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Bankruptcy Court Determines Redemption Value of Frankenstein Truck

On April 18, 2019 the Bankruptcy Court for the District of New Mexico entered an order determining the redemption value of a highly modified pickup truck.The Debtor purchased the truck in August of 2014 by obtaining a loan in the amount of $15,715.88 from State Employees Credit Union (Credit Union). Prior to filing bankruptcy, the Debtor made extensive changes to the truck. Originally a 1978 Ford F-150, it was modified to add four-wheel drive and a Super-Cab with the designation of an F-350. The Debtor valued the truck at $600.00 stating it needed repairs including a new transmission. The estimate provided did not include an amount for a transmission.

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Bankruptcy Court Rejects Equitable Tolling Argument to Extend Deadline to File Dischargeability Complaint

On April 16, 2019 the Bankruptcy Court for the District of New Jersey denied the Creditors’ motion to extend the dischargeability complaint deadline.Creditors allege that they were the victims of a fraudulent real estate scheme carried out by one of the Debtors. The Creditors had filed a lawsuit in state court which was pending when the bankruptcy was filed.

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Bankruptcy Court Cites Achilles in Well-Heeled Analysis of Sovereign Immunity for the State Revenue Department

It’s going to be an interesting opinion when the first line reads “In mythological lore, the Greek hero Achilles thought himself to be invincible, impervious to the swords and arrows of his enemies.” Judge Taddonio of the Bankruptcy Court for the Western District of Pennsylvania goes on to discuss the sovereign immunity claims by the Pennsylvania Department of Revenue (Revenue) in an opinion dated March 29, 2019.

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Illinois Bankruptcy Court Examines Whether Severance Pay is Estate Property

On May 1, 2018 the Debtor was laid off from his job. His employer offered the Debtor a separation agreement offering the debtor the amount of $83,333.33 which was four months of base salary. These payments were to be paid out to the Debtor in bi-weekly installments. In exchange, the Debtor had to agree to a non-compete provision, release of claims, be available to help transition his duties to others, and cooperate with and assist his former employer in connection with any audits, inspections, inquiries or legal proceedings.

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Texas Bankruptcy Court Says Surrender Doesn’t Require Delivery

In 2005 the Debtors purchased a used mobile home with a secured loan from 21st Mortgage Corporation (21st Mortgage). In August 2018 the Debtors filed a chapter 7 bankruptcy petition with the intent of reaffirming the debt to 21st Mortgage. After their 341 Debtors decided to surrender the mobile home to 21st Mortgage.

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Georgia Bankruptcy Court Reviews Case Split on Bases to Amend Plan Under 1329 (Subtitle: When the Original Plan was Confirmed with Inclusion of SSI Benefits, Can the Debtor Later Amend the Plan to Remove That Contribution?)

In this case the debtor had a confirmed plan in which he had pledged some of his fiancé’s SSI income to make his plan payments feasible. The debtor then moved to amend the plan to reduce his plan payment by withdrawing this contribution. This was based on a recent decision by the bankruptcy court concluding SSI is not included in current monthly income, and that it is not per se bad faith to exclude SSI from plan payments. In re Green, 2018 WL 1581635, at *2 (Bankr. S.D. Ga. Mar. 27, 2018).

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7th Circuit Reverses Bankruptcy Courts’ Uniform Rule to Keep Debtor’s Vehicle in Chapter 13 Post-Confirmation Estate

This opinion was based on the consolidated appeals of seven cases. Each of the seven debtors filed a petition for bankruptcy under Chapter 13 of the Bankruptcy Code in the Bankruptcy Court for the Northern District of Illinois. The uniform confirmation order in this district (in most cases) is that upon confirmation, the property of the estate remains property of the estate. City of Chi. v. Marshall, 281 F. Supp. 3d 702, 704 (N.D. Ill. 2017).

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In Stay Violation Proceeding, Florida Bankruptcy Court Awards Debtor $45,500.00 against the Creditor, $15,000.00 against Creditor’s Counsel, Plus a Show Cause Order Why The Court Shouldn’t Impose Additional Sanctions Against Counsel

The Bankruptcy Court for the Northern District of Florida recently issued an opinion that all debtors’ counsel should read. The court reviewed in detail the requirements of the automatic stay, including the duty to correct a violation, the bases for awards of actual damages (including emotional distress) and punitive damages against both a creditor and the creditor’s counsel.

