BankruptcyProf Blog

9th Circuit Rules on Requirement that a Debtor Keep Records

Sun Communities v. Caneva (In re Caneva), ---- F. 3d ----, 2008 WL -------- (9th Cir. November 2008)

Issue:   Does the debtor’s admission that he did not keep business records establish a prima facie case that his discharge should be denied such that summary judgment is appropriate?

Holding:   Yes   
appeal from District Court Arizona

Per Curiam
This chapter 7 debtor owned and operated “numerous business entities, recreational vehicle and mobile home parks in Florida, and an airplane.”  Sun Communities filed an adversary proceeding asserting that the debtor should be denied a discharge for failure to keep sufficient books and records.  Section 727(a)(3).  During a 2004 exam, the debtor “admitted that he kept no records for the entities, despite the fact that some of them had business operations and others existed as holding companies for active businesses.  [He] also admitted during the Rule 2004 Examination that he had no documentation regarding the payment of $500,000 to Bowden as a brokerage fee for a $20 million loan that [the debtor] stated he did not receive.”  Sun filed a Motion for Summary Judgment which was granted.  The district court affirmed. 

The 9th Circuit affirmed also.  “The statute does not require absolute completeness in making or keeping records.  Rather, the debtor must ‘present sufficient written evidence which will enable his creditors reasonably to ascertain his present financial condition and to follow his business transactions for a reasonable period in the past.’  This exception to dischargeability, however, ‘should be strictly construed in order to serve the Bankruptcy Act’s purpose of giving debtors a fresh start.’  A creditor states a prima facie case under § 727(a)(3) by showing ‘(1) that the debtor failed to maintain and preserve adequate records, and (2) that such failure makes it impossible to ascertain the debtor’s financial condition and material business transactions.’  After showing inadequate or nonexistent records, ‘the burden of proof then shifts to the debtor to justify the inadequacy or nonexistence of the records.’”

The debtor argued that there was a triable issue of fact as to whether the significant records that were turned over were sufficient to meet the test.  He also argued that additional records were available to Sun through at least one criminal action that had taken place prepetition.  “We disagree. The Seventh Circuit has held that § 727(a)(3) ‘places an affirmative duty on the debtor to create books and records accurately documenting his business affairs.” Peterson v. Scott (In re Scott), 172 F.3d 959, 969 (7th Cir. 1999)  The court also noted that when a debtor is sophisticated and carries on a business involving substantial assets, ‘creditors have an expectation of greater and better record keeping.’”  “Without the records that [the debtor] admitted he did not keep, Sun cannot determine what assets his business entities held or may still hold, what assets passed through them and where they might have gone, and what their present value is, if anything.  Without any documentation related to the payment to Bowden, Sun cannot determine the details of that transaction or verify that it actually took place.”  Further the debtor did not provide any justification for the failure to keep records in his opposition to the MSJ. 

Bainbridge on Twenty Years of Law Teaching

Professor Steven Bainbridge's article, Reflections on Twenty Years of Law Teaching can be accessed here.  I have always been a "soft socratic" teacher, as Prof. Bainbridge describes it, and will remain so.  Bainbridge discusses whether law school teaches students how to think like lawyers.  I have no doubt about it.  Even the most inattentive students who spend the minimum amount of time studying (usually at the end of the semester as panic sets in) learn the basic rules on the subject and can spew them back on the test.  But ask the student in class whether or not the federal court will have jurisdiction if I sue my former client who lives in Florida, their eyes glaze over, they panic trying to find those rules on their laptop while I am waiting for some analysis.  The rules on personal jurisdiction, subject matter jurisdiction and venue, which I have spent hours discussing, become a jumbled mess when finally put into a very simple fact hypothetical.  A big part of that is a lack of effort, but a big part is that students have difficulty thinking like a lawyer.  It is something that is learned.  I tell my students to stop thinking like a law student and start thinking like a lawyer.  A law student searches for "issues," usually as many as possible, or at least as many as there are rules that they remember.  A lawyer trys to solve Joe's problem, the guy sitting in his office spewing out facts in random order, which must be assimilated into the rules, and a conclusion reached and advice given to help Joe solve his problem.  Ah! IRAC.  It works.

