The debtor was not permitted to convert from chapter 7 to chapter 13 post-discharge but prior to administrative closure of his case where the court found the attempted conversion to be an abuse of process and his conduct in his chapter 7 case to indicate bad faith. In re Chamoun, No. 20-5069 (C.D. Cal. Dec. 2, 2020). [Read more…] about Debtor’s Post-Discharge Pre-Closure Motion to Convert Denied
Unlawful Possession of Real Property Does Not Create Property Interest
Where the debtor was subject to a state court judgment cutting off his right to cure the default on an installment land contract, he had no interest in the property despite his continued unlawful possession and, therefore, the bankruptcy court erred in confirming the debtor’s chapter 13 plan that provided for payment of the default judgment. In re Peralta, No. 20-2380 (E.D. Pa. Dec. 4, 2020).
The debtor entered into an installment contract with the creditor for the transfer of real property. After the debtor defaulted on the contract, a new agreement was reached obligating the debtor in the event of future default to submit to a default judgment and vacate the property. He defaulted and the creditor obtained a judgment in the amount of $41,151.70, as well as a Judgment for Possession in state court. But rather than vacate the property, the debtor filed for chapter 13 bankruptcy and proposed a plan under which he would pay off the judgment and obtain possession of the property free and clear of the creditor’s interest. The bankruptcy confirmed the plan over the creditor’s objection. [Read more…] about Unlawful Possession of Real Property Does Not Create Property Interest
Med School Loans Partially Discharged after Debtor Fails to Match for Residency
Finding that the debtor’s string of very bad luck unrelieved by his concerted efforts to increase his earnings, satisfied the Brunner test, a bankruptcy court granted him a partial discharge of his student loan, reducing the debt from $440,000 to $8,291.67. Koeut v. U.S. Dept. of Ed., No. 12-7242, Adv. Proc. No. 18-90130 (Bankr. S.D. Cal. Dec. 4, 2020). [Read more…] about Med School Loans Partially Discharged after Debtor Fails to Match for Residency
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
California Clarifies Marital Property Presumptions
Relying on the answer to a certified question propounded to the California Supreme Court regarding presumptions attached to marital property, the Ninth Circuit found that one of two properties owned by the individual debtor and his wife was community property despite its being designated a joint tenancy. Brace v. Speier (In re Brace), No. 17-60032 (9th Cir. Nov. 9, 2020).
The debtor and his wife acquired the San Bernardino property sometime after they married in 1972, and the Redlands property in 1977 or 1978. When the husband filed for chapter 7 bankruptcy, the trustee sought to sell both properties and distribute the proceeds to the debtor’s creditors. Even though both deeds characterized the properties as joint tenancies, the bankruptcy court found that, under the California Family Code, they were community property and could be sold to satisfy the husband’s debts. The BAP affirmed. In re Brace, 566 B.R. 13 (B.A.P. 9th Cir. 2017). [Read more…] about California Clarifies Marital Property Presumptions
ACA’s Shared Responsibility Payment Debt Not Entitled to Priority
The shared responsibility payment under the Affordable Care Act is not an “excise tax,” within the meaning of section 507(a)(8) and, therefore, the IRS’s claim for unpaid SRP was not entitled to priority in bankruptcy. IRS v. Huenerberg, No. 18-1617 (E.D. Wisc. Oct. 22, 2020).
When the debtors filed for chapter 13 bankruptcy, the IRS submitted a claim for over $6,000 in unpaid taxes, a portion of which was attributable to the debtors’ failure to pay what they owed under the Affordable Care Act as their shared responsibility payment (SRP). The IRS sought to have the SRP treated as a priority tax debt under section 507(a). The bankruptcy court found that the SRP did not qualify as an “excise tax” under that section and denied the IRS’s motion. The IRS appealed to the district court. [Read more…] about ACA’s Shared Responsibility Payment Debt Not Entitled to Priority
Local Standards Apply but Trustee Need Not Be a Sumpsimus
Despite higher actual vehicle operating costs, when calculating disposable income on the means test, above-median debtors must use the exact numerical values for expenses that are specified in the IRS’s National and Local Standards. Rodriguez v. Bronitsky (In re Rodriguez), No. 20-1085 (B.A.P. 9th Cir. Oct. 16, 2020). [Read more…] about Local Standards Apply but Trustee Need Not Be a Sumpsimus
The Case of the Vanishing Homestead Exemption
When the debtor failed to reinvest the proceeds from the sale of his exempt homestead within the period required by state homestead exemption law, the exemption vanished. McCallister v. Wells (In re Wells), No. 20-86 (D. Idaho Oct. 14, 2020).
The debtor filed for chapter 13 bankruptcy and listed the equity in his home as exempt under Idaho law. During his bankruptcy, he sold the home in order to use the proceeds to pay off one of his creditors. He did not reinvest in a new home as required by Idaho exemption law. The trustee sought to capture the proceeds of the sale for the bankruptcy estate on the basis that the debtor’s homestead exemption vanished when the debtor sold the home without reinvesting within one year. The bankruptcy court overruled the trustee’s objection to the exemption. The trustee appealed to the district court. [Read more…] about The Case of the Vanishing Homestead Exemption
Complete Snapshot Rule Applies to Debtor’s Homestead Exemption
The First Circuit found that a debtor with a legitimate homestead exemption at the time of filing chapter 13 bankruptcy retains that exemption despite post-petition sale of the property, conversion to chapter 7, and failure to reinvest in a new homestead within six months as required by state homestead exemption law. Rockwell v. Hull (In re Rockwell), No. 19-2074 (1st Cir. July 30, 2020), petition for cert. filed (U.S. Oct. 13, 2020) (No. 20-499). [Read more…] about Complete Snapshot Rule Applies to Debtor’s Homestead Exemption