What is nonemployee compensation
SUPREMES: NO STRIP OFF OF WHOLLY UNSECURED LIENS IN CHAPTER 7 CASES
Chapter 7 debtor cannot use § 506(d) to void wholly unsecured junior lien because “Dewsnup defined the term ‘secured claim’ in § 506(d) to mean a claim supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim.” Bank of America, N.A. v. Caulkett, No. 13-1421, 2015 WL 2464049 (June 1, 2015). Available here .
Supremes: Consent Works
“We hold that Article III is not violated when the parties knowingly and voluntarily consent to adjudication by a bankruptcy judge.” Wellness Int’l Network, Ltd. v. Sharif, No. 13-935, 2015 WL 2456619 (May 26, 2015).
Supremes: Debtor Gets Refund at Conversion
At conversion (in good faith) to Chapter 7 after confirmation, undistributed funds held by Chapter 13 trustee must be refunded to debtor. Harris v. Viegelahan, No. 14-400, 2015 WL 2340847 (May 18, 2015).
Bankruptcy Rule 3002(c) Applies to Secured Creditors
The 90-day bar date for timely filing proofs of claim in Bankruptcy Rule 3002(c) applies to secured creditors. In re Pajian, No. 14-2052, 2015 WL 2182951 (7th Cir. May 11, 2015) (Wood, Easterbrook, Williams).
FDCPA Reaches Debt Collectors for State of Ohio
Private attorneys appointed as "special counsel" to Ohio Attorney General and authorized to use OAG stationary to collect debts owed State are not excepted from FDCPA liability. Gillie v. Law Office of Eric A. Jones, LLC, Case No. 14-3836, 2015 WL 2151755 (6th Cir. May 8, 2015) (Clay, Gilman, Sutton).
Supremes: Denial of Confirmation is NOT Final
The Supreme Court has unanimously sentenced debtors to suffer dismissal or confirmation of a plan debtors do not want as a condition for appeal of the denial of confirmation. Bullard v. Blue Hills Bank, No. 14-116, 2015 WL 1959040 (May 4, 2015).
Confirmation Bars FDCPA Action in Fourth Circuit
FDCPA class action against debt buyer for illegally filing proofs of claims without a Maryland debt collection license is precluded by confirmation of Chapter 13 plans: “[Debtors] should have raised these statutory claims during the plan confirmation hearings, and their failure to do so means that these claims are barred by res judicata.” Covert v. LVNV Funding, LLC. No. 14-1016, 2015 WL 877133, at *4 (4th Cir. Mar. 3, 2015) (Niemeyers, Shedd, Keenan).
Counting Debt Unsupported by Value or Personal Liability
To calculate “aggregate debt” for purposes of eligibility in a Chapter 12 case, “debt” includes the unsecured portion of an undersecured claim notwithstanding discharge of the debtor’s personal liability in a prior Chapter 7 case. Davis v. U.S. Bank, N.A. (In re Davis). No. 12-60069, 2015 WL 662001 (9th Cir. Feb. 17, 2015) (Graber, Gould, Callahan).
Supremes Accept Another Chapter 13 Case: Can You Appeal the Denial of Confirmation?
Addressing a nasty split among the circuits, the Supreme Court will decide whether the denial of confirmation of a plan is a final, appealable order. In several circuits, the debtor must suffer dismissal of the case or confirmation of a plan to which the debtor objects to gain access to appellate review of the denial of confirmation. Bullard v. Hyde Park Sav. Bank. No. 14-116 (U.S. Dec. 12, 2014).
Supremes Grant Cert: Who Gets $ at Conversion After Confirmation?
The Supreme Court today granted certiorari to resolve this circuit split: When a debtor in good faith converts to Chapter 7 after confirmation of a Chapter 13 plan, undistributed funds held by the Chapter 13 trustee are refunded to the debtor -- as the Third Circuit held in In re Michael. 699 F.3d 305 (3d Cir. Oct. 26, 2012) (Ambro, Roth, Sloviter) -- or distributed to creditors -- as the Fifth Circuit held in Viegelahn v. Harris (In re Harris). 757 F.3d 468 (5th Cir. July 7, 2014) (Graves, Benavides, Clement).