Having said all of that, I am mindful that professors these days are using power point more and posting recordings on blogs or school websites and assigning cases to students in advance and various other "new" teaching strategies.  I'm working to learn and use these; the goal really is to prepare interested and motivated persons to become lawyers.  It is a goal I enjoy.   

Letter from President of cdcbaa to California Attorney General re Attack on California Wildcard Exemption

Dear Mr. Krueger,

        I write to you as the President of the Central District of California Consumer Bankruptcy Attorneys Association (cdcbaa).  We are the second largest organization of consumer bankruptcy attorneys in the United States, second only to the National Association of Consumber Bankruptcy Attorneys (NACBA).  The cdcbaa consists of about 170 members based in the Central District of California (from San Luis Obispo, Orange, Riverside, Los Angeles, San Bernardino, Ventura and Santa Barbara Counties); the largest Federal District in the country.  In the past, nearly 10% of all bankruptcy filings have originated in this District.  We are also the sponsoring organization for the Southern California Bankruptcy Inn of Court, a member of the International Inn of Court; counting among its members and participants several Bankruptcy Judges, the United States Trustee for the Region, as well as attorneys from the Unites States Attorneys Office, and law professors.

        We have been communicating and standing ready to assist Mr. Furlong and other Arizona and Ninth Circuit bankruptcy attorneys who find their use of the California exemptions under attack.  We have been provided by Mr. Furlong with the emails that you have read.  We encourage the California Attorney General to intervene in the pending matter in which Mr. Furlong is counsel, as well as examining the need to protect the "wild card" exemption for California residents and former residence who are attempting to preserve what few assets they may have left during these trying (and yet more to come) economic times.  In the absence of any home equity from which to claim a $50,000 to $150,000 exemption, homeowners are relying more on the Wild Card exemption of CCP 703.140 to retain property from liquidation by hungry bankruptcy trustees.  The Wild Card exemption is further important in the course of a liquidation analysis under Chapter 13, when there are nonexempt assets that may be liquidated in a Chapter 7.  A Chapter 13 Trustee may move for conversion and liquidation; especially, if the debtors otherwise have insufficient income to pay claims.  Clearly these are very important issues, guided by the legislative intent to preserve home ownership and stabilize our economy.

        Bankruptcy, one of the oldest forms of economic recovery, dating back to Deuteronomy and the United States Constitution provisions that require Congress to enact uniform Bankruptcy laws, is the root of our capitalist form of economy.  Even those former Eastern Block countries that seek membership in the Europeon Union must enact laws on Bankruptcy.  Our own Central District Bankruptcy Judge, Samuel Bufford, travels the world lecturing and instructing jurists and legislators on how to interpret and devise bankruptcy laws.  His latest travels are taking him to China!  In California, the exemption scheme enables Californians of all economic strata to retain some semblance of economic stability.  And, using either Chapter 13 or Chapter 11 to value homes and eliminate wholly undersecured second and third deeds of trust, while maintaining current payments on first deeds of trust, will enable the consumer bankruptcy attorneys and the courts to slow the spread of foreclosure and loss of home ownership.  Truly, one home at a time!  The Wild Card Exemption of CCP 703.140 is one of the cornerstones in that strategy, because the debtor's ability to pay based upon income, rather than the addition of nonexempt property, is taken into consideration.

        We therefore encourage your office to carefully examine and support intervention in the Arizona case to preserve the California exemption scheme.

        As the President of the cdcbaa, I further encourage your office to accept our invitation to send a representative to be member in 2009 in the cdcbaa, as well as the Inn of Court.  It is important during these economic times that the California Attorney General Offices joins with the Bankruptcy Judges of the Central District of California to maintain an open dialogue with the consumer bankruptcy attorneys who are in the trenches, in the line of fire and in the emergency rooms of the economy.  No business school or bank economist can provide you with greater access to the real economy as the 170 members of the cdcbaa.  Please join our group and participate in our members only ListServ, sharing inquiries and ideas 24/7.

Should you have any questions, please do not hesitate to ask them in a further or reply email, and by all means, please do not hesitate to call.

Thank you, and best regards, Lou Esbin

Louis J. Esbin, Esq.
Law Offices of Louis J. Esbin
27201 Tourney Road, Suite 122, Valencia, CA  91355-1857
Tel: 661-254-5050 | Fax: 661-254-5252 | Web: www.Esbinlaw.com
 
Certified Bankruptcy Specialist - State Bar of California Board of Legal Specialization.

