In Brace v. Speier (In re Brace), the Ninth Circuit certified the following question to the Supreme Court of California: “Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate?” No. 17-60032 (9th Cir. Nov. 8, 2018) (order certifying question). [Read more…] about Ninth Circuit Certifies Community Property Question to Calif. S.Ct
Debtor Cannot Exempt His Interest in Ex-Wife’s Retirement Accounts
Accounts the debtor received from his ex-wife in a divorce were not retirement accounts for bankruptcy exemption purposes because, even though his ex-wife had contributed to the accounts for retirement, his interest was merely through a property settlement. Lerbakken v. Sieloff and Assoc., P.A., No. 18-6018 (B.A.P. 8th Cir., Oct. 16, 2018).
The bankruptcy court disallowed chapter 7 debtor, Brian Lerbakken’s, claimed exemptions for a 401K account and an IRA that he had received in a property settlement when he and his wife divorced. The funds in the accounts were contributed in their entirety by his ex-wife. [Read more…] about Debtor Cannot Exempt His Interest in Ex-Wife’s Retirement Accounts
Debtors Entitled to Discharge Despite Bad Faith Conduct
The debtors were entitled to discharge once they completed their payments under the plan notwithstanding the fact that they “gamed the system” and conducted their bankruptcy in bad faith. Davis v. Holman (In re Holman), No. 17-1118 (D. Kans. Oct. 31, 2018).
During the course of their chapter 13 bankruptcy, debtors, Shala and Nathan Holman, failed to disclose assets and debts, employment status, post-petition debts, and other relevant information. They modified their chapter 13 plan numerous times and responded to challenges by the trustee based on bad faith. In one challenge, addressing the entirety of their misconduct to date, the court held a hearing and the parties reached a stipulated agreement resolving the issues. In July, 2016, the trustee again sought dismissal of their case based on bad faith. While that litigation was pending, the debtors successfully completed their payments in accordance with their confirmed plan. After trial on the motion, the bankruptcy court found that while the debtors’ conduct indeed constituted bad faith, the court was precluded from dismissing the case because the debtors’ successful completion of their plan payments entitled them to discharge. [Read more…] about Debtors Entitled to Discharge Despite Bad Faith Conduct
Automatic Stay Does Not Require Return of Repossessed Property
A New Jersey District Court applied the minority view that a creditor does not have an affirmative duty to return a vehicle repossessed pre-petition upon learning of the debtor’s bankruptcy filing. Denby-Peterson v. Nu2u Auto World, No. 17-9985 (D. N.J. Nov. 1, 2018).
Joy Denby-Peterson entered into a purchase money security agreement for the purchase of her 2008 Corvette. The original seller transferred the debt to Nu2u. When Ms. Denby-Peterson failed to make payments according to the agreement, Nu2u repossessed the vehicle. Ms. Denby-Peterson filed for chapter 13 bankruptcy and initiated an adversary proceeding seeking turnover of the vehicle and actual damages for violation of the automatic stay. The bankruptcy court ordered return of the vehicle, but denied Ms. Denby-Peterson’s motion for sanctions. [Read more…] about Automatic Stay Does Not Require Return of Repossessed Property
Property Tax Refund Not “Based on Need” for Exemption Purposes
The debtor’s tax refund under Minnesota’s Property Tax Refund Act was not “government assistance based on need,” and therefore she could not exempt it in her bankruptcy. Hanson v. Seaver (In re Hanson), No. 17-1192 (8th Cir. Sept. 11, 2018).
The circuit court affirmed the BAP’s finding that chapter 7 debtor, Sheri Hanson, could not exempt her tax refund under Minnesota’s Property Tax Refund Act (PTRA), which provides for taxpayers to receive a refund when their property taxes exceed a certain percentage of their household income. [Read more…] about Property Tax Refund Not “Based on Need” for Exemption Purposes
Subjective Belief that Conduct Not Subject to Discharge Order Precludes Sanctions
A creditor’s good faith belief that its conduct did not violate the discharge order precludes a finding of contempt for violation of the discharge injunction even if that belief is unreasonable. Taggart v. Lorenzo (In re Taggart), No. 16-35402 (9th Cir. April 23, 2018).
