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
Dischargeability of Sanctions Against Attorney
State law discovery sanctions owed to a non-governmental entity for compensatory purposes do not fall under Section 523(a)(7)’s exception to discharge for fines or penalties, and are therefore dischargeable. Costs related to the State Bar’s disciplinary actions are owed to a governmental agency, are punitive rather than compensatory in nature, and are therefore excepted from discharge. Where the debtor’s law license suspension was contingent upon her paying nondischargeable costs, the suspension was not discriminatory in violation of Section 525(b). Albert-Sheridan v. State Bar of Calif., No. 19-60023 (9th Cir. June 10, 2020). [Read more…] about Dischargeability of Sanctions Against Attorney
10th Circuit – Student Loan Not Excepted from Discharge as Educational Benefit
An educational benefit is not a student loan for nondischargeability purposes under section 523(a)(8)(A)(ii). McDaniel v. Navient Solutions, LLC, No. 18-1445 (10th Cir. Aug. 31, 2020).
When the debtors filed their Chapter 13 petition, they had many outstanding student loans, including six private educational loans held by Navient totaling approximately $107,000 (the Loan). The trustee objected to confirmation of the plan, citing its failure to provide for nondischargeable student loans. The debtors filed an amended plan specifically to correct certain inaccuracies not related to student loans. They also added the provision that “[s]tudent loans are to be treated as an unsecured Class Four claim or as follows: deferred until the end of the plan.” The plan defined unsecured Class Four claims as “[a]llowed unsecured claims not otherwise referred to in the Plan.” Navient agreed that class four claims were dischargeable. [Read more…] about 10th Circuit – Student Loan Not Excepted from Discharge as Educational Benefit
9th Circuit Equates Lease Assumption with Waiver of Discharge
The Ninth Circuit found that a debtor who assumes a lease under Section 365(p) of the Bankruptcy Code waives her right to discharge of debt arising out of that lease. Bobka v. Toyota Motor Credit Corp., No. 18-55688 (9th Cir. Aug. 3, 2020).
The debtor filed her Chapter 7 petition in 2016. She had an ongoing lease with Toyota Motor Credit on her Toyota Rav4. The trustee opted not to assume the lease. In September 2016, the debtor called Toyota about keeping the vehicle. Toyota agreed and sent her and her attorney a lease assumption agreement. She did not return the agreement until December 5, well more than 30 days after she orally told Toyota she wanted to keep the vehicle. The next day, the debtor received her bankruptcy discharge. [Read more…] about 9th Circuit Equates Lease Assumption with Waiver of Discharge
Lienholder May Seek Value for Post-Discharge Release of Lien
The discharge injunction does not prohibit a lienholder from seeking value for release of its lien so long as, under the specific facts of the case, its conduct is not an improper attempt to coerce repayment of the discharged debt. Bentley v. OneMain Financial Group, No. 19-8026 (B.A.P. 6th Cir. July 8, 2020). [Read more…] about Lienholder May Seek Value for Post-Discharge Release of Lien
Arbitration Clause Not Enforced in Discharge Violation Case
In the absence of an intervening legislative or Supreme Court directive, the Second Circuit followed its precedent, finding that a debtor could not be compelled to arbitrate his contempt motion for violation of the discharge injunction. Belton v. GE Capital Retail Bank, No. 19-648 (2d Cir. June 16, 2020) (consolidated with Bruce v. Citicorp Inc., No. 19-655). [Read more…] about Arbitration Clause Not Enforced in Discharge Violation Case
Failure to Disclose Employment is not a Statement under 523(a)(2)(A)
Failure to report a change in employment status is not a “statement respecting financial condition” within the meaning of Section 523(a)(2)(A) and, therefore, a debt based on overpayment of public assistance benefits made in reliance on the non-disclosure is nondischargeable. State of Oregon v. Mcharo, No. 19-1010 (B.A.P. 9th Cir. Jan. 9, 2020).
When applying for public assistance benefits, Blake Mcharo and his wife signed DHS0415R, averring that they would inform the DHS of any change in their eligibility status. After signing the application and receiving Temporary Assistance for Needy Families (TANF) benefits, Mr. Mcharo found employment. Neither he nor his wife informed the DHS of his employment.
In the Mcharo’s Chapter 7 bankruptcy, the DHS filed a claim for the amount it had overpaid in TANF benefits after Mr. Mcharo was employed. The DHS also sought an order that the debt was non-dischargeable under 523(a)(2)(A). The bankruptcy court issued a default judgment against Ms. Mcharo but declined to do the same against Mr. Mcharo, finding that his failure to report his employment was an unwritten statement respecting financial condition falling outside the purview of either section 523(a)(2)(A) or (B). The State of Oregon appealed to the Ninth Circuit Bankruptcy Appellate Panel. [Read more…] about Failure to Disclose Employment is not a Statement under 523(a)(2)(A)