Where the family court litigation was resolved in favor of the debtor’s ex-husband after the court struck the debtor’s pleadings in a sanctions order, the elements of collateral estoppel applied to preclude the debtor from challenging the state court orders in her subsequent chapter 7 bankruptcy case. Dahlin v. Dahlin, No. 16-36169, Adv. Proc. No. 17-3425 (Bankr. S.D. Tex. May 15, 2018). [Read more…] about Collateral Estoppel Applied to “Death Penalty” Default Judgment
Debtor Must Exhaust Administrative Remedies to Get Damages and Fees from IRS
A debtor seeking recovery of damages, fees, or costs from the IRS in connection with a discharge injunction violation must first exhaust administrative remedies as required by the Internal Revenue Code. In re Thal, No. 09-12434, In re Slattery, No. 11-20554, 2018 Bankr. LEXIS 1308 (Bankr. S.D. Fla. May 8, 2018).
The chapter 13 debtors, Lucy Thal and Robert Slattery, filed plans in their separate bankruptcy cases under which they paid priority IRS tax debts in full and treated their remaining tax liability as general unsecured debt. Both debtors completed their plans and obtained discharges. Nonetheless, after discharge, the IRS sent both debtors levy notices. It also intercepted a portion of Ms. Thal’s social security benefits, which it later returned, and Mr. Slattery’s tax refunds, which it did not return. In both cases, the debtors filed motions for contempt for violation of the discharge injunction. [Read more…] about Debtor Must Exhaust Administrative Remedies to Get Damages and Fees from IRS
Debtors Restricted by District Form in Treatment of Tax Refund
A District Form Chapter 13 Plan’s treatment of debtors’ tax refunds as disposable income was not contrary to the Code and could not be altered by individual debtors. In re Vega-Lara, No. 17-52553 (Bankr. W.D. Tex. May 4, 2018).
Carlos Vega-Lara and Aura Cecilia Vega filed an amended chapter 13 plan using the court’s District Form plan as required by the bankruptcy court. Their plan proposed to pay priority claims and administrative costs at 100% and unsecured nonpriority creditors at 24%. [Read more…] about Debtors Restricted by District Form in Treatment of Tax Refund
Failure of Evidence Sinks Motion for Relief from Stay
Where the evidence showed assignment of the mortgage to U.S. Bank, but did not show that the underlying promissory note was likewise assigned, U.S. Bank was not a party-in-interest in the debtor’s chapter 7 bankruptcy and its servicer was not entitled to relief from stay. In re Garcia, No. 18-10229, 2018 Bankr. LEXIS 1352 (Bankr. S.D. N.Y. May 8, 2018).
In this case, Bankruptcy Judge Martin Glenn bemoaned the sloppy work of both Miguel Garcia’s chapter 7 counsel and the counsel for U.S. Bank’s servicer, Rushmore Loan Management Services (Rushmore). But it was Rushmore’s failure to include sufficient evidence in its motion that ruled the day. [Read more…] about Failure of Evidence Sinks Motion for Relief from Stay
PLUS Loan Proceeds Are Not Debtor’s Property and Transfer Cannot Be Avoided
The chapter 7 trustee could not avoid transfers of PLUS Loan funds to the University where the debtors’ daughter was enrolled because the debtors, who applied for and obtained the loans, had no property interest in the funds. Roumeliotis v. Johnson & Wales University (In re DeMauro), No. 14-32312, Adv. Proc. No. 15-3011 (Bankr. D. Conn. June 19, 2018).
The chapter 7 trustee, George Roumeliotis, sought to avoid eight payments totalling $46,909.00 made to Johnson & Wales University for debtors, Robert and Jean DeMauro’s, adult daughter’s tuition and education expenses. All of the payments consisted of Federal Direct Parent PLUS Loan proceeds under the program established by the Higher Education Act and administered by the U.S. Department of Education. Pursuant to regulations, once the DeMauro’s were approved for the loan, the PLUS loan funds were deposited in a “G5 Portal” and the University withdrew the funds as they became due. The DeMauros had no access to the funds at any time and, in fact, swore to use the funds only for their daughter’s education expenses as a condition of receipt of the loan. Any unauthorized use of the funds would subject the DeMauros to criminal prosecution. [Read more…] about PLUS Loan Proceeds Are Not Debtor’s Property and Transfer Cannot Be Avoided
Scotus Resolves Circuit Disagreement over Non-Dischargeability Based on Fraud
A falsehood concerning a single asset may be a “statement respecting the debtor’s financial condition,” and therefore, the misrepresentation must be in writing to render non-dischargeable a debt arising out of the creditor’s reliance on it. Lamar, Archer & Cofrin, LLP, v. Appling, 584 U.S. ___, No. 16-1215 (S. Ct. June 4, 2018).
