National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Debt To Client Security Fund Dischargeable as Compensatory

“Indebtedness arising from a disbarred attorneys’ obligation to reimburse the State Bar for payments made by the CSF to victims of that attorney’s misconduct are not excluded from discharge under § 523(a)(7).” Kassas v. State Bar of Calif., No. 21-55900 (9th Cir. Aug. 1, 2022).

After the chapter 7 debtor was disbarred from the practice of law, the State Supreme Court ordered him to pay restitution in the amount of $201,706 to be distributed to 56 of his clients, and $61,122.27 to the State Bar to reimburse its costs of investigation and discipline. The court also ordered the debtor to reimburse California’s Client Security Fund (CSF) for its payments to clients injured by his misconduct. [Read more…] about Debt To Client Security Fund Dischargeable as Compensatory

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Covid Mortgage Forbearance Justifies Plan Modification

The court granted the trustee’s motion to modify the debtor’s chapter 13 plan, finding that the debtor’s mortgage deferral due to Covid was an “unanticipated and substantial” change in his financial status which he had a duty to disclose and which increased his income for 18 months during the plan. In re Ilyev, No. 17-12987 (Bankr. E.D. Va. July 26, 2022). [Read more…] about Covid Mortgage Forbearance Justifies Plan Modification

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Bankruptcy Court Takes 7th Circuit to Task

The bankruptcy court gave the debtors guidance on how to challenge a decision issued by the Seventh Circuit earlier this month by pointing out, among other things, that the circuit court decision addressed an order not actually on appeal before it. In re Terrell, No. 18-28674 (Bankr. E.D. Wisc. July 19, 2022). [Read more…] about Bankruptcy Court Takes 7th Circuit to Task

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Refinancing Loans Not Consumer Debts

The movant bears the burden of demonstrating by a preponderance of the evidence that the debtor’s debts were “consumer” rather than “business,” and the debtor’s subjective purpose in taking out the loans is a crucial factor where the debts do not fall neatly into either category. Centennial Bank v. Kane, No. 21-4597 (N.D. Cal. July 22, 2022). [Read more…] about Refinancing Loans Not Consumer Debts

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Debtor Not Fiduciary to Mother’s Nursing Home

A state court judgment for breach of contract was dischargeable in the debtor’s chapter 7 bankruptcy where the breach occurred when the debtor, acting as Power of Attorney for her mother, entered into a contract with her mother’s nursing home and, acting upon advice from her mother’s legal counsel, failed to comply with its terms. The court found the debtor was not a fiduciary with respect to the nursing home and did not act with willfulness or malice. Presbyterian Home for Central NY, Inc. v. DeFazio, No. 20-80009 (June 23, 2022). [Read more…] about Debtor Not Fiduciary to Mother’s Nursing Home

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Debtor Squeezes Through Loophole and Lands in Dismissal

Where the debtor filed her second chapter 13 petition while her first case was still pending, the automatic stay was not reduced by section 362(c)(3) but, without regard to the debtor’s intent, the second case was an abuse of process and the court could dismiss sua sponte after notice and a hearing. In re Giles, No. 22-14494 (Bankr. S.D. Fla. July 15, 2022). [Read more…] about Debtor Squeezes Through Loophole and Lands in Dismissal

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Debtors May Not Modify Plan to Deprioritize State’s Claim

The bankruptcy court erred in permitting the debtors to modify their chapter 13 plan to deprioritize the State of Wisconsin’s claim based on a public assistance overpayment, where the only authority for such modification would come from Rule 60(b)(1) and the debtors sought the modification too late to rely on that Rule. In the Matter of Terrell, No. 21-3059 (7th Cir. July 12, 2022). [Read more…] about Debtors May Not Modify Plan to Deprioritize State’s Claim

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Debtors Need Not File Annual Updated Schedules

In a nice win for long-time NACBA member, Greggory Colpitts, the Bankruptcy Court for the Southern District of Oklahoma declined to place a prospective order requiring all chapter 13 debtors to submit annual tax returns and updated schedules I and J where the Code and local rules provide for annual filing of tax returns with the bankruptcy court, and section 521(f) requires debtors to file further financial information upon request by the trustee. In re Williams, No. 18-80539 (Bankr. S.D. Okla. July 5, 2022).
[Read more…] about Debtors Need Not File Annual Updated Schedules

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Creditor Could Not Object to Modification that Did Not Change Treatment of its Loan

A creditor that fails to object to treatment of its loan in the debtor’s proposed chapter 13 plan cannot object to modification of that plan where the modification did not change treatment of its loan. In re Powell, No. 21-3069 (Bankr. D.S.C May 16, 2022). [Read more…] about Creditor Could Not Object to Modification that Did Not Change Treatment of its Loan

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Lender Sanctioned for Self-Inflicted Wound

The lender’s efforts to coerce the debtors to reopen their bankruptcy case to reaffirm the mortgage agreement violated the discharge injunction where post-discharge reaffirmation was legally unavailable and the court found the lender was merely attempting to collect personally against the debtors. In re Go, No. 21-12657 (Bankr. D. Nev. June 29, 2022). [Read more…] about Lender Sanctioned for Self-Inflicted Wound