National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property

A debtor seeking to avoid a lien as impairing a homestead exemption must calculate the impairment using his proportionate interest in the property and the sum of the corresponding mortgage liens in proportion to that interest. Sandoval Irrevocable Trust v. Taylor, No. 17-1241 (10th Cir. Aug. 14, 2018).

As a result of Mark Taylor’s misappropriation of funds from an Irrevocable Trust for which he was trustee, the Trust (Sandoval) obtained state court judgments against him and liens against his residence. Mr. Taylor filed for chapter 13 bankruptcy and listed the property, which he co-owned with his ex-wife, as having a total value of $560,000 with his portion amounting to $280,000. He later converted his case to chapter 7 and moved to avoid the judgment liens as impairing his state homestead exemption of $37,500. [Read more…] about Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property

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Eleventh Circuit Applies New Judicial Estoppel Analysis

When addressing judicial estoppel, courts may no longer apply a presumption of motive to conceal, but must look at the facts and circumstances behind a bankruptcy debtor’s failure to disclose his civil action in the bankruptcy proceeding. Silva v. Pro Transport Inc., No. 17-12744 (11th Cir. Aug. 10, 2018).

After Julio Antonio Silva’s chapter 13 bankruptcy plan was confirmed, he filed an FLSA claim in district court against his employers for failure to pay overtime. He did not tell his civil counsel about his bankruptcy nor did he immediately inform the bankruptcy court of the district court case. The district court granted the employer’s motion for summary judgment on the basis of judicial estoppel, and awarded over $50,000 to the employer in sanctions and attorney fees. Mr. Silva appealed the sanctions award. [Read more…] about Eleventh Circuit Applies New Judicial Estoppel Analysis

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Local Plan Form’s Treatment of Tax Returns Is Mandatory

Any conflict between Arizona’s Local Plan Form and the Bankruptcy Code’s requirement relating to a chapter 13 debtor’s obligation to file post-confirmation tax returns was not significant and the debtors here could not confirm a plan that failed to comply with the Local Form. In re Reichard, No. 16-12633 (Bankr. D. Ariz. July 5, 2018).

In their motion to set confirmation hearing, chapter 13 debtors, John and Ericka Rae Reichard, included a stipulated order of confirmation (SOC) under which they proposed to pay creditor, Harley Davidson, $6,255, consistent with Harley Davidson’s proof of claim but less than the amount the debtors had proposed in their plan. The SOC also included a provision for submitting post-confirmation tax returns to the court, in accordance with section 521(f), rather than directly to the trustee as required by Arizona Local Plan Form. [Read more…] about Local Plan Form’s Treatment of Tax Returns Is Mandatory

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Collection Due Process Action Tolls Look-Back Period for Tax Debt

Because of the IRS’s inability to levy against the debtor’s property, bankruptcy’s three-year look-back period for tax debts is tolled while a tax debtor pursues a collection due process action. Tenholder v. United States of Amer., No. 17-1310 (S.D. Ill. Sept. 17, 2018).

Angela and Randy Tenholder reopened their chapter 7 case to challenge the IRS’s post-discharge efforts to collect tax debts the Tenholders asserted were outside the three-year look-back period and had therefore been discharged. The bankruptcy court found the tax liabilities were non-dischargeable under section 523(a)(1)(A) because the three-year limitations period was tolled during the Tenholder’s pursuit of a “collection due process” (CDP) action. [Read more…] about Collection Due Process Action Tolls Look-Back Period for Tax Debt

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Court Lacks Discretion to Allow Ineligible Student Loan Debtor to Proceed in Chapter 13

A debtor who exceeds the debt limit specified in section 109(e) is ineligible for chapter 13 bankruptcy regardless of the nature of the debts and, therefore, there is cause for dismissal or conversion. Stearns v. Pratola (In re Pratola), No. 18-213 (N.D. Ill. Aug. 31, 2018).