Bradley Taggart, a 25% owner of a real estate business, became embroiled in state litigation involving two other 25% owners of the business after he transferred his share to his lawyer without giving the co-owners their contractual right of first refusal. Mr. Taggart filed for chapter 7 bankruptcy and the state court stayed the business litigation until after he obtained his discharge. At that time, the business litigation resumed for the purpose of unwinding the business interest, but with the condition that, due to his bankruptcy discharge, Mr. Taggart would not be liable for any monetary judgment. At the conclusion of the business litigation, however, the state court permitted both parties to seek attorney’s fees. The attorneys for Mr. Taggart’s opponents sought attorney fees for their post-discharge work on the basis that Mr. Taggart had “returned to the fray” and the fees were thus the result of post-discharge conduct not related to the bankruptcy discharge. [Read more…] about Subjective Belief that Conduct Not Subject to Discharge Order Precludes Sanctions
Equitable Recoupment Does Not Violate Stay
The creditor’s equitable recoupment of an overpayment of retirement benefits from the debtor’s ongoing monthly benefit payments did not violate the automatic stay. Williamson v. PARS, No. 17-1375 (B.A.P. 9th, Oct. 10, 2018) (unpublished).
The Public Agency Retirement System (PARS) erroneously calculated Barbra Williamson’s entitlement to supplemental retirement benefits by listing her yearly salary as monthly. When it discovered the mistake, PARS offset Ms. Williamson’s retirement benefit overpayment by withholding from the ongoing monthly payments to which she was entitled. Ms. Williamson filed for chapter 13 bankruptcy and sought sanctions against PARS for violation of the automatic stay. The bankruptcy court found no violation and denied the motion. [Read more…] about Equitable Recoupment Does Not Violate Stay
Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property
A debtor seeking to avoid a lien as impairing a homestead exemption must calculate the impairment using his proportionate interest in the property and the sum of the corresponding mortgage liens in proportion to that interest. Sandoval Irrevocable Trust v. Taylor, No. 17-1241 (10th Cir. Aug. 14, 2018).
As a result of Mark Taylor’s misappropriation of funds from an Irrevocable Trust for which he was trustee, the Trust (Sandoval) obtained state court judgments against him and liens against his residence. Mr. Taylor filed for chapter 13 bankruptcy and listed the property, which he co-owned with his ex-wife, as having a total value of $560,000 with his portion amounting to $280,000. He later converted his case to chapter 7 and moved to avoid the judgment liens as impairing his state homestead exemption of $37,500. [Read more…] about Impairment to Exemption Calculation Based on Debtor’s Half Interest in Property
Eleventh Circuit Applies New Judicial Estoppel Analysis
When addressing judicial estoppel, courts may no longer apply a presumption of motive to conceal, but must look at the facts and circumstances behind a bankruptcy debtor’s failure to disclose his civil action in the bankruptcy proceeding. Silva v. Pro Transport Inc., No. 17-12744 (11th Cir. Aug. 10, 2018).
After Julio Antonio Silva’s chapter 13 bankruptcy plan was confirmed, he filed an FLSA claim in district court against his employers for failure to pay overtime. He did not tell his civil counsel about his bankruptcy nor did he immediately inform the bankruptcy court of the district court case. The district court granted the employer’s motion for summary judgment on the basis of judicial estoppel, and awarded over $50,000 to the employer in sanctions and attorney fees. Mr. Silva appealed the sanctions award. [Read more…] about Eleventh Circuit Applies New Judicial Estoppel Analysis
Local Plan Form’s Treatment of Tax Returns Is Mandatory
Any conflict between Arizona’s Local Plan Form and the Bankruptcy Code’s requirement relating to a chapter 13 debtor’s obligation to file post-confirmation tax returns was not significant and the debtors here could not confirm a plan that failed to comply with the Local Form. In re Reichard, No. 16-12633 (Bankr. D. Ariz. July 5, 2018).
In their motion to set confirmation hearing, chapter 13 debtors, John and Ericka Rae Reichard, included a stipulated order of confirmation (SOC) under which they proposed to pay creditor, Harley Davidson, $6,255, consistent with Harley Davidson’s proof of claim but less than the amount the debtors had proposed in their plan. The SOC also included a provision for submitting post-confirmation tax returns to the court, in accordance with section 521(f), rather than directly to the trustee as required by Arizona Local Plan Form. [Read more…] about Local Plan Form’s Treatment of Tax Returns Is Mandatory