Section 521(i)(1) (a BAPCPA addition to the Code) provides that if a debtor in a chapter 13 case fails to file the documents required by section 521(a)(1) “the case shall be automatically dismissed effective on the 46th day after the date of the filing of the petition.” But does a court really lack discretion to decide not to dismiss, and can the case be dismissed without notice and a hearing? These are a couple of the questions addressed by the BAP for the First Circuit in Soto v. Doral Bank, No. 12-75 (May 8, 2013). [Read more…] about BAP Explores Requirements for “Automatic Dismissal”
Hybrid Plans Rejected by First Circuit BAP
The BAP for the First Circuit rejected confirmation of so-called “hybrid” plans in chapter 13. Bullard v. Hyde Park Savings Bank, No. 12-54 (May 24, 2013). The debtor proposed a plan under which his mortgage (including both residential and non-residential elements) was to be divided into secured and unsecured portions under section 1322(b)(2) with the unsecured portion paid for cents on the dollar through the plan. The secured portion would be paid outside the plan and beyond the completion of the plan period as contemplated by the cure and maintain provision in section 1322(b)(5). The bankruptcy court found that sections 1322(b)(2) and 1322(b)(5) are mutually exclusive and therefore the plan could not be confirmed as proposed. In re Bullard, 475 B.R. 304 (Bankr. D. Mass. 2012). The BAP for the First Circuit accepted the interlocutory appeal. [Read more…] about Hybrid Plans Rejected by First Circuit BAP
Factual Findings in Student Loan Discharge Case Reviewed for Clear Error
Dischargeability of student loans is often determined by application of the test set forth in 1987 case of Brunner v. New York Higher Education Services Corp., 831 F.2d 395 (2d Cir.). The Ninth Circuit recently discussed the proper standard of review when the third prong of that test—good faith—is at issue. Hedlund v. ECMC, No. 12-35258 (9th Cir. May 22, 2013). [Read more…] about Factual Findings in Student Loan Discharge Case Reviewed for Clear Error
Debtor Has Standing to Pursue Pre-Petition Employment Discrimination Case
The Fourth Circuit confirmed the chapter 13 debtor’s standing to pursue a pre-petition cause of action against his former employer. Wilson v. Dollar General Corp., No. 12-1573 (4th Cir. May 17, 2013). [Read more…] about Debtor Has Standing to Pursue Pre-Petition Employment Discrimination Case
Fourth Circuit Allows Chapter 20 Lien Strip
The Fourth Circuit is the first circuit court to find that a debtor may strip a wholly unsecured lien in chapter 13 where no discharge is available. In re Davis, No. 12-1184 (May 10, 2013). [Read more…] about Fourth Circuit Allows Chapter 20 Lien Strip
Two Courts Reject Narrow Parameters for Rule 3002.1
A bankruptcy court in Illinois found that JP Morgan Chase violated Rule 3002.1 by raising the debtors’ mortgage payments without providing proper notification even though there was no mortgage arrearage being cured through the chapter 13 plan. In re Tollios, No. 09-19329 (Bankr. N.D. Ill. May 13, 2013). In the Eastern District of Kentucky, the bankruptcy court found that the rule continued to apply even after the mortgagee was granted relief from stay. In re Holman, No. 12-50023 (March 15, 2013). [Read more…] about Two Courts Reject Narrow Parameters for Rule 3002.1
Supreme Court Determines Scienter for Defalcation
Debts for “defalcation” have been excepted from discharge for almost one hundred and fifty years, yet only now has the Supreme Court resolved the question of what mental state is required for an actor to commit defalcation within the meaning of section 523(a)(4). Bullock v. BankChampaign, 569 U. S. ____ (2013), No. 11-1518 (May 13, 2013). [Read more…] about Supreme Court Determines Scienter for Defalcation
Creditor Must Return Repossessed Vehicle upon Bankruptcy Filing
The Second Circuit upheld sanctions against vehicle loan creditor, SEFCU, for refusing to return debtor’s repossessed vehicle without a court order and adequate protection. Weber v. SEFCU, No. 12-1632 (May 8, 2013). SEFCU had lawfully repossessed the debtor’s pick-up truck pursuant to the loan agreement but when the debtor filed for bankruptcy SEFCU refused to return the vehicle. The bankruptcy court determined that SEFCU’s actions did not violate the automatic stay. The district court reversed. Weber v. SEFCU, 477 B.R. 308, 311 (N.D.N.Y. 2012). [Read more…] about Creditor Must Return Repossessed Vehicle upon Bankruptcy Filing
Chapter 20 Lien Stripping Goes to Circuit
The Ninth Circuit is poised to be the first circuit court to address the issue of whether a lien may be stripped in a “chapter 20” case where discharge is unavailable. The Western District of Washington recently found that lien stripping was not contingent upon the availability of discharge. Litton Loan v. Blendheim, No. 11-2004 (W.D. Wash. March 29, 2013). Litton Loan filed a notice of appeal on April 26, 2013.
In upholding the bankruptcy court’s finding in favor of the debtors, the district court noted “an emerging trend” in the Ninth Circuit permitting such lien stripping. See In re Tran, 321 B.R. 230, 235 (Bankr. N.D. Cal. 2010); In re Hill, 440 B.R. 176, 182 (Bankr. S.D. Cal. 2010); In re Okosisi, 451 B.R. 90, 100 (Bankr. D. Nev. 2011), and found that those cases were correctly decided. It reasoned that the Supreme Court in Johnson v. Home State Bank, 501 U.S. 78 (1991), explicitly sanctioned chapter 20 cases, and nothing in the later amendments to the Bankruptcy Code imposed a discharge requirement upon the ability to strip a lien that is otherwise amenable to stripping. The court concluded that the lien would be stripped upon completion of plan payments.
The Eighth Circuit recently avoided the issue in the case of In re Fisette, 695 F.3d 803 (8th Cir. 2012), by concluding that the BAP’s order that liens may be stripped in chapter 20 was an interlocutory order not subject to appeal.
No Presumption of Validity for Payment Changes under Rule 3002.1
The bankruptcy court for the Northern District of Mississippi differentiated between the shifting burdens of proof under Rule 3001, which deals with proofs of claim generally, and Rule 3002.1, relating to notice of changes to mortgage payments on debtor’s residence. In re Taylor, No. 12-11463 (March 27, 2013). [Read more…] about No Presumption of Validity for Payment Changes under Rule 3002.1