News

Case Bites – Interesting Bites From This Week’s Cases

If service of an adversary complaint is not completed until 21 days after the Clerk issues the summons, and no response is filed, can a Court sua sponte deny a request for entry of default judgment for improper service? Can a chapter 13 Trustee avoid the claim of a creditor who did not perfect its security interest until after a chapter 13 is filed? Are negative procedural rulings against a party grounds to recuse the bankruptcy judge for bias? What is the standard to challenge a trustee’s decision to settle litigation? Can a motion for sanctions under Rule 11 be dismissed as untimely if filed after final adjudication of the offending pleading or motion?

No Comments Read More

7th Circuit Rules Chicago Can Not Ignore the Automatic Stay and Hold Vehicles Until Tickets are Paid

On June 19, 2019 the 7th Circuit Court of Appeals affirmed the decisions of the lower bankruptcy courts. In four chapter 13 bankruptcies, the City of Chicago impounded vehicles owned by the Debtors for failure to pay multiple traffic fines. After the Debtors filed chapter 13, the City refused to return the vehicles claiming they needed to maintain possession to continue their perfection on them and wouldn’t return the vehicles until the fines were paid.

No Comments Read More

Bankruptcy Court Rules Exemption Planning Doesn’t Justify Exemption Disallowance Unless there is Fraudulent Conduct

On June 14, 2019 the Bankruptcy Court for the Western District of Wisconsin overruled the chapter 7 trustee’s objection to a claimed exemption. Prior to filing their bankruptcy, the Debtors sold non-exempt property including stock and four parcels of real estate. They deposited the funds ($177,000.00) in a Prudential annuity account. Fourteen (14) days later, the Debtors filed a chapter 7 bankruptcy and claimed the funds as entirely exempt under Wisconsin’s retirement benefits exemption.

No Comments Read More

District Court Examines Split in Authority Whether Religious and Charitable Donations Are Permissible Expenses In Determining Undue Hardship in Student Loan Discharge Proceeding

On June 12, 2019 the United States District Court for the Southern District of New York entered an order affirming the order of the bankruptcy court. On June 20, 2017 the Debtor filed a chapter 7 bankruptcy and received a discharge. He filed an adversary against the Educational Management Corporation (“ECMC”) seeking a discharge of his student loans under 11 U.S.C. §523(a)(8).

No Comments Read More

DC Circuit Rules Waiver of Res Judicata Not Binding on the Court and Once Raised A Debtor Needs to Submit Evidence To Support Mistaken Nondisclosure

On June 7, 2019 the United States Court of Appeals for the District of Columbia Circuit addressed whether the failure to disclose their discrimination claims judicially estopped them from participating in a lawsuit. The Debtors were part of a 47-member class action against the District of Columbia (DC) alleging race and age discrimination.

No Comments Read More

Mom’s Pre-petition Payoff of Debt Considered Preferential Transfer Says 10th Circuit BAP

On June 4, 2019 the Bankruptcy Appellate Panel for the 10th Circuit Court of Appeals (BAP) affirmed the decision of the bankruptcy court. Prior to filing bankruptcy, the Debtor owed over $20,000.00 to his attorneys, Stevens, Littman, Biddison, Tharp and Weinberg, LLC (Law Firm). The Debtor signed a promissory note with his mother in which he promised to pay his mother $21,672.65. Three days later Debtor’s mother paid $21,672.65 to the Law Firm. The terms of the loan indicated the money was to be used exclusively to pay the debt to the Law Firm and was not a general loan to be used for any other purpose. The payment was made directly by Debtor’s mother to the Law Firm from an account owned solely by her. Of importance, the Debtor, in his Statement of Financial Affairs indicated that his mother paid the Law Firm on his behalf.

No Comments Read More

District Court Holds Condo Association’s Interest Is Not Protected by 1322(b)(2) Because It Is Both A Security Interest and a Statutory Lien (Subtitle: Good Case to Brush Up on Exceptions to Anti-Modification Rule of 1322(b)(2) Regarding HOA and Condo Association Liens)

On May 21, 2019, the United States District Court for the District of New Jersey reversed the dismissal of the Debtor’s chapter 13 petition and remanded it for a redetermination of the feasibility of the proposed plan.  The Debtor was represented by NACBA member Herbert B. Raymond.