Leon Bayer on Your Legal Rights Radio Program

Dear Jonathan:

I will be interviewed on the radio show "Your Legal Rights" sponsored by the State Bar of California Committee on Legal Specialization. The program will air tomorrow (11/26), on KALW.  We'll be on the air from 7:30 - 8:30 PM.   In the Bay Area the program is on 91.7 FM.   For the rest of the state we're on the Internet at www.kalw.org.  We will take calls, live on the air from people with bankruptcy questions.  Any listeners who are unable to get through can contact me via my email and through my web site.

LEON D. BAYER*
Bayer, Wishman & Leotta
www.debt-relief-bankruptcy.com
888 S. Figueroa Street, Suite 1970
Los Angeles, CA 90017
TEL: 213-629-8801
Toll Free: 800-477-3111
* Certified Specialist, Bankruptcy Law, State Bar of California
   Board of Legal Specialization

9th Circuit Rules that Payment to Trustee of a Preference Resurrects the Debt for Non-Dischargeability Purposes

Busseto Foods v. Laizure (In re Laizure), ---- F. 3d ----, 2008 WL ------ (9th Cir. November 2008)

Issue:   When the debtor pays an otherwise non-dischargeable debt to the creditor during the prepetition preference period and the creditor is forced to return the payment later to the trustee, is the debt resurrected to the extent that the creditor can obtain a non-dischargeability judgment?

Holding:   Yes   
appeal from BAP

Judge Hug
The debtor admitted prepetition to embezzling from his employer, the plaintiff here.  The debtor settled with the employer and made 3 payments based on the settlement.  When the debtor filed chapter 7, the trustee sued the employer to return the last the payments, $38,000, as a preference.  The employer paid the trustee and then filed a non-dischargeability action against the debtor.  The debtor defended saying that there was no debt when the chapter 7 was filed and repaying the payment to the trustee did not resurrect the debt so it could not be non-dischargeable.  The bankruptcy court ruled for the debtor and the BAP affirmed.

The 9th Circuit reversed.  “According to the language of § 502(h), the trustee, through using this § 550 recovery ability, revived Busseto’s claim to prepetition status.  Consequently, Busseto has a claim against Laizure ‘the same as if . . . [it] had arisen before the date of the filing of the petition.’ 11 U.S.C. § 502(h).”   Section 502(h) states that a “claim arising from the recovery of property
under section . . . 550 . . . of this title shall be determined, and shall be allowed . . . or disallowed . . ., the same as if such claim had arisen before the date of the filing of the petition.”  “The BAP’s conclusion . . . conflicts with our precedent as well as the relevant statutory language.  In In re Verco we stated: [T]he import of Section 502(h) is that where a claim is allowable as provided in that section, its status is as a claim in existence on the date of the filing of the petition regardless of when, after the petition, the trustee has taken the necessary action and recovered.”

3rd Circuit Rules for Lender in TILA Case

In re Sterten,  ---- F.3d ----, 2008 WL 4780109 (3rd Cir. November, 2008)

Issue:   Was the defendant lender in this TILA case required to assert its statutory “tolerances for accuracy” defense specifically as an affirmative defense?                     

Holding:    No.      

This chapter 13 debtor filed an adversary proceeding against her lender “seeking recission of the loan along with various statutory penalties.”  At trial, the bankruptcy court ruled in favor of the lender on numerous facts although the parties agreed that certain required disclosures had not been made.  “The Court then sua sponte applied [TILA’s] tolerances for accuracy provision, 15 U.S.C. § 1605(f), concluding that, because the $57 in nondisclosed finance charges were within the tolerance range, the disclosure was ‘accurate as a matter of law.’”  The debtor argued that the provision was required to be pled as an affirmative defense which it was not and therefore could not be used by the lender at trial.  The bankruptcy court agreed with the debtor and entered judgment for the debtor.  The district court reversed. 