Supremes Grant Cert: Strip off of Wholly Unsecured Lien in Chapter 7 Case
The question presented: "whether section 506(d) permits a Chapter 7 debtor to 'strip off' a junior mortgage lien in its entirety when the outstanding debt owed to a senior lienholder exceeds the current value of the collateral." Bank of America, N.A. v. Caulkett. No. 13-1421, 2014 WL 2207208 (Nov. 17, 2014) (Petition for Writ of Certiorari available at 2014 WL 2213197).
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Tenth Circuit BAP: “Derived” Means “Received”
In a Chapter 7 case, to determine current monthly income under § 101(10A), wages received during six-month look-back period are included notwithstanding that work was performed and wages were earned before period began. Miller v. United States Trustee (In re Miller). No. WY-14-002, 2014 WL 5018464 (B.A.P. 10th Cir. Oct. 8, 2014) (Karlin, Nugent, Somers).
Chapter 13 Debtor Lacks Standing to Sue Mortgagee
Without discussion of § 1303 or of contrary authority from other circuits, Chapter 13 debtor lacks capacity to sue Nationstar for predatory and deceptive practices and to undo prepetition foreclosure; cause of action passed to Chapter 13 estate and only the trustee has standing to pursue the action. Rugiero v. Nationstar Mortg. LLC. No. 13–2126, 2014 WL 4549003 (6th Cir. Sept. 15, 2014) (Batchelder, Boggs, White).
Funding Plan from Legal Marijuana Sales Is "Means Forbidden by Law"
Citing Marrama v. Citizens Bank of Massachusetts. 549 U.S. 365, 127 S. Ct. 1105, 166 L. Ed. 2d 956 (Feb. 21, 2007), conversion from Chapter 7 to Chapter 13 is bad faith when any confirmable plan would be funded from sales of marijuana that are legal in Colorado but illegal under federal law; production and sale of a controlled substance is a means forbidden by law under § 1325(a)(3). In re Arenas. Case No. 14-11406 HRT, 2014 WL 4288991 (Bankr. D. Colo. Aug. 28, 2014) (Tallman).
Restitution Trumps Automatic Stay
18 U.S.C. § 3613(a) empowers federal government to collect criminal restitution from property of a Chapter 13 estate without regard to the automatic stay or relief from the stay. United States v. Robinson (In re Robinson). No. 13-5857, 2014 WL 4116476 (6th Cir. Aug. 22, 2014) (Cole, Griffin, Pearson).
Proof of Claim Violates FDCPA
Filing a proof of claim to collect a stale debt is actionable under the Fair Debt Collection Practices Act: filing the proof of claim was a "collection activity;" filing a time-barred claim is "unfair. unconscionable. deceptive. and misleading." Crawford v. LVNV Funding, LLC. No. 13-12389, 2014 WL 3361226 (11th Cir. July 10, 2014) (Goldberg, Hull, Walter).
Eleventh Circuit Agrees: No-Discharge Lien Strip Is Allowed
The Eleventh Circuit has joined the Fourth Circuit (Branigan v. Davis (In re Davis). 716 F.3d 331 (4th Cir. May 10, 2013) (Niemeyer, Keenan, Diaz)), in holding that a "Chapter 20" debtor can strip off a wholly unsecured junior mortgage notwithstanding that the debtor is not eligible for discharge because of § 1328(f). Wells Fargo Bank, N.A. v. Scantling (In re Scantling). No. 13-10558, 2014 WL 2750349 (11th Cir. June 18, 2014) (Tjoflat, Moore, Schlesinger).
Replacement Value Standard Applies to Surrender
“Replacement value” standard in § 506(a)(2) applies at surrender of recreational vehicle under Chapter 13 plan. BAPCPA arrived
after Associates Commercial Corp. v. Rash. 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (June 16, 1997), and plain language of § 506(a)(2) requires replacement value without regard to “disposition or use” by debtor. When replacement value is greater than debt, plan can surrender collateral in full satisfaction of claim. Santander Consumer USA, Inc. v. Brown (In re Brown). No. 13-13013, 2014 WL 1245266 (11th Cir. Mar. 27, 2014) (Wilson, Bucklew, Lazzara).