No Comments Read More

5th Circuit Rules That Bankruptcy Courts May (But Not Shall) Allow Reimbursement of Fees for Filing, Credit Counseling and Credit Reports to Debtor’s Attorneys in Chapter 13

On May 13, 2019, the Fifth Circuit Court of Appeals ruled on an appeal stemming from several cases involving no-money-down chapter 13 business models, wherein the debtor’s attorney agrees to advance the costs of filing fees, credit counseling course fees, and credit report fees on behalf of the debtor. The case pitted the Bankruptcy Court for the Western District of Louisiana (represented by two chapter 13 trustees) against the chapter 13 debtor’s bar.

No Comments Read More

U.S. Senator Sherrod Brown Awarded NACBA’s 2019 Champion of Consumer Rights Award

The National Association of Consumer Bankruptcy Attorneys (NACBA) is pleased to announce that Senator Sherrod Brown (D-OH) has been awarded the prestigious Champion of Consumer Rights Award for 2019. Since 2007, Senator Brown has served American consumers ensuring that consumers’ rights are protected and that the rights of consumer debtors most in need are preserved in bankruptcy relief.

No Comments Read More

Bankruptcy Court Gnaws Whether Dog Bite Non-Dischargeability Claim is De Jure Not A Willful and Malicious Injury

On May 3, 2019, the Bankruptcy Court for the District of New Mexico ruled on Defendants’ motion to dismiss in a dischargeability adversary complaint. The complaint alleges that the City of Albuquerque determined after notice and administrative hearing that the Defendant’s dog was dangerous, and Defendants were irresponsible owners. After this determination the Plaintiff was attacked and injured by Defendants’ dog. Plaintiff sued Defendants in state court and obtained a judgment in the amount of $25,691.08.

No Comments Read More

9th Circuit BAP Finds Disclosure of Debtor’s Claim in the SOFA Sufficient for Abandonment (Subtitle: BAP Surveys Cases Nationally on Disclosure and Abandonment)

In an unpublished opinion entered on April 29, 2019, the 9th Circuit Bankruptcy Appellate Panel addressed the thorny issue whether a debtor’s disclosure of an asset in the SOFA but not in the Schedules of Assets and Liabilities precludes abandonment under 11 U.S.C. § 554(c).

No Comments Read More

District Court Holds Arbitration Provision in Credit Card Contract Survives Discharge

On May 1, 2019 the District Court for the Eastern District of Pennsylvania granted motions by Debtor’s discharged credit card lenders to compel arbitration of claims made under the Fair Credit Reporting Act.The Debtor filed a chapter 7 bankruptcy and listed the three creditors at issue, First Premier Bank, OneMain Financial, and Citibank (Creditors). The Debtor received a discharge of these debts in November 2016.

No Comments Read More

Bankruptcy Court Denies Fee for Debtor’s PI Attorney For Failure to Check PACER and Have Retention Agreement Approved

On March 27, 2019 the Bankruptcy Court for the Southern District of Alabama denied a fee request by Debtor’s personal injury (PI) attorney.Prior to filing bankruptcy Debtor was involved in a car accident. She hired a PI attorney to represent her. When her bankruptcy case was filed, she listed the car accident on her schedules. Subsequently the PI case settled, and the Debtor signed a settlement agreement that indicated she was not in a bankruptcy. The Debtor filed a motion to approve the settlement in the Bankruptcy Court. The trustee demanded that the attorney’s fee be turned over to the bankruptcy estate.

1 Comment Read More

Bankruptcy Court Rules that Pre-Petition Guilty Plea and Civil Judgment Not Collateral Estoppel in Subsequent Dischargeability Proceeding

On April 25, 2019 the Bankruptcy Court for the Northern District of Illinois ruled on several issues concerning a dischargeability complaint filed against the Debtor.Prior to filing bankruptcy, the Debtor was involved in a physical fight with the Creditor (Salgado). The result of the fight is that Salgado lost the vision in his right eye. The parties disagree who caused the injury.

No Comments Read More

Bankruptcy Court Awards Debtor $204,867.00 in Damages Against Creditor and Creditor’s Law Firm for Post-Discharge Lawsuit of Discharged Debt

On April 23, 2019 the Bankruptcy Court for the Northern District of Oklahoma entered a lengthy 87 page opinion awarding the Debtor $50,000.00 in damages for emotional distress, $54,867.00 for her attorney’s fees, and $100,000.00 as punitive damages against the creditor and creditor’s counsel. NACBA member Ron Brown spearheaded the case along with NACBA member Greggory Colpitts.

No Comments Read More

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.

No Comments Read More

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.

No Comments Read More

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.

No Comments Read More

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.

No Comments Read More