The 3rd Circuit affirmed the district court.  “The question we face is whether [TILA’s] tolerance for error is invoked by a Rule 8(b) general denial, or whether it falls within Rule 8(c)'s catch-all ‘any other matter’ provision and therefore requires affirmative pleading.”  “It is helpful to look instead at what Rule 8(c) is intended to avoid.  As we have explained in a different context, ‘[t]he purpose of requiring the defendant to plead available affirmative defenses in his answer is to avoid surprise and undue prejudice by providing the plaintiff with notice and the opportunity to demonstrate why the affirmative defense should not succeed.’”  “We see no reason to think that [the debtor] suffered any ‘unfair surprise’ as a consequence of Option One's failure to plead specifically the tolerances for accuracy defense.”  The debtor “cannot establish that she suffered any prejudice as a result of Option One's failure to raise the issue. Cf. Cetel, 460 F.3d at 506 (holding that, even in the case of an affirmative defense, there is no waiver if there is ‘no prejudice’).”  Footnote 6 of the opinion states:  “Option One contends that it did raise the tolerances provision as an affirmative defense in its answer.  Its argument to that effect is, however, unconvincing.  Its answer included a section labeled ‘Affirmative Defenses,’ which asserted, among other defenses, that ‘Option One Mortgage Corporation acted at all times relevant hereto in full compliance with all applicable laws and acts.’  But simply contending that, as a general matter, the applicable laws were complied with is not enough to plead a true affirmative defense adequately.”

Circuit Court of Appeals Cases for Last Week

10th Circuit Court of Appeals, November 13, 2008
Mosier v. Callister, Nebeker & McCullough, --- F.3d ---- 2008 WL ------ (10th Cir. 2008)(where trustee sued debtor's attorneys for malpractice, summary judgment for atttorneys is affirmed on in pari delicto defense)

10th Circuit Court of Appeals, November 13, 2008
In re Lanning, --- F.3d ---- 2008 WL ------ (10th Cir. 2008)(projected disposable income for above-median Chapter 13 debtor computed using the "forward-looking approach")

Thanks to Findlaw.com

ABI Zinman Scholar Announcement

From Prof. Bob Lawless.

Sam Gerdano, executive director of the American Bankruptcy Institute, asked me to pass along the following announcement for any interested academics on the list:

The American Bankruptcy Institute is looking for an academic to serve as the Robert M. Zinman Resident Scholar for the Fall 2009 semester. The position is funded by the ABI Endowment and includes corporate housing and travel in addition to a salary. The ABI Scholar performs a variety of tasks, including advising Congressional staff and testifying before Congressional committees, speaking at CLE programs, writing and editing and handling media calls. The Scholar is expected to be in the ABI offices (in Alexandria, Va) 3-4 days per week but has the flexibility to continue to teach a class.  Jack Williams is the current ABI Scholar.  Past Scholars have included Marianne Culhane, David Epstein, Margaret Howard, Nathalie Martin, Jeff Morris, Mark Scarberry, David Skeel and Ray Warner.  Anyone interested should contact ABI Executive Director Sam Gerdano at SGerdano@abiworld.org. 

You can find more information about the Resident Scholars, including narratives about the activities of past Resident Scholars here.   

Bob

Robert Lawless
Professor of Law and Galowich-Huizenga Faculty Scholar
University of Illinois College of Law
rlawless@illinois.edu

6th Circuit BAP Rules that Student Loan Litigation Can be Ripe Early in Chapter 13 Case

In re Cassim,  395 B.R. 907 (6th Cir. BAP November, 2008)

Issue:   Is the issue of whether a student loan should be discharged for undue hardship “ripe” at the beginning of a chapter 13?                     

Holding:    Yes, at least here where the debtor’s condition will not change during the plan period.   

This chapter 13 debtor filed an adversary proceeding to have her student loans of $22,000 discharged.  She filed the AP shortly before her chapter 13 plan was confirmed.  Her plan was $50 per month which was sufficient to pay only her attorney for the chapter 13 case.  No creditor would receive a distribution.  She was disabled with monthly income of $675 from social security.   The lender filed a “motion to dismiss for lack of subject matter jurisdiction” saying the matter was not ripe.  The bankruptcy court denied the motion. 

