National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

bankruptcy

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Haven Act Guide

 The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income. 

This Guide provides an overview of the HAVEN Act, identifies benefits that are excluded, and answers frequently asked questions.

HAVEN Act Guide 2019

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Court May Not Deny Amendment to Exemptions Based on Bad Faith

Based on Law v. Siegel the bankruptcy court properly overruled the trustee’s objection to the debtor’s amendment to his exemptions without regard to whether the debtor concealed assets in bad faith. Rucker v. Belew (In re Belew), No. 18-3045 (8th Cir. Nov. 26, 2019).

In his bankruptcy schedules, the debtor initially failed to disclose that he had $30,000 in cash in a home safe. When the trustee learned of the cash, the debtor sought to amend his exemptions to exempt the money. The trustee objected because the debtor had intentionally concealed the asset and was therefore precluded from amending based on bad faith. The bankruptcy court overruled the objection and the BAP affirmed. [Read more…] about Court May Not Deny Amendment to Exemptions Based on Bad Faith

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District Court Misapplied Fugitive Disentitlement Doctrine to Dismiss Appeal

Sometimes bad facts can lead to good law, and the debtor who appears neither honest nor unfortunate can nonetheless raise a good legal point. In this case, the First Circuit, in a colorful opinion alluding to Whack-a-Mole and haunting specters, found that the district court abused its discretion when it dismissed the debtor’s appeal under the fugitive disentitlement doctrine, where the order on appeal was not affected by the debtor’s flight. In re Kupperstein, Nos. 18-2248, 18-2249 (1st Cir. Nov. 15, 2019).

The case arose when attorney, Donald Kupperstein, and his cohort “helped” a homeowner resolve a $3,379.13 local tax liability by purchasing her home for less than $100 and the payment of the outstanding taxes. The homeowner had inherited the home from her father, and, in addition to the tax liability, it was encumbered by a lien held by the Massachusetts Office of Health and Human Services (MassHealth) for a debt owed by the father’s estate of more than $191,000. The state court reversed the sale of the property as illegal, but Kupperstein continued to possess it and collect rents in defiance of the court’s orders to release the property and turn over the collected rents.

A tangle of state court judgments, arrest warrants, and contempt sanctions ensued and Kupperstein sought refuge in bankruptcy. After the bankruptcy court lifted the automatic stay to allow MassHealth to pursue its state remedies, Kupperstein disappeared. His bankruptcy attorney filed an appeal for the relief from the stay order. When Kupperstein continued to skip probate court dates, MassHealth and the father’s estate moved the district court to dismiss the appeal under the “fugitive disentitlement doctrine.” When Kupperstein then missed yet another state hearing, the district court dismissed the case for the reasons sought in the motion. This appeal followed. [Read more…] about District Court Misapplied Fugitive Disentitlement Doctrine to Dismiss Appeal

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No Stay Violation When Creditor Retains Vehicle Repossessed Pre-Petition

The Third Circuit joined the Tenth and D.C Circuits to hold that, “upon notice of the debtor’s bankruptcy, a secured creditor’s failure to return collateral that was repossessed pre-bankruptcy petition is [not] a violation of the automatic stay,” because it is not an act “to exercise control over property of the estate.” In re Denby-Peterson, No. 18-3562 (3rd Cir. Oct. 28, 2019).

After Joy Denby-Peterson paid $9,200 over approximately eighteen months toward her used Chevy Corvette, the holder of the loan repossessed the vehicle due to her failure to pay the $2,491 down payment that the purchase agreement required. Ms. Denby-Peterson filed for Chapter 13 bankruptcy. She notified the creditor of the petition and demanded the return of the vehicle. When the creditor failed to return the vehicle, the bankruptcy court granted Ms. Denby-Peterson’s motion for turnover under section 542(a), but, finding that the creditor’s retention of the vehicle did not violate the automatic stay, denied her demand for sanctions. The district court affirmed. [Read more…] about No Stay Violation When Creditor Retains Vehicle Repossessed Pre-Petition

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Tuition Payments for Adult Daughter Subject to Claw Back

The chapter 7 trustee could use his strong-arm powers to “claw back” tuition payments the debtors had made for their adult daughter’s education. DeGiacomo v. Sacred Heart University, Inc. (In re Palladino), No. 17-1334 (1st Cir. Nov. 12, 2019).

Steven and Lori Palladino made college tuition payments for their adult daughter within two years of filing for chapter 7 bankruptcy. The bankruptcy trustee filed an adversary proceeding against Sacred Heart University seeking to recover almost $65,000 in tuition payments. Both the trustee and Sacred Heart filed motions for summary judgment and the bankruptcy court granted judgment to Sacred Heart. The First Circuit granted direct appeal. [Read more…] about Tuition Payments for Adult Daughter Subject to Claw Back

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NCBRC Seeks to Intervene in Student Loan Case and Unseal TERI Documents.

NCBRC filed a motion to unseal documents in the chapter 7 case of Mata v. National Collegiate Student Loan Trust 2006-1, et al., No. 16-30625, Adv. Proc. No. 18-1089 (Bankr. C.D. Cal.) (motion filed Nov. 15, 2019).

