A debt based on a civil judgment for pain and suffering arising out of an incident during which the debtor had an acute psychotic break and severely beat the claimant, was dischargeable in bankruptcy because his psychiatric condition prevented him from acting willfully within the meaning of section 523(a)(6). Lombardi v. Picard (In re Picard), No. 16-15432 Adv. Proc. No. 16-359 (Bankr. E.D. Pa. June 10, 2022). Read More
Tag Archive: dischargeability
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Act Not Willful Where Debtor Suffered Acute Psychosis
Posted by NCBRC - June 13th, 2022
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Filing Petition Three Days after Loan Does Not Make Debt Nondischargeable
Posted by NCBRC - May 13th, 2022
The debtors were entitled to summary judgment on the issue of dischargeability of their payday loans despite the fact that they took out the loans three days prior to filing for bankruptcy. Ameri Best, LLC, v. Holmes, No. 18-20578, Adv. Proc. No. 18-6044 (Bankr. D. Kans. April 27, 2022).
As they had done many times before, in March, 2018, the debtors, James and Stacy Holmes, each borrowed $500 from payday lender, Ameribest. The loans were due two weeks later with $75 interest. Three days later, they filed for bankruptcy owing Ameribest $1,150. Ameribest filed an adversary proceeding seeking an order that the debt was nondischargeable under sections 523(a)(2)(A) and (a)(6). It moved for summary judgment. The court denied the motion and ordered Ameribest to show cause why it should not enter summary judgment in favor of the debtors. The debtors then filed their own motion for summary judgment seeking an order of dischargeability and an award of attorney fees and costs under section 523(d). Read More
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Costs of Attorney Disciplinary Proceeding Not Dischargeable
Posted by NCBRC - March 1st, 2022
An order by the state that a lawyer pay the costs of the regulatory authority’s action against him for professional misconduct was penal rather than compensatory for purposes of nondischargeability. Osicka v. Office of Lawyer Reg., No. 21-1556 (7th Cir. Feb. 7, 2022).
The chapter 7 debtor, a Wisconsin lawyer, was subjected to disciplinary proceedings before the Wisconsin Office of Lawyer Regulation for misconduct in the handling of one of his client’s cases. The referee recommended temporary suspension of his law license, full restitution in the amount of $150, and the costs of the disciplinary proceedings. In re Disciplinary Proceedings Against Osicka, 765 N.W.2d 775 (Wis. 2009). The debtor appealed to the Wisconsin Supreme Court which reduced the suspension to a public reprimand and upheld but the reduced the order for costs to $12,500.64. Read More
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Discharge of Judgment Related to Ponzi Scheme
Posted by NCBRC - February 7th, 2022
A judgment against the debtor based on fraudulent transfer of funds arising out of his gains in a Ponzi scheme was dischargeable where the court found that only a debt traceable to a securities law violation committed by the debtor is excepted from discharge under section 523(a)(19) and the debtor in this case was not liable for a securities violation. In re Simons, 2021 WL 5225940 (Bankr. D. Minn. Nov. 9, 2021) (case no. 4:20-bk-40631; adv. proc. no. 4:21-ap-4027). Read More
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Discharge Despite Unpaid Mortgage Fees
Posted by NCBRC - December 23rd, 2021
The chapter 13 debtor was entitled to discharge despite the fact that she had incurred but not paid fees and assessments under her mortgage contract while she was paying the mortgage outside the plan, where the creditor had not sought payment of those fees and assessments prior to plan completion. In re Brown, — B.R. —-, 2021 WL 4480832 (Bankr. D. S.C. Sept. 15, 2021) (case no. 16-4122).
In this case, the debtor’s plan provided for the trustee to pay off the mortgage arrears through the plan and the debtor to maintain all other payments according to the mortgage agreement outside the plan. After she successfully completed her plan, the mortgage creditor, Citizen’s Bank, objected to discharge arguing that the debtor owed $1,085 in post-petition fees and assessments.