The BAP affirmed.  “The constitutional ripeness of a declaratory judgment action depends upon ‘whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’”  “Delay of the dischargeability determination would deprive Cassim of the opportunity to pay any non-dischargeable student loan debt and attorneys fees related to the adversary proceeding through the chapter 13 plan as well as potential loss of the automatic stay.  The Bankruptcy Code’s  purpose is to provide a debtor with a fresh start.  Requiring a debtor to wait until after completion of the plan and entry of the general discharge may well unnecessarily prolong that fresh start.”  “We reject the notion raised by ECMC that because there is a chance that Cassim will not complete her plan and qualify for a general discharge, any determination of dischargeability is too speculative to warrant the issuance of a declaratory judgment.  Confirmation of Cassim's plan was premised on a finding that ‘the debtor will be able to make all payments under the plan[.]’  Indeed, ECMC has never asserted any facts suggesting that Cassim will not be able to complete her plan; its concern is strictly hypothetical.”  “Moreover, it is noteworthy in the present case that there is no suggestion that Cassim's completion of her plan will ‘significantly advance our ability to deal with the legal issues presented[.]’”

The BAP cited an 8th Circuit case, Bender v. Educ. Credit Mgmt. Corp. (In re Bender), 368 F.3d 846 (8th Cir.2004).   “In that case, the Eighth Circuit held that the student loan dischargeability claim was not ripe three and a half years before the general discharge would occur.  The court noted that the exception for a hardship discharge must be measured considering the facts at the time of discharge and rejected the debtor's argument that her situation was ‘so dire, and the possibility of improvement so remote, that a court could determine whether repayment of her student loans three and a half years down the road would constitute undue hardship.’ Id. at 848.  The court held that ‘[d]eferring a decision until the case is ripe will allow a court to make its undue hardship determination on the basis of real rather than speculative circumstances.’”  The 8th Circuit commented that “such proceedings should take place relatively close to that date so that the court can make its determination in light of the debtor's actual circumstances at the relevant time.”  The BAP distinguished the facts of Bender saying that this debtor’s situation will not change during the plan period and therefore the case is different. 

The BAP commented in a footnote, “Because the Appellant did not raise the issue on appeal, the Panel will not address whether a 0% plan, which pays only a debtor's attorney fees for filing the bankruptcy case, meets the good faith requirement for plan confirmation under 11 U.S.C. § 1325(a)(3).”

5th Annual Bankruptcy Ethics Symposium

The Bankruptcy Section of the Federal Bar Association and the Los Angeles Chapter of the Federal Bar Association is sponsoring the

5th Annual Bankruptcy Ethics Symposium

On Friday, December 12, 2008, 8:30 a.m. at

725 South Figueroa Street
Los Angeles, California

The flyer can be accessed here. 

10h Circuit Chimes in on "Projected Disposable Income" Rejecting a Mechanical Test: In re Lanning

In re Lanning,  --- B.R.  ---, 2008 WL 4879134 (10th Cir. November, 2008)

Issue:   In determining “projected disposable income” for purposes of chapter 13 plan confirmation, should the court use the mechanical test set forth in the code or a “forward looking approach”?                     

Holding:    The mechanical approach “subject to a showing of substantial change in circumstances,” in other words the forward-looking approach. 

This is an above-median chapter 13 debtor.  Her I and J net income was $149.  Her B22C net disposable income was $1,114.  The reason for the difference was termination pay she received in the previous 6 months when she left her job at Payless.  She proposed a 36 month plan of $144 per month.  The trustee objected and proposed a 60 month plan of $756 “despite acknowledging that Ms. Lanning did not have the means to fund such a plan.”  The bankruptcy court rejected both positions saying “monthly disposable income’ reflected on Form B22C constituted ‘projected disposable income’ under § 1325(b)(1)(B), subject to a showing ‘that there has been a substantial change in circumstances such that the numbers contained in Form B22C are not commensurate with a fair projection of the debtor's budget in the future.’”  “The court also noted that the prefatory portion of § 1325(b)(1) requires the determination of ‘projected disposable income’ to be made ‘as of the effective date of the plan.’”  The bankruptcy court said the “mechanical approach” leads to an absurd result.  For one reason, if the debtor’s income has gone down, the debtor, who clearly would need bankruptcy help, could not get a plan confirmed.   The bankruptcy court reasoned that the schedule I income less the B22C deductions resulted in a negative numberin this case.   He said, “[n]othing prevents debtors from electing to pay more than the statutory means test requires, in order to meet the requirement that a plan must be feasible.”  He then confirmed the plan at $145 per month for 60 months.   The trustee appealed. 