Scott Appling put off paying his attorneys fees in a business litigation case by assuring his attorneys at Lamar, Archer & Cofrin, LLP, (Lamar) that he expected a tax refund that would more than cover the bill. When the actual refund was smaller than he represented, he used the money to pay business expenses and told Lamar he had not yet received the refund. In reliance on Mr. Appling’s false statements, Lamar continued to represent him. When the final litigation bill remained unpaid for five years, however, Lamar sued in state court and obtained a judgment against Mr. Appling and his wife. The Applings then filed for chapter 7 bankruptcy relief. [Read more…] about Scotus Resolves Circuit Disagreement over Non-Dischargeability Based on Fraud
Government Penalty Not Dischargeable
A penalty owed to a governmental agency based on fraud falls under section 523(a)(2) and is therefore nondischargeable under section 1328(a) even though the debt also falls under section 523(a)(7) which is not listed in the debts excepted from discharge. Andrews v. Mich. Unemployment Ins. Agency, No. 16-2383, Kozlowski v. Mich. Unemployment Ins. Agency, No. 16-2680 (6th Cir. May 29, 2018).
In two separate cases, chapter 13 debtors, Priscilla Andrews and Richard Kozlowski, sought to discharge penalties imposed upon them for fraudulent collection of unemployment insurance benefits. The bankruptcy courts denied discharge under section 1328(a). The district courts affirmed in both cases. [Read more…] about Government Penalty Not Dischargeable
Local Rule for Dismissal without Hearing Is Inconsistent with Code
The Code requires notice and a hearing before a bankruptcy court dismisses a debtor’s chapter 13 case and a contrary Local Rule is invalid. No v. Gorman (In re No), No. 17-1679 (4th Cir. May 24, 2018).
Sarah Hyunsoon No filed for chapter 13 bankruptcy and filed a proposed plan but failed to attend the meeting of creditors or make the first payment under the plan as required under section 1326 and Local Rule 3070-1(C). The trustee, Thomas Gorman, certified to the court that by failing to commence payments under the plan, Ms. No had failed to comply with the Local Rule and that her case was therefore subject to dismissal. Although the bankruptcy court scheduled a hearing on the motion, it dismissed Ms. No’s case prior to the hearing. The district court affirmed. [Read more…] about Local Rule for Dismissal without Hearing Is Inconsistent with Code
What Is a Loan?
Money need not change hands for a deferred tuition payment plan to be a “loan,” for purposes of nondischargeability under section 523(a)(8). In re Hazelton, No.16-12372 (Bankr. W.D. Wisc. Feb. 23, 2018).
Ms. Hazelton enrolled at the University of Wisconsin, Stout, and entered into a Payment Plan which deferred her tuition payments until the end of the first week of classes. She completed her degree requirements but did not pay the tuition according to the Payment Plan. Stout withheld her degree pending payment of her tuition and intercepted her state tax return. Ms. Hazelton and her husband obtained a chapter 7 discharge and sought sanctions against Stout for its collection efforts, arguing that the tuition deferment did not constitute a student loan and that the debt was therefore discharged in chapter 7 along with her other debts. [Read more…] about What Is a Loan?
Nationstar Cannot Wriggle Out of Discharge Injunction Violation
Nationstar waived its right to argue that the court could not address the merits of the debtor’s discharge injunction case before ruling on class certification, and several of Nationstar’s post-discharge communications violated the injunction. Forson v. Nationstar Mortgage, LLC., No. 08-61001, Adv. Proc. No. 15-2137 (Bankr. S.D. Ohio March 21, 2018).
Terry Lee Forson reopened his chapter 13 bankruptcy and filed an adversary complaint against Nationstar Mortgage LLC, alleging violation of the discharge injunction, section 524(a)(2), based on Nationstar’s continued collection activities post-discharge. Contending that Nationstar’s conduct was part of an ongoing business practice, Mr. Forson sought class certification. He filed a motion for summary judgment to which Nationstar objected, arguing that, under the one-way rule, the court could not address the merits of the case until it had made a finding with respect to class certification. [Read more…] about Nationstar Cannot Wriggle Out of Discharge Injunction Violation