Filing Fees Go Up on June 1, 2014
The Judicial Conference approved the following increases in bankruptcy fees effective June 1, 2014: the “administrative fee” charged at the filing of every Chapter 7 or Chapter 13 case increases to $75 (from $46); a new fee of $75 will be charged to divide a joint case under Chapter 7 or Chapter 13; the filing fee for an adversary proceeding increases to $350 (from $293).
Carelessness or Inadvertence Upsets Judicial Estoppel
Judicial estoppel does not bar debtor’s disability action because failure to schedule in Chapter 13 case was error by attorney of which debtor was not aware and exemption for disability benefits under state law negates motive to benefit from concealment. Javery v. Lucent Technologies, Inc. Long Term Disability Plan for Mgmt. or LBA Emps.. 741 F.3d 686 (6th Cir. Feb. 3, 2014) (Cole, Clay, Bertelsman).
What Happens When Courts Don’t Understand Chapter 13
Bankruptcy court did not clearly err in finding lack of good faith under § 1325(a)(3) and (a)(7) when disabled debtor with limited income from Social Security and no nonexempt assets proposed “attorney-fee-centric” plan that would require 17 months to pay attorney fees; that 36-month plan would pay all allowed unsecured claims in full did not change outcome because “abysmal failure rate” of Chapter 13 cases made it unlikely that debtor would complete plan. Brown v. Gore (In re Brown). No. 13-10260, 2014 WL 563601 (11th Cir. Feb. 14, 2014) (Carnes, Hull, Cox).
Standing Trustee Acts Under Officer of the United States
Standing Chapter 13 Trustee is a “person acting under” an Officer of the United States—the United States Trustee within the Department of Justice—for purposes of removing a discrimination action to federal court under 28 U.S.C. § 1442(a)(1); trustee had “colorable federal defense” that employment action was performance of official duties that included involvement of United States Trustee and of a United States bankruptcy judge after peer review by National Association of Chapter 13 Trustees. Bell v. Thornburg. No. 13-30155, 2013 WL 6850026 (5th Cir. Dec. 30, 2013) (Stewart, King, Prado).
No Benefit to Estate? No Derivative Standing
Assuming derivative standing is possible in a Chapter 13 case, debtor does not have derivative standing to avoid prepetition foreclosure sale when trustee elected not to pursue avoidance because there was no equity in the property to benefit creditors. Weyandt v. Federal Home Loan Mortgage Corp. (In re Weyandt). No. 11-4565, 2013 WL 6052130 (3d Cir. Nov. 18, 2013) (unpublished) (Chagares, Vanaskie, Shwartz).
Lien Stripping Limitation
In a Chapter 13 case filed by only one spouse, plan cannot strip off valueless junior lien on residence owned as tenancy by the entireties. Alvarez v. HSBC Bank USA, N.A. (In re Alvarez). No. 12-1156, 2013 WL 5737704 (4th Cir. Oct. 23, 2013) (Gregory, Davis, Keenan).
Ninth Circuit Finishes Off Kagenveama
A majority of the Ninth Circuit sitting en banc has overruled the surviving part of Maney v. Kagenveama (In re Kagenveama). 521 F.3d 868 (9th Cir. June 23, 2008) (Siler, Bea, Pregerson): the applicable commitment period in § 1325(b) is temporal; even a debtor with no projected disposable income must propose a plan that is at least as long as the 3 or 5 year applicable commitment period. Danielson v. Flores (In re Flores). No. 11-55452, 2013 WL 4566428 (9th Cir. Aug. 29, 2013) (en banc).
Significant Proposed Rules and Forms Changes: Speak Up Now
The Judicial Conference Advisory Committee on Bankruptcy Rules has just published important proposed amendments to the bankruptcy rules and forms. Comments are due by February 15, 2014. These amendments dramatically change the content and timing of proofs of claims and include a new form for the Chapter 13 Plan. The proposed amendments and committee reports are posted at www.uscourts.gov/rulesandpolicies/rules.aspx. The Chapter 13 Plan form is tied to rule changes that would not become effective until December 1, 2015. Most of the other proposed form changes could become effective December 1, 2014. The Advisory Committee through its chair, Gene Wedoff, has reached out robustly to the entire bankruptcy community for comments and suggestions about these important changes. Comments may be submitted electronically at www.uscourts.gov/RulesAndPolicies/rules/proposed-amendments.aspx .