The BAP affirmed.  “The BAP adopted a rebuttable presumption that the Form B22C figures were correct subject to a showing of ‘a substantial change in circumstances’ by way of documentation similar to that required by Chapter 7 debtors under the means test.”

The 10th Circuit also affirmed.  It said, “Congress left § 1325(b)(1)(B) substantially unchanged (for present purposes).”  “[T]he Bankruptcy Code should not be read ‘to erode past bankruptcy practice absent a clear indication that Congress intended such a departure.”  It went through an analysis of the cases so far dealing with the issue.  It concluded the “forward looking approach” was closest to what Congress intended.  “[T]he mechanical approach advocated by the Trustee would effectively foreclose bankruptcy protection to debtors like Ms. Lanning, who lack adequate income going into the commitment period to pay the amount of disposable income on Form B22C, while at the same time permitting above-median debtors who have greater income at the time of plan confirmation to pay less to unsecured creditors than they are able to.”    

Judge Robert L. Krechevsky 1922-2008

Thanks to Bob Hiller,

First chief judge of the Connecticut Bankruptcy District court died earlier this month at age 86.  Article from the Connecticut Law Journal can be accessed here.

Circuit Court of Appeals Cases for Last Week

3rd Circuit Court of Appeals, November 04, 2008
In re Sterten, --- F. 3d ---, 2008 WL ------ (3rd Cir. 2008)(judgment for Truth in Lending Act (TILA) defendant affirmed)

5th Circuit Court of Appeals, November 06, 2008
In the Matter Of: Entringer Bakeries Inc., --- F. 3d ---, 2008 WL ------ (5th Cir. 2008)(pre-petition transfers avoided where the "earmarking" doctrine did not apply)

7th Circuit Court of Appeals, November 06, 2008
Moglia v. Pac. Employers Ins. Co., --- F. 3d ---, 2008 WL ------ (7th Cir. 2008)(issue is enforcement of arbitration clause against trustee and whether matter is ripe for appeal)

9th Circuit Court of Appeals, November 05, 2008
In the Matter of: Caneva, --- F. 3d ---, 2008 WL ------ (9th Cir. 2008)(judgment denying discharge for failure to keep sufficient records under Section 727(a)(3) is affirmed)

10th Circuit Court of Appeals, November 04, 2008
In re Rafter Seven Ranches L.P., --- F. 3d ---, 2008 WL ------ (10th Cir. 2008)(judgment re liability for equipment leases affirmed)

Thanks to Findlaw.com

So Who Owns the Promissory Note?

This story is posted on wsj.com/law.  It seems Joanne Fredenburg, a widowed homeowner in Lehigh Acres, Fla., where real estate prices have plummeted was served with two foreclosure lawsuits from two different plaintiffs that both claimed to own her promissory note and mortgage and said she owed them each more than $276,000.  One of the complaints alleges that the promissory note cannot be found and seeks equitable relief resolving the issue in favor of the plaintiff.  The story (posted on Nov. 14) including the two complaints can be accessed here.   

Judge Samuel Bufford in Los Angeles is requiring lenders moving for relief from stay to bring the original promissory note into court at the time of the hearing and testimony from a witness who has personal knowledge that the debtor actually owes the movant something.  I've been told that Motions for Relief are not being filed in his courtroom any longer. 

Chapter 11 Analysis from Profs Warren and Westbrook

This article, "Chapter 11: Conventional Wisdom and Reality," with more mind-boggling data, is about a year old but has some really useful information on the uses and successes of "a cross-section" of chapter 11 cases.  The total assets in the cases studied range from $13 (dollars) to $19 billion.  The article can be accessed here. 

