NACBA has filed an amicus brief on the issue of whether debtor’s social security income may be considered by the court when addressing whether debtor’s chapter 13 plan is proposed in good faith and is confirmable over the trustee’s objection. Beaulieu v. Ragos (In re Ragos), No. 11-31046 (5th Cir.). [Read more…] about NACBA Files Amicus on Issue of Social Security Benefits in Chapter 13 Plan
Fee-Only Plans Not Per Se Bad Faith
Making specific reference to NACBA’s “helpful” amicus brief, the First Circuit Court of Appeals found that fee-only chapter 13 plans are not per se bad faith under section 1325(a)(3). In re Puffer, No. 11-1831 (1st Cir. March 22, 2012). Debtor’s chapter 13 plan proposed to pay $2,900 to his counsel, $300 to general unsecured creditors and $400 as trustee fees. The bankruptcy court declined to confirm the plan on the basis that it was per se bad faith to file a plan in which debtor’s bankruptcy counsel was essentially the only beneficiary. In reversing, the first circuit borrowed the totality of the circumstances analysis from section 706(a), placing the burden on the debtor to establish that the facts are such that the chapter 13 plan is in good faith. The decision will make bankruptcy relief more available to debtors who otherwise could not find competent counsel and for whom proceeding pro se is a poor alternative. [Read more…] about Fee-Only Plans Not Per Se Bad Faith
Win for Debtors on Absolute Priority Rule in Chapter 11
In a thoughtful and comprehensive opinion, the BAP for the Ninth Circuit held yesterday that the absolute priority rule does not apply to individual debtors filing chapter 11 bankruptcy. In re Friedman, Nos. 11-1149, 11-1105 (B.A.P. 9th Cir. March 19, 2012).
Daniel Press is to be congratulated on his fine oral argument on behalf of NACBA in this case.
[Read more…] about Win for Debtors on Absolute Priority Rule in Chapter 11
Another Court Allows Chapter 20 Lien Strip
The Colorado District Court found that a chapter 13 debtor may strip a lien even though he is ineligible for discharge due to a prior chapter 7 discharge within the preceding four years. In re Waterman, No. 11-929 (D. Colo. March 13, 2012). The court rejected the trustee’s argument that section 1325(a)(5) prohibits strip-off, finding that that section applies only to “allowed secured” claims and that where there is no value in the collateral, the claim is not secured. The court further noted that strip-off was not prohibited by the plain language of section 1328(f) and that, where discharge only applies to personal liability, allowance of the strip-off did not constitute a de facto discharge. See also, In re Frazier, No. 11-290 (E.D. Cal. March 9, 2012) (reaching the same holding). But see, Victorio v. Billingslea, No. 11-1825 (S.D. Cal. Feb. 24, 2012) (relying on pre-BAPCPA decisions to find that a chapter 13 case may end in one of only three ways: discharge, dismissal, conversion, and that a lien strip becomes permanent only upon discharge).
BAP’s Consider Appeals of Sanctions Orders
Creditor’s counsel is appealing an order by the Bankruptcy Court of the Western District of Missouri awarding chapter 7 debtor sanctions in the amount of $1,500.00 as a result of creditor’s violation of the discharge injunction under section 524(a)(2) and (3). In re King, No. 12-6014 (B.A.P. 8th Cir.). The appeal, filed on February 21, 2012, is before the 8th Circuit BAP. The debtor had filed a motion to reopen his bankruptcy case to add the creditor and the underlying debt was thereafter discharged with no objection. The creditor then filed suit in State Court seeking recovery on that debt. After notifying creditor’s counsel of the bankruptcy discharge to no avail, debtor sought sanctions and attorney fees against creditor’s counsel. The creditor’s counsel appeals the bankruptcy court’s denial of creditor’s motion for reconsideration of the court’s order granting sanctions.
The BAP for the 9th Circuit is also considering an appeal of an order granting sanctions against creditors and their counsel in the amount of $11,217 for violation of the automatic stay under section 362(a). In re Knapp, No. 12-1092 (B.A.P. 9th Cir.). Like King, that case involves pursuit of a state court lawsuit against chapter 7 bankruptcy debtor even after debtor’s counsel sought to educate creditor’s counsel about the automatic stay.
Fifth Circuit Holds that Debtor May Exempt Inherited IRA
The Fifth Circuit today held that a debtor may exempt an inherited IRA from the bankruptcy estate under section 522(d)(12). In re Chilton, No. 11-40377 (March 12, 2012) (affirming the decision of the U.S. District Court for the Eastern District of Texas). [Read more…] about Fifth Circuit Holds that Debtor May Exempt Inherited IRA
Lien Strip Allowed in Chapter 20
In a positive outcome in the growing debate over “chapter 20” lien stripping, the Eastern District of California found that a debtor may strip off of a wholly unsecured junior lien in chapter 13 even though the debtor was ineligible for discharge because of a prior chapter 7 discharge. Real Time Resolutions v. Frazier, No. 11-290 (E.D. Cal. March 9, 2012) (creditor appealed bankruptcy court’s allowance of lien strip). [Read more…] about Lien Strip Allowed in Chapter 20
NACBA Amicus Brief on Issue of Applicable Commitment Period
NACBA has filed an amicus brief in the case of American Express Centurion Bank v. Henderson, No. 11-35864 (9th Cir.), arguing that a chapter 13 plan for an above-median debtor with negative disposable income need not extend for 60 months under the plain language of section 1325(b)(4) because there is no “projected disposable income.” [Read more…] about NACBA Amicus Brief on Issue of Applicable Commitment Period
Debtor May File Protective POC for Tax Claim
The Sixth Circuit Court of Appeals found that, under section 501(c), a debtor could file a protective proof of claim for a tax debt that became due and payable post-petition. Michigan Dept. of Treasury v. Hight (In re Hight), No. 10-2103 (6th Cir. March 5, 2012). While the court agreed with the Michigan DOT that the debtor could not file the POC under section 1305, as that section only permits the creditor to file, it went on to find that section 1305 was not exclusive. The debtor could file the claim under section 501(c) if the claim is of the type specified in section 502(i) which permits treatment of post-petition claims as pre-petition if they have priority under section 507(a)(8)(A). Because the claim came due after three years before the filing of the bankruptcy petition, it had priority under section 507(a)(8)(A)(i), and section 502(i) applied. Therefore, the debtor was permitted to file the proof of claim under section 501(c).
Exemption May Not Be Claimed as 100% FMV
The Bankruptcy Appellate Panel for the First Circuit found that a debtor may not claim an exemption in property in the amount of 100% of the fair market value. In re Massey, No. 11-60 (B.A.P. 1st Cir., Feb. 27, 2012). The court mischaracterized the issue as whether a debtor was permitted to exempt an asset “in kind,” thereby entitling the debtor to the actual asset regardless of whether its value exceeds the statutory limit. This is not the purpose of the 100% FMV exemption, however, and the Massey decision simply bypasses the unequivocal statement by the Supreme Court that an exemption may be claimed in the amount of 100% of the FMV. Schwab v. Reilly, 560 U.S. __,130 S.Ct. 2668 (2010).