The Catch-22 of considering social security income for a Chapter 7 abuse analysis while excluding its use in a Chapter 13 plan was recently addressed by a bankruptcy court in the Central District of California. In In re Suttice, No. 12-21006 (Bankr. C.D. Cal. Jan. 9, 2013), the debtors were an 85-year-old husband and a 69-year-old wife, both with significant medical concerns. The bulk of their income consisted of social security benefits, pension and retirement accounts, and Veterans Benefits with a small amount coming from family contributions. Their combined income minus expenses left them with a monthly surplus of $896.94. The trustee sought to dismiss their Chapter 7 bankruptcy on the basis that the totality of the circumstances indicated abuse of bankruptcy under section 707(b)(3)(B). Specifically, the trustee sought to have the debtors’ social security income considered in their ability to pay. [Read more…] about Social Security May Not Be Considered in 707(b)(3)(B) Totality of Circumstances Test
Property Associations Lose Battle of the Liens in Two Florida Cases.
In two cases out of the Middle District of Florida, property associations fought for priority over mortgage lenders in order to prevent their liens from being stripped as wholly unsecured. In re Plummer, No. 12-3870 (Bankr. M.D. Fla. Jan. 14, 2013); In re Buckner, No. 12-4962 (Bankr. M.D. Fla. Jan. 17, 2013). The Associations failed to convince the court, however, and, in Plummer, the court permitted the lien stripping under section 1322(b)(1), while in Buckner, the lien was stripped under section 506(d). [Read more…] about Property Associations Lose Battle of the Liens in Two Florida Cases.
Applicable Commitment Period Where No Projected Disposable Income
The Bankruptcy Court for the Eastern District of North Carolina found that the applicable commitment period outlined in section 1325(b)(1)(B) does not apply to above-median debtors with zero or negative disposable income and that early termination of the plan does not alter the debtor’s projected disposable income calculation. In re Ballew, 12-4059 (Bankr. E.D. N.C. Jan. 11, 2013). [Read more…] about Applicable Commitment Period Where No Projected Disposable Income
U.S. Bank Fails to Establish Standing to Seek Relief from Stay to Foreclose
The Bankruptcy Court for the Southern District of New York denied U.S. Bank’s motion for relief from stay on the basis that U.S. Bank had failed to show that it had standing to obtain such relief. In re Idicula, No. 12-12120 (Bankr. S.D. N.Y. Jan. 10, 2013). [Read more…] about U.S. Bank Fails to Establish Standing to Seek Relief from Stay to Foreclose
Bankruptcy-Specific Exemptions Found Constitutional by Tenth Circuit BAP
The Bankruptcy Appellate Panel for the Tenth Circuit found that Kansas’s bankruptcy-only exemption scheme, under which a debtor in bankruptcy is permitted to exempt his Earned Income Tax Credit, is constitutional. Williamson v. Westby (In re Westby), No. 12-27 (B.A.P. 10th Cir. Feb. 4, 2013). [Read more…] about Bankruptcy-Specific Exemptions Found Constitutional by Tenth Circuit BAP
New CFPB Rules Fail to Resolve Problem of Dual-Tracking on Delinquent Mortgages
On January 17, 2013, the Consumer Financial Protection Bureau enacted mortgage servicing rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act provisions relating to the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). [Read more…] about New CFPB Rules Fail to Resolve Problem of Dual-Tracking on Delinquent Mortgages
Fairness for Struggling Students Act
Illinois Senator Richard Durbin began the 113th Congress by reintroducing the Fairness for Struggling Students Act of 2013, S. 114, proposing to make private student loans, like other consumer debts, dischargeable in bankruptcy. In presenting the legislation, Senator Durbin said:
The first two pieces of legislation I will introduce this Congress deal with what I think is one of the biggest threats to millions of working families – the growing student loan debt crisis. Too many Americans are carrying around mortgage-sized student loan debt that forces them to put off major life decisions like buying a home or starting a family. It’s not only young people facing this crisis, it is parents, siblings, and even grandparents who co-signed private loans long ago and are still making payments decades later. It’s time for action. We can no longer sit by while this student debt bomb keeps ticking.”
Federal student loans have been essentially non-dischargeable since 1978 but it was not until the Bankruptcy Code underwent upheaval in 2005 that private student loans were accorded the same favored treatment. Although private student loans comprise only about 20% of the total student loan debt, private loans tend to be substantially more onerous for borrowers. They typically have higher interest rates, limited or no availability of deferment or forbearance, and no income-based repayment plans. In addition, they are not subject to the consumer protections in place for federal student loans.
Senators Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), Al Franken (D. MN), Tom Harkin (D-IA), and Elizabeth Warren (D-MA), are co-sponsors of the bill. Other organizations that have publically called on Congress to amend student loan treatment in bankruptcy are the American Association of University Women, the Consumer Financial Protection Bureau, the U.S. Department of Education, The Institute for College Access and Success, and Sallie Mae.
NACBA has actively fought for a return to pre-2005 treatment of private student loans and NACBA members have an opportunity to make their voices heard at the 2013 Capitol Hill Meeting in Washington on February 26-27. You can register for this event through the NACBA website, www.NACBA.org.
NACBA Amicus Opposes “Carve-Out” Agreement
NACBA has filed an amicus brief in the Fourth Circuit case of In re Reeves, No. 12-2127. In that case, the trustee, claiming authority under section 724(b), sought to sell the debtor’s fully encumbered residential property to give effect to an agreement the trustee had entered into with the IRS, a lienholder, under which the IRS agreed to “carve out” a portion of its share of the proceeds from any sale of the property. That portion would then go toward administrative costs and unsecured creditors. [Read more…] about NACBA Amicus Opposes “Carve-Out” Agreement
Absolute Priority Rule Found to Apply to Individual Debtor
The Tenth Circuit joined the Fourth Circuit in finding that BAPCPA did not abrogate the absolute priority rule with respect to individual debtors in chapter 11 bankruptcy. In re Stephens, No. 11-6309 (10th Cir. Jan. 15, 2013) (agreeing with In re Maharaj, 681 F.3d 558 (4th Cir. 2012)). [Read more…] about Absolute Priority Rule Found to Apply to Individual Debtor
Whether Inheritance Received More than 180 Days Post-Petition Is Property of Estate
The Fourth Circuit has agreed to hear a direct appeal to address the issue of whether an inheritance received more than 180 days post-petition is property of the Chapter 13 estate. Carroll v. Logan (In re Carroll), No. 13-1024. The debtors received a $100,000.00 inheritance after the 180-day period had lapsed and the trustee sought to modify the plan to include those funds. The bankruptcy court found that the inheritance was part of the estate and granted the trustee’s motion. In re Carroll, 2012 WL 5512356 (Bankr. E.D. N.C. Nov. 14, 2012). [Read more…] about Whether Inheritance Received More than 180 Days Post-Petition Is Property of Estate