“The shared responsibility payment is neither ‘a tax on or measured by income or gross Receipts’ nor ‘an excise tax on . . . a transaction’ within the meaning of § 507(a)(8)(A) or (E) of the Bankruptcy Code.” In re Juntoff, 2021 WL 1522206 (Bankr. N.D. Ohio April 15, 2021) (case nos. 1:19-bk-17032, 1:20-bk-13035) (unpublished). [Read more…] about The ACA’s Shared Responsibility Payment Is Not a Priority Claim
Tax Credits Exemptible as Public Assistance
Where the Additional Child Tax Credit and Earned Income Tax Credit were both intended to benefit low-income households and were not limited by taxes owed, they were properly deemed “public assistance” under state exemption laws. In re Moreno, — B.R. —-, 2021 WL 1904189 (Bankr. W.D. Wash. May 11, 2021) (case no. 3:20-bk-42855). [Read more…] about Tax Credits Exemptible as Public Assistance
Debtor Has Private Right of Action to Enforce Anti-Discrimination Provision
A debtor has a private right of action to enforce bankruptcy’s anti-discrimination provision and may recover damages under the court’s authority under section 105. Johnston v. Speedway, LLC, 2021 WL 1662725 (W.D. Va. April 28, 2021) (case no. 7:21-cv-100).
The plaintiff, Michael Johnston, worked as an assistant manager at Speedway for eight years, but fell on hard times and found himself homeless and living out of his car. He filed for chapter 13 bankruptcy. Speedway learned of the bankruptcy and fired him, citing as the reason that he was a risk for stealing from the cash register. The plaintiff filed an adversary proceeding in his bankruptcy case alleging discrimination under section 525(b), and seeking reinstatement, compensatory and punitive damages, and attorney’s fees. The case was later withdrawn from the bankruptcy court and transferred to district court. Speedway moved to dismiss. [Read more…] about Debtor Has Private Right of Action to Enforce Anti-Discrimination Provision
Modification of Pawn Contract
Where the debtor entered bankruptcy prior to the maturation date of her pawn contract, she had an ownership interest in her pawned vehicle, the lender was a lienholder, and the pawn contract could be modified under section 1322(b). TitleMax of Alabama, Inc. v. Womack, 2021 WL 1343051 (M.D. Ala. April 9, 2021) (case no. 2:20-cv-416). [Read more…] about Modification of Pawn Contract
Sanction Against Student Loan Servicer Exceeded Court’s Civil Contempt Power
The bankruptcy court’s contempt order against a student loan servicer requiring it to pay off the entire amount of the debtor’s student loan was punitive rather than compensatory or coercive and, therefore, the award exceeded the court’s civil contempt power. Great Lakes Educ. Loan Serv. Inc. v. Leary, No. 20-8050 (S.D.N.Y. June 22, 2021). [Read more…] about Sanction Against Student Loan Servicer Exceeded Court’s Civil Contempt Power
Scotus Punts Student Loan Case
The Supreme Court today declined the opportunity to clarify the test for determining whether a debtor has met the undue hardship standard for purposes of student loan discharge under section 523(a)(8). McCoy v. United States, No. 20-886, pet’n denied, (June 21, 2021). The debtor/petitioner sought to reverse the Fifth Circuit’s application of the Brunner test under which that court found that the 62-year-old debtor, who had suffered a cascade of mental and physical catastrophes, failed to establish “total incapacity” to repay the debt in the future. In re McCoy, No. 19-40269 (5th Cir. June 5, 2020). The petition contrasted the Fifth Circuit’s Draconian test with the totality of circumstances test, under which the Eighth and the First Circuits consider whether the debtor’s “reasonable future financial resources will sufficiently cover payment of the student loan debt[] while still allowing for a minimal standard of living.” NACBA filed an amicus brief in support of the petitioner pointing out that a debtor’s chance of discharging a student loan was almost entirely dependent on what jurisdiction the debtor happened to live in. Unfortunately, the Supreme Court chose not to correct the anti-debtor stance the Fifth Circuit and other courts have adopted.
Trustee Can Avoid Tax Penalty Lien for Benefit of Estate
Under sections 724(a) and 551, the chapter 7 trustee could avoid the penalty portion of a federal tax lien on the debtor’s homestead property and preserve the value of the avoided lien for the benefit of the bankruptcy estate. United States of America v. Warfield, 2021 WL 1530094 (D. Ariz. April 19, 2021) (case no. 3:20-cv-8204). [Read more…] about Trustee Can Avoid Tax Penalty Lien for Benefit of Estate
Law Firm and Counsel Joint and Severally Liable for D/C Injunction Violation
A creditor law firm and one of its individual attorneys may be held in contempt on a joint and several liability basis for violation of the discharge injunction when the lawyer fails to cease a garnishment action and return collected wages upon learning of the debtor’s discharge in bankruptcy. Ragone v. Stefanik & Christie, LLC, No. 20-8013 (B.A.P. 6th Cir. May 13, 2021). [Read more…] about Law Firm and Counsel Joint and Severally Liable for D/C Injunction Violation
Arizona District Court Addresses Eligibility for Exemptions
Where the Arizona debtors were subject to Kansas exemption law but could not actually take any exemptions due to residency requirements, they were entitled to use federal exemptions under section 522(d). Mackenzie v. Schreiber (In the Matter of Schreiber), No. 20-1993 (D. Ariz. June 4, 2021). [Read more…] about Arizona District Court Addresses Eligibility for Exemptions
Attorney Fees Intended To Pressure Debtor Unnecessary
The creditor’s attorney fees attributable to its repeated motions to continue foreclosure proceedings during the debtor’s pending bankruptcy cases were unnecessary given that the automatic stay was in place, and the bankruptcy court deducted those fees from the allowed claim. In re Peta, 2021 WL 608233 (Bankr. E.D. Pa., Feb. 10, 2021) (case no. 2:19-bk-13264). [Read more…] about Attorney Fees Intended To Pressure Debtor Unnecessary