In the underlying adversary proceeding filed by the debtor seeking to discharge student loans, the defendant student loan securitization trusts moved for summary judgment arguing that the loans were nondischargeable under section 523(a)(8)(A)(i), which excepts from discharge “an educational benefit overpayment or loan made, insured, or guaranteed by a . . . nonprofit institution.” The trusts argued that, although they were not non-profit organizations, the loans “were made under a program funded, in whole or in part, by [TERI] a non-profit institution.”

NCBRC’s motion seeks to “unseal (1) two student loan guaranty agreements between National Collegiate Student Loan Trust 2006-1, National Collegiate Student Loan Trust 2006-4, and National Collegiate Student Loan Trust 2007-4, on the one hand, and the now-defunct The Education Resources Institute, Inc. (“TERI”), . . . and (2) two unredacted pleadings that rely on the Guaranty Agreements.” [Read more…] about NCBRC Seeks to Intervene in Student Loan Case and Unseal TERI Documents.

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Bankruptcy Court May Not Enforce Discharge Order from Other District

On direct interlocutory appeal, the Fifth Circuit found that courts may not use their contempt powers to enforce discharge orders issued by other courts outside their judicial districts. The court also held that the private student loans at issue were not subject to section 523(a)(8)(A)(ii)’s nondischargeability provision because that provision applies only to educational benefits where, as in the case of grants or scholarships, the obligation to repay is conditional. Crocker v. Navient Solutions LLC, No. 18-20254 (5th Cir. Oct. 22, 2019). [Read more…] about Bankruptcy Court May Not Enforce Discharge Order from Other District

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Class Certification in FDCPA Case where Servicer Raised Preclusion Defense

The district court abused its discretion when it denied certification of a class of plaintiffs alleging FDCPA violations based on the mortgage servicer’s post-discharge collection efforts where the servicer’s defense that the Bankruptcy Code’s discharge injunction precluded the claim applied to all claims of the purported class members. Sellers v. Rushmore Loan Management Services, No. 15-1106 (11th Cir. Oct 29, 2019).

After the Sellerses moved out of their home and obtained a chapter 7 discharge, the mortgage servicer, Rushmore, continued to send them monthly statements listing an ever-increasing amount due on their mortgage. The Sellerses filed suit in the district court alleging that Rushmore’s continued collection efforts violated the FDCPA and the Florida Consumer Collection Practices Act (FCCPA) by falsely representing its right to collect the discharged debt. In addition, the Sellerses sought to certify a class of consumers subject to the same conduct. In its answer to the complaint, Rushmore argued against class certification and raised the affirmative defense that the claims were preempted/precluded by the Bankruptcy Code’s discharge injunction provision.

The district court declined to certify the class, finding that the issue of whether the Code preempted/precluded the purported class’s claims was a matter of individualized consideration. Its decision rested on the finding that the preclusive effect of the Bankruptcy Code was a function of the applicability of section 524(j), which permits a debt collector to collect payments in lieu of foreclosure from a debtor whose personal liability was discharged in bankruptcy but who continues to live on the property. The district court found that the issue of preclusion would affect only debtors to whom section 524(j) applied. [Read more…] about Class Certification in FDCPA Case where Servicer Raised Preclusion Defense

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Vanishing Homestead Exemption Reappears in Bankruptcy Despite Conversion

The District Court for the District of Maine adopted the “complete snap-shot” rule for treatment of a homestead exemption attached to property the debtor owned at the time of his chapter 13 petition and sold during the pendency of that case, even though he failed to reinvest the proceeds within six months as required by state exemption law, and converted his case to chapter 7. Hull v. Rockwell, No. 18-385 (D. Me. Sept. 24, 2019).

When Jeffrey Rockwell filed his chapter 13 petition in August, 2015, he claimed an exemption on his residence for the maximum amount of $47,500. During the course of his chapter 13 plan, in March, 2017, Mr. Rockwell sold the property and contributed the proceeds over and above the amount of his exemption to his plan. In August, 2017, Mr. Rockwell converted his case to chapter 7. He received a discharge in November, 2017. In December, 2017, the trustee filed an objection to Mr. Rockwell’s homestead exemption because he had not reinvested the funds in a new homestead within six months as required by state exemption law. After a hearing, the bankruptcy court overruled the objection. [Read more…] about Vanishing Homestead Exemption Reappears in Bankruptcy Despite Conversion

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Voluntary 401k Contributions Not Excluded from Disposable Income

A Chapter 13 debtor’s voluntary post-petition contributions to his 401k plan must be included in the calculation of disposable income under section 1325. Penfound v. Ruskin, No. 18-13333 (E.D. Mich. Sept. 20, 2019).

Above-median Debtor, John Penfound, worked continuously for twenty-four years during which time he made regular voluntary contributions to his 401k plans. When he and his wife, Jill Penfound, filed a petition for Chapter 13 bankruptcy, he sought to continue contributing $1,375/month to his 401k and exclude those amounts from his calculation of disposable income. Upon objection by the trustee, the bankruptcy court ordered the debtors to amend their proposed plan based on a re-calculation of disposable income including the monthly contributions to the 401k plan. The debtors appealed confirmation of the amended plan.

Relying on reasoning and dictum in In re Seafort, 669 F.2d 662 (6th Cir. 2012), the district court affirmed. [Read more…] about Voluntary 401k Contributions Not Excluded from Disposable Income