National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

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Canadian Pension Plan Not Qualified Retirement Plan

Under Illinois and federal law, a pension plan that is organized in Canada does not meet the definition of a qualified retirement plan and may not be exempted from the debtor’s bankruptcy estate. In re Green, No. 21-6189 (Bankr. N.D. Ill. March 9, 2022).

The debtor sought to exempt from his bankruptcy estate his $72,300 interest in a Retirement Fund which was organized in Canada. The chapter 7 trustee objected to the exemption on the basis that the plan was not a qualified retirement plan within the meaning of the state or federal exemptions. [Read more…] about Canadian Pension Plan Not Qualified Retirement Plan

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Changes to Bankruptcy Code Dollar Amounts

Certain dollar amounts in the U.S. Bankruptcy Code will increase effective April 1, 2022, pursuant to 11 U.S.C. §104.  On February 4, 2022, the Judicial Conference of the United States announced and detailed these changes in The Federal Register. See Adjustment of Certain Dollar Amounts in the Bankruptcy Code, 87 Fed. Reg. 6625 (February 4, 2022).

Changes relevant to consumer bankruptcy attorneys include:

  • 11 U.S.C. § 109(e) (debt limits for chapter 13):
    • The unsecured debt cap has increased from $419,275 to $465,275.
    • The secured debt cap has increased from $1,257,850 to $1,395,875.
  • 11 U.S.C. § 522(d) (federal exemptions):
    • Section 522(d)(1) (homestead exemption) has increased from $25,150 to $27,900.
    • Section 522(d)(2) (motor vehicle exemption) has increased from $4,000 to $4,450.
    • Section 522(d)(3) (household goods etc. exemption) has increased from $625 to $700 for value in any particular item and from $13,400 to $14,875 in aggregate value.
    • Section 522(d)(4) (jewelry) has increased from $1,700 to $1,875.
    • Section 522(d)(5) (unused amounts from 522(d)(1)) has increased from $1325 to $1,475 for value in any particular item and from $12,575 to $13,950 in aggregate value.
  • 11 U.S.C. § 522(n) (Exemption cap for certain individual retirement accounts) has increased from $1,362,800 to $1,512,350.
  • 11 U.S.C. § 707(b)(2)(A)(i)(Means Test) – CMI is not less than the lesser of –
    • Section 707(b)(2)(A)(i)(I) 25% of unsecured claims or $9,075 (up from $8,175) or
    • Section 707(b)(2)(A)(i)(II) $15,150 (up from $13650).
    • Section 707(b)(2)(A)(ii)(IV) (necessary dependent school expenses) has increased from $2,050 to $2,275.
    • Section 707(b)(6)(C) (to calculate median income for family greater than 4) the amount per additional family member has increased from $750 to $825.

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Interest Rate on Tax Debts

Illinois Property Tax law provides an interest rate of 18% for tax debts where the debtor does not intend to redeem the property, even where the debt is owned by tax purchaser at the time of the debtor’s chapter 13 petition. In re Drake, No. 21-4903 (Bankr. N.D. Ill. Feb. 23, 2022).

The debtor failed to pay Illinois property taxes on her real property and Integrity Investment Fund, LLC, purchased the tax debt (“Sold Taxes”). Over the next few years, the debtor failed to pay the property taxes and Integrity, in accordance with its rights as the tax debt purchaser, paid the taxes (“Subsequent Taxes”) and added the amount to the debt. The debtor did not redeem the property by paying the delinquent tax debt as permitted by Illinois law. Instead, she filed for chapter 13 bankruptcy and proposed a plan under which she would pay off the debt of $30,711 at a 0.5% interest rate. Integrity objected to confirmation of the plan, arguing, in part, that the appropriate interest rate was 18% for the tax debts. The debtor objected to Integrity’s claim. [Read more…] about Interest Rate on Tax Debts

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Trustee in Dismissed Case May Keep Pre-Confirmation Fees

In a cursory opinion, the District Court for the Eastern District of New York, found the chapter 13 trustee was entitled to retain his statutory fees despite the fact that the debtor’s bankruptcy was dismissed prior to confirmation. Soussis v. Macco (In re Soussis), No. 20-5673 (E.D.N.Y. Jan. 24, 2022) (online publication only). [Read more…] about Trustee in Dismissed Case May Keep Pre-Confirmation Fees

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Costs of Attorney Disciplinary Proceeding Not Dischargeable

An order by the state that a lawyer pay the costs of the regulatory authority’s action against him for professional misconduct was penal rather than compensatory for purposes of nondischargeability. Osicka v. Office of Lawyer Reg., No. 21-1556 (7th Cir. Feb. 7, 2022).