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Kansas Bankruptcy Court Denies Motion to Extend Deadline to Object to Discharge When Debtor Has Been Cooperative, Courts in the 10th Circuit Must Strictly Enforce the Discharge Objections Deadline.

On March 7, 2019 the Bankruptcy Court for the District of Kansas denied a creditor’s motion to extend the deadline to file an adversary proceeding to determine dischargeability of the underlying debt. On September 25, 2018 the Debtor filed for relief under Chapter 7 of the Bankruptcy Code. The Bank of Holyrood (Bank) is a creditor who filed a claim for more than $600,000.00. Bank’s counsel entered its appearance within two weeks of the bankruptcy filing, attended the 341 meeting of creditors and the trustee’s 2004 exam of the Debtor.

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Bankruptcy Court Approves Higher Hourly Rate for Attorney Who Attended CLE

The Bankruptcy Court for the Western District of Michigan has a three-tiered presumptive hourly rate for chapter 13 debtor’s attorneys. The first, at $175.00 per hour, is the lowest tier. The second, at $220.00 per hour, is for attorneys who have attended at least seven hours of CLE and certified attendance and chapter 13 expertise to the court. The third, at $250.00 per hour, is for attorneys who are certified by the American Board of Certification (ABC).

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9th Circuit Rules on Whether Chapter 20s Are Per Se Bad Faith Filings and Whether An Obvious Intended Lien Avoidance Action Affects Eligibility Under 11 U.S.C. § 109

The 9th Circuit Court of Appeals, in an unpublished opinion, recently ruled on two important issues. The Court examined whether filing a chapter 13 bankruptcy soon after completion of a chapter 7 is a bad faith filing per se. The Court also examined whether the amount of a wholly unsecured lien should be considered in determining debtor’s eligibility under the secured or unsecured debt caps found in §109(e) when the debtor’s obvious intention is to strip off the lien.

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Nebraska Bankruptcy Court Rules §506(b) Is Not A Blank Check for Over-Secured Creditors, Knocks off $38,355.85 of Excessive Fees and Charges

The Bankruptcy Court for the District of Nebraska recently reviewed the reasonableness of the fees and charges claimed by a mortgage creditor on an over-secured loan. Prior to filing for protection under Chapter 13 of the Bankruptcy Code, the Debtor owned two properties, one residential and the other business, and pledged them as collateral for an SBA loan through the creditor. He subsequently fell behind on payments and was not able to pay the balloon amount. The properties are collectively valued at $220,000.00 and the principal and interest balance at filing was less than $70,000.00. The creditor’s claim also included $13,592.20 for late charges and $41,365.85 for expenses for appraisals, assessments and other fees. The Debtor objected to the reasonableness of the charges and expenses.

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Maryland Bankruptcy Court Holds Failure to Produce Writings Doesn’t Invalidate Credit Card Claims

The Bankruptcy Court for the District of Maryland recently ruled whether several claims based on an open-ended credit card agreements could be disallowed for failure to provide the Debtors documents supporting the claim. The Debtors’ counsel had requested the creditors to deliver copies of the writings on which each of the claims was based and other documents including copies of all monthly statements to copies of all notices of transfer of the account. When the creditors failed to supply the information, the Debtors objected to those claims and asked that they be disallowed.

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Bankruptcy Court Addresses Eligibility, Non-formal Notice of Bankruptcy and a Creditor’s Affirmative Duty to Correct Technical Violations of the Automatic Stay

A bankruptcy court recently ruled on several issues of importance to all potential debtors. First, the court examined the effect of a prior dismissal order (for failure to timely file certain schedules, statements or other documents) on a subsequent bankruptcy petition. Specifically, the court examined the small slice of cases where the automatic stay does not apply in a second case when the Debtor is not an “eligible Debtor” under 11 U.S.C. § 109(g). The court also examined the split in authority on who bears the burden of proof of proving eligibility.

