Posted by NCBRC - October 11th, 2018
Because of the IRS’s inability to levy against the debtor’s property, bankruptcy’s three-year look-back period for tax debts is tolled while a tax debtor pursues a collection due process action. Tenholder v. United States of Amer., No. 17-1310 (S.D. Ill. Sept. 17, 2018).
Angela and Randy Tenholder reopened their chapter 7 case to challenge the IRS’s post-discharge efforts to collect tax debts the Tenholders asserted were outside the three-year look-back period and had therefore been discharged. The bankruptcy court found the tax liabilities were non-dischargeable under section 523(a)(1)(A) because the three-year limitations period was tolled during the Tenholder’s pursuit of a “collection due process” (CDP) action. Read More
Posted by NCBRC - August 28th, 2018
Where state law treats criminal fines, fees and costs as punitive rather than compensatory those debts are excepted from discharge in bankruptcy. Sanders v. AllianceOne Receivables Management Inc., No. 15-15243, Adv. Proc. No. 16-1204 (Bankr. W.D. Wash. July 6, 2018).
When Randy Sanders filed for chapter 13 bankruptcy, AllianceOne Receivables Management, Inc., as collection agency for Bellingham Municipal Court and Whatcom County, filed proofs of claim based on criminal fines, costs and fees. The debts, or “Legal Financial Obligations,” (LFO) arose out of Sentencing Orders following numerous criminal convictions. Mr. Sanders filed an adversary complaint alleging that AllianceOne’s conduct relating to the debts for which it filed proofs of claim and a debt based on a criminal conviction in the Whatcom County District Court, violated state consumer protection statutes as well as the discharge injunction from his prior chapter 7 bankruptcy. Both parties moved for summary judgment. Read More
Posted by NCBRC - July 11th, 2018
Condominium association assessments that become due after the debtor has filed for chapter 13 bankruptcy are dischargeable. Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. 16-35384 (9th Cir. July 10, 2018).
When chapter 13 debtor, Penny Goudelock, stopped her condominium association (CA) payments in 2009, Sixty-01 initiated foreclosure proceedings. In March 2011, Ms. Goudelock moved out of her condominium. She filed for bankruptcy and surrendered her unit. Sixty-01 filed a proof of claim for $18,780.35 for unpaid pre-petition assessments and noted that the assessments continued to accrue at $388.46 per month. The mortgage lender foreclosed on the property in February, 2015 and Ms. Goudelock successfully completed her plan in July, 2015. Sixty-01 moved the bankruptcy court for an order finding that the CA assessments that accrued between the time Ms. Goudelock filed her bankruptcy petition and the time the mortgage lender foreclosed were not dischargeable. The bankruptcy court granted summary judgment in favor of Sixty-01 and the district court affirmed. Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. C15-1413-MJP, 2016 WL 1365942 (W.D. Wash. Apr. 6, 2016). Read More
Posted by NCBRC - June 20th, 2018
A falsehood concerning a single asset may be a “statement respecting the debtor’s financial condition,” and therefore, the misrepresentation must be in writing to render non-dischargeable a debt arising out of the creditor’s reliance on it. Lamar, Archer & Cofrin, LLP, v. Appling, 584 U.S. ___, No. 16-1215 (S. Ct. June 4, 2018).
Scott Appling put off paying his attorneys fees in a business litigation case by assuring his attorneys at Lamar, Archer & Cofrin, LLP, (Lamar) that he expected a tax refund that would more than cover the bill. When the actual refund was smaller than he represented, he used the money to pay business expenses and told Lamar he had not yet received the refund. In reliance on Mr. Appling’s false statements, Lamar continued to represent him. When the final litigation bill remained unpaid for five years, however, Lamar sued in state court and obtained a judgment against Mr. Appling and his wife. The Applings then filed for chapter 7 bankruptcy relief. Read More
Posted by NCBRC - June 12th, 2018
A penalty owed to a governmental agency based on fraud falls under section 523(a)(2) and is therefore nondischargeable under section 1328(a) even though the debt also falls under section 523(a)(7) which is not listed in the debts excepted from discharge. Andrews v. Mich. Unemployment Ins. Agency, No. 16-2383, Kozlowski v. Mich. Unemployment Ins. Agency, No. 16-2680 (6th Cir. May 29, 2018).
In two separate cases, chapter 13 debtors, Priscilla Andrews and Richard Kozlowski, sought to discharge penalties imposed upon them for fraudulent collection of unemployment insurance benefits. The bankruptcy courts denied discharge under section 1328(a). The district courts affirmed in both cases. Read More
Posted by NCBRC - March 29th, 2018
Although a chapter 13 debtor continues to accrue post-petition condo fees while in bankruptcy, discharge extends to his in personam liability for those fees. In re Wiley, No. 16-15361 (Bankr. D. Md. Jan. 26, 2018).