FIRST CIRCUIT BAP: WITHHOLDING ORDER IS PREDICATE TO STAY EXCEPTION IN § 362(b)(2)(C)
State court contempt proceeding and incarceration for failure to pay alimony violated automatic stay when state court order required debtor to pay alimony from postpetition income but there was no garnishment or similar withholding order in effect at the Chapter 13 petition. In re DeSouza. No. 11-40315-MSH, 2013 WL 2991034 (B.A.P. 1st Cir. June 14, 2013) ( Deasy, Kornreich, Tester).
Seventh Joins Tenth: Dewsnup Applies in Chapter 13 Cases
Echoing Woolsey v. Citibank, N.A. (In re Woolsey). 696 F.3d 1266 (10th Cir. Sept. 4, 2012) (Gorsuch, Holmes, Matheson), Dewsnup applies in Chapter 13 cases: § 506(d) does not void unsecured portion of undersecured tax lien. Ryan v. United States (In re Ryan). No. 12-3398, 2013 WL 3380131 (7th Cir. July 8, 2013) (Ripple, Rovner, Williams).
Second Circuit: Car Lender Willfully Violated Stay by Refusing Turnover of Repossessed Car
Car lender willfully violated stay by refusing to return car lawfully repossessed before petition; debtor’s equitable interest under state law became property of Chapter 13 estate and lender exercised control over that property by demanding adequate protection as condition of turnover. Weber v. SEFCU (In re Weber). No. 12-1632-bk, 2013 WL 1891371 (2d Cir. May 8, 2013) (Cabranes, Raggi, Carney).
First Circuit BAP: Untimely Claim Filed by Debtor is Disallowed and Dischargeable
Untimely priority claim filed by debtor on behalf of taxing authority is disallowed on trustee’s objection and will be discharged without payment upon completion of plan. Municipality of Carolina v. Gonzalez (In re Gonzalez). BAP No. PR 12-063, 2013 WL 1629235 (B.A.P. 1st Cir. Apr. 12, 2013) (Haines, Feeney, Hoffman).
Third Circuit: Fesq is Alive and Well Notwithstanding Espinosa
In re Fesq. 153 F.3d 113 (3d Cir. Aug. 18, 1998) (Stapleton, Alito, Shadur), was not overruled by United Student Aid Funds, Inc. v. Espinosa. 559 U.S. 260, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010); bank cannot challenge confirmation order by Rule 60 motion on any ground except fraud. In re Rodriguez. No. 12-2146, 2013 WL 1716110 (3d Cir. Apr. 22, 2013) (Jordan, Aldisert, Nygaard) (unpublished).
First Circuit: Claim Disallowance Can Bar Collection of Nondischargeable Debt
Allowance of student loan debt “in the amount of $0.00” based on unrebutted evidence that loans were paid in full before petition precludes post-bankruptcy collection of student loan debt without regard to nondischargeability. Hann v. Educational Credit Mgmt. Corp. (In re Hann). 711 F.3d 235 (1st Cir. Mar. 29, 2013) (Torruella, Stahl, Thompson).
Supremes Say "Defalcation" Requires Intentional Wrong
To determine dischargeability under § 523(a)(4), defalcation in a fiduciary capacity requires an intentional wrong: either “conduct that the fiduciary knows is improper. [or] reckless conduct of the kind that the criminal law often treats as the equivalent." Bullock v. BankChampaign, N.A.. No. 11-1518, 2013 WL 1942393, at *5 (May 13, 2013).
Fourth Circuit: Lien Strip Okay in No-Discharge Cases
BAPCPA did not upset lien-stripping of wholly unsecured mortgage in no-discharge Chapter 20 case; good faith test provides sufficient protection from abuse. Branigan v. Davis (In re Davis). No. 12-1184, 2013 WL 1926407 (4th Cir. May 10, 2013) (Diaz, Niemeyer; Keenan dissenting).
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