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Bankruptcy Court Rejects Ditech’s Standing to file Mortgage Claim

A bankruptcy court recently expunged a claim of Ditech Financial LLC (Ditech) asserting that it was the creditor and the servicer of a note secured by an investment property (the “Property”) owned by the Debtors. Ditech filed a petition for bankruptcy in Case No. 19-10414 (Bankr. S.D.NY February 11, 2019). The order was entered in another proceeding before a different judge after Ditech’s bankruptcy was filed.

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Bankruptcy Court Denies USA’s Blanket Request for Tolling of Deadlines During Lapse of Appropriations

In an unpublished opinion, the Bankruptcy Court for the Northern District of Ohio recently denied a motion from the United States Attorney’s Office “requesting a tolling of all deadlines applicable to the United States, its agencies, or its employees, including, without limitation a tolling of all bar dates for the filing of proofs of claim and request for the payment of administrative expenses with respect to the United States and its agencies from December 22, 2018 through January 28, 2019 (the “Appropriations Lapse”).”

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Should You Object to that Claim Now or in The Next Bankruptcy Case? A Bankruptcy Court Discusses the Effect of Res Judicata in Claim Allowance and Disallowance

The Bankruptcy Court for the Central District of California recently examined whether a claim, allowed or disallowed in a previously dismissed bankruptcy, has res judicata effect in a subsequent bankruptcy. The court discussed the elements of res judicata in these circumstances.

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Bankruptcy Court Clarifies Authentication Standard in Motions for Summary Judgment

The Bankruptcy Court for the District of Delaware recently clarified the authentication standard for an exhibit attached to a motion for summary judgment. The court specifically examined the change in Fed.R.Civ.P. 56(c)(4) in 2010 (made applicable to bankruptcy proceedings in Fed.R.Bankr.P. 7056 and applicable to all contested matters in Fed.R.Bankr.P. 9014(c)).

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10th Circuit BAP Says Amending Schedules in a Reopened Case is not Subject to Excusable Neglect Test

The Bankruptcy Appellate Panel for the 10th Circuit recently addressed a thorny issue about amending schedules in reopened cases. See In re Dollman, BAP No. NM-18-030(10th Cir. B.A.P. February 5, 2019). The question is whether a debtor in a reopened case seeking to amend schedules must first move for an extension of time pursuant to Fed.R.Bankr.P. 9006, and demonstrate excusable neglect.

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Bankruptcy Court Allows Exemption of Pre-petition Disbursement from 401k

The Bankruptcy Court for the Eastern District of Louisiana recently reviewed an interesting case where the debtor’s pre-petition 401k disbursement was held by a state taxing agency. See In re Bostick, No. 18-10069 (Bankr. E.D.LA. Feb. 1, 2019). The court determined whether the money returned from the state was a tax refund or an exempt asset.

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2019 President’s Letter to Membership

As we collectively depart 2018 and begin anew in 2019, it may be an overstatement to apply this famous quote to any portion of our lives, our practices, or of NACBA as a whole. Still, in looking back, one can obviously spot highlights and low lights and, importantly, use that perspective in shaping the path forward.

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8th Circuit Addresses Res Judicata and Good Faith in Sanctions Case

In First State Bank of Roscoe v. Stabler, No. 17-1904, 2019 U.S. App. LEXIS 3041 (8th Cir. Jan. 30, 2019), the 8th Circuit affirmed discharge violations against the First State Bank of Roscoe and it’s principal John R. Beyers for concocting a scheme post-discharge that ended with debtors owing the Bank money originally discharged. The court rejected the preclusive effect of an underlying state court action and defendants’ good faith defense.

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In Sanctions Matter Bankruptcy Court Shuts Down Creditor’s Defense of No Notice

The Utah Bankruptcy Court framed the issue as “Is it a credible defense to a motion for sanctions for stay violations for a creditor to claim it lacked notice of the bankruptcy filing, even after service of multiple bankruptcy papers followed by phone calls from the debtors? The Court thinks not.” In re Kelley, No. 17-29915, 2019 Bankr. LEXIS 29, at *1 (Bankr. D. Utah Jan. 4, 2019).

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