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Case Bites: Interesting Issues and Decisions from This Week’s Cases

Issues discussed in cases below: In an adversary discharge proceeding, can the bankruptcy court treat a motion for summary judgment […]

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Siding with Minority, Bankruptcy Court Rules the 365-Day Anti-Modification Rule of Section 1325(a)(9) Applies to Vehicles

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Bankruptcy Court Holds Trustee’s Avoidance Action Untimely and Not Determined by State Law

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Bankruptcy Court Rules Vintage Undrivable Car Not Entitled to Vehicle Exemption

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Case Bites: Interesting Issues and Decisions from This Week’s Cases

Issues discussed in cases below: In a student loan discharge proceeding regarding nine (9) loans, can a bankruptcy court discharge […]

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Taggart Watch – Bankruptcy Court Asserts Authority Citing Taggart and Fines PHH for Violations of Rule 3002.1

This case consolidated three bankruptcy cases with similar facts. In two cases (Gravel and Beaulieu), the Court entered an order determining that the Debtors had cured all prepetition defaults and were current on all post petition mortgage payments (Debtor Current Orders) to the PHH Corporation (PHH). Thereafter PHH issued incorrect mortgage statements including charges that contradicted the Debtor Current Orders. The chapter 13 trustee filed a motion for sanctions based on PHH’s flagrant violation the orders and of Fed. R. Bankr. P. 3002.1.

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Case Bites: Interesting Issues and Decisions from This Week’s Cases

Issues discussed in cases below: If debtors make a pre-petition fraudulent transfer relying on attorney’s advice, when does a cause […]

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Taggart Watch – District Court Discusses Contempt Against Third Parties Who Aid or Abet Contemnor

The most recent case to cite Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) is a non-bankruptcy case discussing the enforcement of an injunction against the defendant and against third parties conspiring to violate the injunction. This case is interesting as it raises the possibility of enforcing the discharge order against not only the creditor but other third parties who conspire with the creditor to violate the discharge order.

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Case Bites: Interesting Issues and Decisions from This Week’s Cases

Issues discussed in cases below: Are state overpayments from the Child Care Assistance Program and the Supplemental Nutrition Assistance Program […]

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Bankruptcy Courts Have Discretion to Allow Chapter 13 Debtors to Make a Curative Payment After Expiration of the Plan Duration Says District Court

On June 25, 2019 the District Court for the Eastern District of Michigan reversed and remanded a decision by the Bankruptcy Court about late plan payments. The Debtors were in a 60 month plan which provided for monthly payments and payment of their 2017 tax refund. At the expiration of the 60 month plan, the Debtors had not paid the refund to the Trustee. The Trustee filed a motion to dismiss and shortly thereafter the Debtors submitted their refund to the Trustee. The Debtors asked the Court to deny the motion to dismiss arguing the Bankruptcy Court had discretion to allow them to cure the default.

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Bankruptcy Court Suspends Counsel for Changing Schedules After Signing. Employing “Trust But Verify” the Court “Peeked and Shrieked.”

It’s going to be a bad opinion when the judge brings up Pandora’s Box in the beginning of the opinion and titles the last section of the opinion “This Is The End.” On June 25, 2019 the Bankruptcy Court for the Southern District of Florida, in a 172 page opinion (including attachments), suspended an attorney from practice for two years before the Bankruptcy Court, terminated her CM/ECF privileges, referred the attorney to District Court’s attorney review committee and the Florida Bar with recommendations to disbar, and referred the attorney to the United States attorney for investigation.

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NACBA Calls to Restore the Student Debt Bankruptcy Discharge

For Immediate Release:  WASHINGTON, D.C.- Today, the National Association of Consumer Bankruptcy Attorneys (NACBA) was given the opportunity to testify […]

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Despite Debtor’s Second Thoughts, the Bankruptcy Court Holds that Firing Attorney, Use of Vulgar Language, and Threats to Sue Are All Bases to Grant Counsel’s Motion to Withdraw

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District Court Affirms $4,000.00 Judgment for Emotional Distress Damages against IRS for Automatic Stay Violations

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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?

