The debtors’ missed plan payments to the mortgage creditor were a result of forbearance and COVID 19-related financial difficulties and were therefore not an impediment to discharge under section 1328. In re McCollum, No. 15-3502 (Bankr. D. S.C. Feb. 4, 2021). [Read more…] about Missed Payments to Mortgagee Do Not Preclude Discharge
First-Time-Homeowner Tax Credit Debt Is Tax rather than Loan
The debt created by the IRS’s first-time-homeowner’s tax credit, which requires a debtor to repay the credit over fifteen years, was a nondischargeable “tax” rather than a dischargeable “loan.” In re Shin, No. 17-13509 (Bankr. E.D. Va. Feb. 16, 2021).
The debtor bought a house with his mother and sister, taking the $7,500.00 first-time homeowner federal tax credit offered by the IRS. The Internal Revenue Code, sections 36(f)(1) and (7), provides that homeowners receiving the tax credit must repay that credit over fifteen years by increasing their yearly taxes. The tax recapture is automatically accelerated upon sale of the property within the fifteen-year payback period. For several years, the debtor paid the recapture tax to the IRS, but when he and his co-owners sold the house, there remained $5,000.00 in unpaid recapture tax. The debtor filed for chapter 7 bankruptcy and received a discharge. After the case was closed the debtor moved to reopen to allow him to seek a ruling that the recapture tax was discharged. The IRS opposed the motion. [Read more…] about First-Time-Homeowner Tax Credit Debt Is Tax rather than Loan
Fraudulent Transfer Claim Precluded by Discharge Injunction
Because an action for fraudulent transfer is not merely a collection action, the creditors were precluded by the discharge injunction from pursuing their state court appeal of that action even though the predicate debt was found to be nondischargeable in the debtor’s bankruptcy. SuVicMon Dev. Inc. v. Morrison, No. 20-11681 (11th Cir. March 25, 2021). [Read more…] about Fraudulent Transfer Claim Precluded by Discharge Injunction
Scotus: Three Denials and a Pending
The Supreme Court recently denied cert petitions in three bankruptcy-related cases: Hull v. Rockwell, No. 20-499 (pet’n denied Feb. 22, 2021); GE Capital Retail Bank v. Belton, 20-481 (pet’n denied March 8, 2021); and Marino v. Ocwen Loan Servicing, No. 20-409 (pet’n denied March 22, 2021). [Read more…] about Scotus: Three Denials and a Pending
Ex-Wife’s Interest In Marital Residence Does Not Enter Debtor’s Estate
The debtor’s ex-wife’s interest in the marital residence did not enter the bankruptcy estate even though the property was titled to the debtor, where their dissolution agreement gave her half interest and the debtor was prohibited from unilaterally disposing of the property. But the debtor’s ex-wife did not show that his failure to comply with the dissolution agreement generally, was an indication that he undertook the debts created by the agreement by fraud where the evidence did not support her contention that he never intended to comply. Williams v. Williams, No. 18-1197 (Bankr. D. Colo. Jan. 8, 2021). [Read more…] about Ex-Wife’s Interest In Marital Residence Does Not Enter Debtor’s Estate
Debtor’s Challenge to Dischargeability Barred by Laches
The debtor was barred by the doctrines of laches and equitable estoppel from asserting that a debt was nondischargeable where he had stipulated to its nondischargeability in an earlier bankruptcy and had not raised the issue of nondischargeability during several subsequent years of litigation concerning that debt. Storick v. CFG LLC, No. 20-80126 (S.D. Fla. Jan. 21, 2021). [Read more…] about Debtor’s Challenge to Dischargeability Barred by Laches
Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
A state-mandated notification with the state taxing authority of a change in the taxpayer’s federal taxes is a “return, or equivalent report or notice,” which, if not filed by the taxpayer, renders the state tax debt nondischargeable under section 523(a)(1)(B). Berkovich v. Calif. Franchise Tax Bd., No. 20-1025 (B.A.P. 9th Cir. Oct. 5, 2020). [Read more…] about Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
9th Circuit Limits Walls, Permits FDCPA Action for Post-D/C Collection
Declining to extend its 2002 holding in Walls, the Ninth Circuit found that a chapter 13 debtor who fully paid the creditor’s claim prior to completion of his plan was not precluded from pursuing an FDCPA claim based on the creditor’s post-discharge collection efforts. Manikan v. Peters & Freedman, L.L.P., No. 19-55393 (9th Cir. Nov. 25, 2020).
The debtor entered chapter 13 bankruptcy after receiving a notice of foreclosure from Peters & Freedman, a debt collector, based on HOA arrears. Through P&F, the HOA filed a claim in his bankruptcy, and the debtor provided for the arrears in his plan. He fully paid off the debt approximately two years prior to completion of his plan. After the debtor received his discharge, P&F hired Advanced Attorney Services (AAS) to re-serve a Notice of Default based on the debt that the debtor had paid off in his bankruptcy. AAS served the notice by breaking through a gate, entering the debtor’s backyard and banging on his windows, causing the debtor to call the police. [Read more…] about 9th Circuit Limits Walls, Permits FDCPA Action for Post-D/C Collection
Ninth Circuit Applies Scotus Standard in Discharge Injunction Case
On remand from the Supreme Court, the Ninth Circuit found that, under the Supreme Court’s objective standard, the debtor’s active post-bankruptcy litigation in state court of the terms of his separation from his business partnership established sufficient cause for his business partner creditors to have a reasonable belief that he had “returned to the fray” and that their motion for attorney’s fees would not violate the discharge injunction. Lorenzen v. Taggart, No. 16-35402 (9th Cir. Nov. 24, 2020). [Read more…] about Ninth Circuit Applies Scotus Standard in Discharge Injunction Case
Bankruptcy Court May Not Enforce Discharge Order from Other District
On direct interlocutory appeal, the Fifth Circuit found that courts may not use their contempt powers to enforce discharge orders issued by other courts outside their judicial districts. The court also held that the private student loans at issue were not subject to section 523(a)(8)(A)(ii)’s nondischargeability provision because that provision applies only to educational benefits where, as in the case of grants or scholarships, the obligation to repay is conditional. Crocker v. Navient Solutions LLC, No. 18-20254 (5th Cir. Oct. 22, 2019). [Read more…] about Bankruptcy Court May Not Enforce Discharge Order from Other District