Christopher Pratola filed a chapter 13 bankruptcy petition listing unsecured debts at less than the debt limit set forth in section 109(e). He later amended his schedules to include an additional federal student loan debt which he was repaying under an IBR at 10%. That loan raised his unsecured debt to above the debt ceiling. [Read more…] about Court Lacks Discretion to Allow Ineligible Student Loan Debtor to Proceed in Chapter 13

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Court’s Sua Sponte Denial of Confirmation Reversed

A bankruptcy court may not deny confirmation of a debtor’s chapter 13 plan in the absence of objection by the trustee or unsecured creditor, based on its belief that the debtor miscalculated her disposable income. Briggs v. Johns (In re Briggs), No. 17-1080 (W.D. La. Sept. 28, 2018).

In calculating her disposable income, chapter 13 debtor, Marlea Briggs, deducted $913.00 as mortgage or rental expenses based on the IRS Local Standard. Though no one objected to the plan, the bankruptcy court scheduled a hearing and denied confirmation sua sponte. The court required Ms. Briggs to file a new plan calculating her income using her actual mortgage payments of $438.20. The court then confirmed the plan over Ms. Briggs’s objection. She appealed. [Read more…] about Court’s Sua Sponte Denial of Confirmation Reversed

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SCOTUS Denies Cert in Creditor’s Arbitration Appeal

The Supreme Court today denied certiorari in a case filed by Credit One Bank seeking to enforce an arbitration clause in a consumer credit card agreement. Credit One Bank, N.A. v. Anderson, No. 17-1652, petition denied, (Oct. 1, 2018).

The case originated in the Bankruptcy Court for the Southern District of New York on the debtor’s motion to reopen his bankruptcy and seek redress for a discharge injunction violation based on Credit One’s post-discharge collection efforts. Faced with Credit One’s motion to compel arbitration, the bankruptcy court found an inherent conflict between arbitration and the goals of the Bankruptcy Code and denied the motion. The district court and the Second Circuit Court of Appeals affirmed. Anderson v. Credit One Bank, No. 16-2496 (2d Cir. March 7, 2018).

Find copies of NACBA’s amicus brief and the Second Circuit opinion here.

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Debtor Wins Battle of the Code Sections: Exemption vs Set-Off

A debtor’s right to an exemption for a tax refund overrides the IRS’s right to set-off of that refund to pay tax liabilities. United States of Amer. v. Copley, No. 16-207 (E.D. Va. Sept. 10, 2018).

In their chapter 7 bankruptcy, Matthew and Jolinda Copley listed tax liabilities for the years 2008, 2009, and 2010, as priority claims held by the IRS. They also sought to exempt their 2013 tax refund of $3,208.00. But the IRS withheld the refund as set-off against a portion of the tax debts. The bankruptcy court ordered the IRS to turn over the refund to the debtors. [Read more…] about Debtor Wins Battle of the Code Sections: Exemption vs Set-Off

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Debtors’ Challenge to Private Student Loan Survives Dismissal Motion

A private loan in excess of the cost of attendance is not subject to exception from discharge under section 523(a)(8)(A)(ii). McDaniel v. Navient Solutions, No. 09-37450, Adv. Proc. No. 17-1274 (Bankr. D. Colo. Sept. 2018).

In their confirmed chapter 13 plan, Byron and Laura McDaniel treated their student loans, including those held by Navient Solutions, as unsecured Class Four claims to be deferred until after discharge. Upon completion of their plan, the McDaniels obtained discharge, but later moved to reopen. They filed an adversary proceeding seeking a declaration that a particular private loan held by Navient was not excepted from discharge. They also sought a finding that Navient violated the discharge injunction by collecting on that private loan post-discharge. Navient moved to dismiss the adversary proceeding. [Read more…] about Debtors’ Challenge to Private Student Loan Survives Dismissal Motion

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No Recovery for Foreclosure Sale of Non-Disclosed Property

The chapter 13 debtor was judicially estopped from challenging the foreclosure sale of his property as a violation of the automatic stay because he failed to disclose his ownership interest in the property. Fornesa v. Fifth Third Mortgage Co., No. 17-20324 (5th Cir. July 27, 2018). [Read more…] about No Recovery for Foreclosure Sale of Non-Disclosed Property