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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.

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Taggart watch: three recent cases interpret the Supreme Court case In re Taggart

I will be publishing cases citing and interpreting the Supreme Court’s recent decision in Taggart concerning the enforcement of the […]

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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.

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7th Circuit Reverses Precedent, Holds No Compliance Exceptions to Rule 8006(g) Based on the Functional-Equivalence Doctrine and/or the Harmless-Error Doctrine

In this case the Debtors moved for sanctions against Kreisler Law, P.C., alleging that the law firm violated the automatic stay arising from their bankruptcy petition by filing a lien against their home.

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Case Bites and Taggart Watch

Every Friday, we will publish a list of interesting case bites from this week’s cases. Also, we will be publishing […]

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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).

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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.

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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.

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Bankruptcy Court Denies Motion To Revoke Discharge Because Creditor’s Address Was Mangled

On May 22, 2019, the Bankruptcy Court for the Southern District of Texas denied the Creditor’s complaint for revocation of discharge. Prior to the bankruptcy, the Creditor obtained a default judgment against the Debtor. The default judgment listed the Creditor’s attorney’s address as 122 Taum Street.

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Bankruptcy Court Sanctions Capital One For Failure to Release Judgment Lien 13 Years After Lien Originally Avoided

On May 28, 2019, the Bankruptcy Court for the Eastern District of Kentucky granted the Debtors’ motion for contempt against Capitol One Bank. The Debtor was represented by NACBA member J.D. Kermode.

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Bankruptcy Court Disallows Retirement Loan Repayment Expenses and Dismisses Chapter 7

On May 23, 2019, the Bankruptcy Court for the District of New Jersey granted the United States Trustee’s (UST) motion to dismiss.

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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.

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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.

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Bankruptcy Court Reviews Creditor’s Remedies to Object to Discharge After Deadline Has Expired

On May 10, 2019, the United States Bankruptcy Court for the Southern District of New York ruled on a creditor’s motion to extend the deadlines to object to the Debtor’s discharge.

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Bankruptcy Court Denies Motion to Impose Stay as Untimely and Unavailable

On May 9, 2019, the United States Bankruptcy Court for the Northern District of Mississippi ruled on the Debtor’s Motion to Impose the Automatic Stay and a creditor’s comfort motion affirming that the stay no longer protects Debtor’s property.

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NACBA Applauds Bicameral Congressional Effort to Diffuse the Student Loan Debt Bomb

WASHINGTON, May 9, 2019—The National Association of Consumer Bankruptcy Attorneys (NACBA), the only organization dedicated to protecting and enhancing the […]

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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.

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In a §523(a)(6) Dischargeability Proceeding, the 4th Circuit Rules Collateral Estoppel Does Not Apply When State Court Judgment Did Not Make Specific Findings of Intent

On May 8, 2019, the Fourth Circuit Court of Appeals reversed and remanded an award of summary judgment concerning a dischargeability proceeding under 11 U.S.C. § 523(a)(6).

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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.

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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).

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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.

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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.

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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.

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District Court Holds That Wells Fargo’s Account Freeze is Not a Violation of the Automatic Stay. (Subtitle: District Court’s Opinion is a Reminder to Warn Clients About Wells Fargo Before Filing Bankruptcy)

On April 25, 2019 the District Court for the Southern District of New York reversed a Bankruptcy Court order that found Wells Fargo had violated the automatic stay.Pursuant to the District Court opinion, Wells Fargo maintains an internal policy known as the Administrative Pledge Policy (the “Policy”). Pursuant to this Policy, if an individual debtor files for bankruptcy and the debtor’s balances on deposit are less than $5,000 in the aggregate, Wells Fargo does not limit the debtor’s access to prepetition account funds; however, if the aggregate amount exceeds $5,000, Wells Fargo places an “administrative pledge” on the accounts, effectively freezing all prepetition funds, and looks solely to the chapter 7 trustee to control payment of account balances that are property of the bankruptcy estate.

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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.

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