While the debtor did not dispute that she had incurred the fees and assessments, she argued that they were not “payments under the plan,” as contemplated by section 1328(a), which would preclude discharge if not paid at plan completion. Read More
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Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
Posted by NCBRC - October 25th, 2021
The Ninth Circuit affirmed the opinion of the bankruptcy appellate panel finding that a state-mandated notification to the state taxing authority of a change in the taxpayer’s federal taxes is a “return, or equivalent report or notice,” which, if not filed by the taxpayer, renders the state tax debt nondischargeable under section 523(a)(1)(B). Berkovich v. Cal. Franchise Tax Bd., No 20-60046 (9th Cir. Oct. 14, 2021) (see discussion of In re Berkovich, 619 B.R. 397 (B.A.P. 9th Cir. 2020) here). Read More
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Debtor Cannot Cure Default After Expiration of Plan
Posted by NCBRC - July 30th, 2021
The bankruptcy court correctly dismissed the debtor’s chapter 13 case after she missed her final two mortgage payments under her five-year plan, even though, shortly after the plan expired, she paid the arrears in full. In re Kinney, No. 20-1122 (10th Cir. July 23, 2021).
The debtor entered bankruptcy current on her mortgage payments, and her chapter 13 plan provided for continued payments to the mortgagee, HSBC Bank USA, “under the plan.” A few months prior to completion of her plan, the debtor was injured in a car accident and, for that reason, missed two mortgage payments before the plan expired and two additional payments after its expiration. She then made the back payments and sought discharge. The bank opposed discharge and moved to dismiss her bankruptcy. The bankruptcy court found that it lacked discretion to grant a discharge and granted the motion to dismiss. After her motion for reconsideration was denied, the debtor was granted leave to appeal directly to the Tenth Circuit. Read More
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Private Student Loan Not “Educational Benefit”
Posted by NCBRC - July 23rd, 2021
A private student loan is not a conditional grant and therefore does not fall within the meaning of section 523(a)(8)(A)(ii) which excepts from discharge an “educational benefit, scholarship, or stipend.” Homaidan v. Sallie Mae, Inc., No. 20-1981 (2d Cir. July 15, 2021).
The chapter 7 debtor received a bankruptcy discharge that was ambiguous as to whether it applied to the “Tuition Answer Loans” he obtained from Navient (as successor to Sallie Mae,Inc.) The loans, in the amount of $12,567, were paid directly into the debtor’s bank account, and exceeded the debtor’s tuition obligation. Post-discharge, Navient pursued repayment of the loans, and the debtor complied, ultimately paying them off. The debtor then reopened his bankruptcy and filed an adversary proceeding seeking an order holding Navient in contempt for violation of the discharge violation. The court determined that the loans had been discharged and denied Navient’s motion to dismiss. Homaidan v. SLM Corp. (In re Homaidan), 596 B.R. 86, 107 (Bankr. E.D.N.Y. 2019). The Second Circuit granted Navient’s petition for direct appeal. Read More
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Student Loan Guaranteed by TERI Was Nondischargeable
Posted by NCBRC - May 13th, 2021
The debtor’s student loan was “funded” by TERI, a nonprofit organization that guaranteed the loan, and was, therefore, nondischargeable under section 523(a)(8). Medina v. Nat’l Collegiate Student Loan Trust 2006-3, No. 20-1912 (S.D. Cal. April 20, 2021). Read More
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First-Time-Homeowner Tax Credit Debt Is Tax rather than Loan
Posted by NCBRC - May 4th, 2021
The debt created by the IRS’s first-time-homeowner’s tax credit, which requires a debtor to repay the credit over fifteen years, was a nondischargeable “tax” rather than a dischargeable “loan.” In re Shin, No. 17-13509 (Bankr. E.D. Va. Feb. 16, 2021).
The debtor bought a house with his mother and sister, taking the $7,500.00 first-time homeowner federal tax credit offered by the IRS. The Internal Revenue Code, sections 36(f)(1) and (7), provides that homeowners receiving the tax credit must repay that credit over fifteen years by increasing their yearly taxes. The tax recapture is automatically accelerated upon sale of the property within the fifteen-year payback period. For several years, the debtor paid the recapture tax to the IRS, but when he and his co-owners sold the house, there remained $5,000.00 in unpaid recapture tax. The debtor filed for chapter 7 bankruptcy and received a discharge. After the case was closed the debtor moved to reopen to allow him to seek a ruling that the recapture tax was discharged. The IRS opposed the motion. Read More
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