and vacated, or release
its lien on the property did not violate the discharge injunction.
Distinguishing In re Pratt, 462 F.3d 14 (1st Cir. 2006), in which the court
held that a secured creditor's refusal to foreclose or release its lien on an inoperable,
worthless car was intended to objectively coerce the debtor into paying a discharged
debt, the court observed that the creditor offered to release its lien through either
a settlement offer or a short sale, which indicated the intent to collect no
more than the value secured by the underlying lien, as well as a willingness to
negotiate a palatable solution for all involved. </div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0tag:blogger.com,1999:blog-3245411734954853276.post-15555406025433478662013-03-13T05:40:00.001-04:002013-03-13T05:42:34.844-04:00Foreclosure: First Circuit would not force mortgagee to foreclose.<br />
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<u>Canning v. Beneficial Maine, Inc. (In re Canning)</u>, ___ F.3d ___(1st Cir. Feb. 1, 2013).</div>
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The refusal by the Chapter 7
debtors’ mortgage creditor to accede to the debtors’ demand that the creditor
either foreclose the mortgage on their residence, which the debtors had surrendered
and vacated, or release its lien on the property did not violate the discharge
injunction. Distinguishing <u>In re Pratt</u>, 462 F.3d 14 (1st Cir. 2006), in which the court held that a secured creditor's refusal to
foreclose or release its lien on an inoperable, worthless car was intended to
objectively coerce the debtor into paying a discharged debt, the court observed
that the creditor offered to release its lien through either a settlement offer
or a short sale, which indicated the intent to collect no more than the value
secured by the underlying lien, as well as a willingness to negotiate a palatable
solution for all involved.<br />
<br />
Click here for the full opinion from the court's web site: <a href="http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=12-9002P.01A">Click
here: USCA1 Opinion</a></div>
Anonymoushttp://www.blogger.com/profile/09546439266037538945noreply@blogger.com0