The chapter 7 debtor, a Wisconsin lawyer, was subjected to disciplinary proceedings before the Wisconsin Office of Lawyer Regulation for misconduct in the handling of one of his client’s cases. The referee recommended temporary suspension of his law license, full restitution in the amount of $150, and the costs of the disciplinary proceedings. In re Disciplinary Proceedings Against Osicka, 765 N.W.2d 775 (Wis. 2009). The debtor appealed to the Wisconsin Supreme Court which reduced the suspension to a public reprimand and upheld but the reduced the order for costs to $12,500.64. [Read more…] about Costs of Attorney Disciplinary Proceeding Not Dischargeable

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Debtor May Reopen Case 8 Years after Closing to Seek to Avoid Liens

There was “cause” to permit the debtor to reopen his chapter 7 bankruptcy eight years after closure to allow him to move to amend his schedules, claim a homestead exemption and avoid judicial liens, where there was no evidence that reopening would cause undue prejudice to any party and the debtor’s quest was not clearly futile. In re Paduch, No. 12-32101 (Bankr. D. Conn. Feb. 14, 2022).

More than eight years after his chapter 7 bankruptcy case was closed, the debtor sought to reopen in order to claim his homestead exemption in an amount greater than $0 and to list two judicial liens on his schedules as secured debts. In his motion to reopen, the debtor acknowledged that his ultimate goal was to avoid the judicial liens as impairing his homestead exemption. The trustee opposed the motion to reopen based on the doctrine of laches, arguing that the debtor could have claimed the exemption and sought to avoid the liens prior to the conclusion of his bankruptcy case. The trustee further argued that the debtor did not meet the standards for post-closure amendment of bankruptcy schedules. [Read more…] about Debtor May Reopen Case 8 Years after Closing to Seek to Avoid Liens

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Debtor May Avoid Transfer under § 522(h) when § 522(f) Not Available

A debtor may avoid a judgment lien impairing her homestead exemption under section 522(h) even though she did not meet the requirements for lien avoidance under section 522(f). In re Garbo, No. 21-11053 (Bankr. W.D. N.Y. Jan. 27, 2022).

Prior to filing for chapter 7 bankruptcy, the debtor and her husband divorced. Their divorce settlement stipulated that the husband would quit claim to the debtor his half-interest in their marital residence. Before he executed the quitclaim deed, however, Discover Bank obtained a judgment lien against him for $3,310.63. He then quitclaimed the property to the debtor. When the debtor filed for bankruptcy, the value of the home was $170,000 and was security for a first mortgage in the amount of $90,640. The debtor claimed her New York homestead exemption in the amount of $89,975, leaving no equity to cover Discover Bank’s lien. She sought to avoid Discover Bank’s lien as a lien against her homestead exemption under section 522(f)(1). [Read more…] about Debtor May Avoid Transfer under § 522(h) when § 522(f) Not Available

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Split on Chapter 13 Trustee Retention of Fees in Unconfirmed Cases Deepens

Deepening the split among lower courts, in McCallister v. Evans, et al., No. 20-112 (D. Ida. Feb. 8, 2022). Chief Judge Nye of the District of Idaho, held that the chapter 13 trustee is entitled to retain her commission on funds collected from the debtors even though the debtors’ case was dismissed prior to confirmation.  While recognizing the split of authority, the court followed in the footsteps of the Ninth Circuit Bankruptcy Appellate Panel in favoring the language of 28 U.S.C. § 586(e)(2) and dodging the clear textual differences between section 1326(a)(2)—applicable in chapter 13—and section 1226(a)(2)—applicable in chapter 12. [Read more…] about Split on Chapter 13 Trustee Retention of Fees in Unconfirmed Cases Deepens

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Calculating Values for 109(e) Bankruptcy Eligibility

In the face of a good faith challenge to the debtors’ eligibility for chapter 13 bankruptcy under section 109(e), the bankruptcy court considered evidence beyond the debtors’ schedules and conducted its own eligibility calculation. In re Beach, 2022 Bankr. LEXIS 313, Case no. 21-10762 (Bankr. D. N.M. Feb. 7, 2022). [Read more…] about Calculating Values for 109(e) Bankruptcy Eligibility

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Discharge of Judgment Related to Ponzi Scheme

A judgment against the debtor based on fraudulent transfer of funds arising out of his gains in a Ponzi scheme was dischargeable where the court found that only a debt traceable to a securities law violation committed by the debtor is excepted from discharge under section 523(a)(19) and the debtor in this case was not liable for a securities violation. In re Simons, 2021 WL 5225940 (Bankr. D. Minn. Nov. 9, 2021) (case no. 4:20-bk-40631; adv. proc. no. 4:21-ap-4027). [Read more…] about Discharge of Judgment Related to Ponzi Scheme