Chapter 13 debtor, Christopher Wiley, owned but did not live in a condominium unit subject to a mortgage lien and a lien held by the condominium association based on post-petition fees and assessments. The mortgagee was granted relief from stay to foreclose but had not done so for over a year. Mr. Wiley’s confirmed plan surrendered the property to the lienholders for foreclosure with any deficiency in sale proceeds being treated as an unsecured claim. The plan also provided that estate property would not vest in the debtor until discharge. Read More
Posted by NCBRC - February 19th, 2018
A debt is nondischargeable when it is incurred as part of a criminal sentence. Medical Lien Management, Inc. v. Dampier, No. 17-1160 (10th Cir. Feb. 14, 2018) (unpublished).
Billy Dampier was convicted of theft from his employer and, as part of his criminal sentencing, was ordered to make restitution. His efforts to discharge that debt failed in the bankruptcy court and before the BAP for the Tenth Circuit. On appeal to the Tenth Circuit the court addressed two issues: 1. Whether his former employer had standing to object to discharge of the debt, 2. Whether the debt was dischargeable under section 523(a)(7). Section 523(a)(7) provides for the nondischargeability of a debt which is “a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.” Read More
Posted by NCBRC - November 9th, 2017
The chapter 7 debtor was denied discharge due to having presented a sham Note purporting to prove a debt taking priority over the debt owed to the creditor in this case. Sloan v. Allen (In re Allen), No. 16-23, Adv. Proc. No. 16-10027 (Bankr. D. D.C. Sept. 21, 2017).
In 2008, Carlos Allen borrowed $60,000 from his friend, Douglass Sloan, to apply toward improvements to real property that Allen anticipated selling for an amount that would bring him enough money to repay the loan within sixty days at $72,000. The agreement gave Mr. Sloan the option to convert the loan to an equity interest and take 14.5% of the proceeds when the property sold. Mr. Sloan never exercised this option. Mr. Allen used the money as planned to renovate the property but, when the bottom fell out of the housing market, the house did not sell. The downturn in the housing market also diminished Mr. Allen’s mortgage business which he had hoped to use as an alternative source of income to repay the loan. While Mr. Allen made some payments on the loan over the years, those payments amounted to approximately $18,000.00, and, when he finally did sell the property five years later, he did not give Mr. Sloan 14.5% of the proceeds. Read More
Posted by NCBRC - October 12th, 2017
A loan modification to cure a post-confirmation default on direct mortgage payments must be approved by the court prior to expiration of the chapter 13 plan. In re Hanley, 2017 WL 3575847, No. 11-76700 (Bankr. E.D. N.Y. Aug. 14, 2017).
Brian and Anahi Hanley’s confirmed chapter 13 plan provided for cure of their mortgage default through the plan and for regular mortgage payments to be made directly to the mortgagee, Nationstar Mortgage, LLC. They fell behind on their direct mortgage payments and, several months before completion of their plan, they entered into a trial loan modification which would cure the post-confirmation default. Though the Hanleys made all payments under the loan modification, they failed to sign and return the Loan Modification Approval Letter within the time required by Nationstar.
At the expiration of their plan, Nationstar filed a Rule 3002.1 Response notifying the court of the default based on the loan as it stood prior to the trial loan modification. The trustee moved to dismiss their bankruptcy without discharge. The Hanley’s moved to strike Nationstar’s Response and sought to modify their plan to allow them to cure the default in accordance with the terms of the loan modification. Read More
Posted by NCBRC - July 12th, 2017
The one-year deadline for seeking revocation of a discharge order is not jurisdictional and may therefore be waived. Weil v. Elliott (In re Elliott), No. 16-55359 (9th Cir. June 14, 2017).
When Edward Elliott filed his chapter 7 bankruptcy petition he failed to mention one important asset: his home. He received a discharge under section 727(a). Fifteen months later, when the trustee discovered the fraudulent nondisclosure, she filed an adversary complaint seeking an order vacating the discharge under section 727(d)(1). Section 727(e)(1) permits a trustee to seek revocation of discharge within one year of the discharge order. Mr. Elliott did not raise the issue of untimeliness in his response to the adversary complaint. The bankruptcy court revoked his discharge. The Bankruptcy Appellate Panel, however, found the one-year filing deadline to be jurisdictional and reversed. Elliott v. Weil (In re Elliott), 529 B.R. 747, 755 (B.A.P. 9th Cir. 2015). On remand, the bankruptcy court dismissed the adversary complaint for lack of jurisdiction. The trustee was permitted direct appeal to the Ninth Circuit. Read More