The facts that struck me are:

• 70% of the cases, where the debtor proposes a plan, result in a confirmed plan.
• 47% of all cases not "booted out" within six months result in a confirmed plan.
• 82% of small business cases which confirmed a plan did not do so within six months, i.e., the new times limits of BAPCPA create serious risk of failure where a little more time may have resulted in success.
• Chapter 11 liquidation plans are about 30% of the total plans confirmed. 
• in 62% of confirmed plans, the original owners retained an equity stake. 
• individual chapter 11s were about 11% of the total cases filed (in 2002 decreasing from 25% in 1994).
• about one-third of all chapter 11 cases result in confirmed plans, not the 15-17% touted as the conventional wisdom.
• About half of all cases that do not file a plan within six months are "booted out."  The courts do a very good job, according to the authors, of weeding out the DOA cases early.   

More on Michael Vick

From my student, Cody Brownstein: Michael Vick has apparently filed his Statement of Financial Affairs.  You can access the "Smoking Gun" article here. 

Bankruptcy Filings Central District of California

 The Central District led the nation with 47,140 filings for the 12-month period ending June 30, 2008, up 85.9% from 25,353 filings in the previous period.

 Central District outpaced the national average percentage increase in filings by 57% (85.9% vs. 28.9%) over the same period.

 Current Filings:

                         Ch 7    Ch 11 Ch 13     Total
Jan – Aug 2008   30,107   557   9,655    40,319
Jan – Aug 2007   15,816   212   4,800    20,828

 Overall, filings through August are up 93.6% district-wide when compared to the same period last year.

 The Court is averaging 1,397 filings per week over the last ten weeks, a 108.3% increase over the 671 filings averaged over the same period in 2007.

 Projected 2008 Filings:

Projection Method Projection Filings
Seasonal Average (2000-2004, 2006-2007) 59,102
2 Year Straight-line (2007-2008) 64,903
1 Year Straight-line (2008) 69,579

 The Court is projecting upwards of 69,579 filings this year, the highest pre-BAPCPA annual total since 2003, when the Court had 75,686 filings.

 In 2008, Chapter 13 filings are approximately 24% of the Courts filings, compared to 9% pre-BAPCPA.

 Pro se filings comprise slightly more than of 23% of the Courts filings in 2008, compared to the national average of 6%.

Circuit City First Day Declaration

Circuit City filed 21 "First Day Motions" yesterday with its petition.  The Declaration of Bruce Besanko, Chief Financial Officer of Circuit City can be accessed here.  The declaration is supposed to support the motions and give an overview of the case, the problems that caused the filing, and generally introduce the parties to the Court, the creditors, prospective creditors and the media.  This one is less useful than most since there is very little financial information and the rest is pretty general and a little political.  There is an interesting expose on the attempted (and apparently successful) takeover of the Board of Directors and ousting of top management in 2008. 

There is a request to approve $900 million of DIP financing as well as a strange comment that management was expecting a $75 million refund from the IRS and that somehow hurt big time when it didn't come.  I assume that amount is a couple of payrolls at most.  The declaration says:  "The Company was optimistic that if the refund arrived promptly, the refund would address immediate short-term liquidity needs and allow the Company to further investigate out-of-court restructuring alternatives.  Notwithstanding indications from the Internal Revenue Service, the Company has not yet received the refund."

These first day motions do make me wonder what army spent how long getting them altogether to file on the first day.  There have to be hundreds of man-hours of time by both the lawyers and the debtor's staff putting these together.  The paperwork for a billion dollar DIP financing transaction alone is more than my little head can comprehend.   

Circuit City Chapter 11

Circuit City filed chapter 11 in Richmond, Virginia on November 10, 2008.  You can access the petition and related here.   The disclosures estimate $3.4 billion in assets and $2.3 billion in liabilities.  Hmm?  The Company operates approximately 712 Superstores and 9 outlet stores under the Circuit City name throughout the United States and Puerto Rico.

U.S. Bankruptcy Court
Eastern District of Virginia (Richmond)
Bankruptcy Petition #: 08-35653-KRH

Assigned to: Kevin R. Huennekens Chapter 11 Voluntary Asset

Date Filed: 11/10/2008

Debtor Circuit City Stores, Inc. 9950 Mayland Drive Richmond, VA 23233 Tax id: 54-0493875	represented by	Daniel F. Blanks McGuireWoods LLP 9000 World Trade Center, 101 W. Main St. Norfolk, VA 23510 757-640-3774 Fax : 757-640-3963 Email: dblanks@mcguirewoods.com
U.S. Trustee W. Clarkson McDow, Jr. Office of the U. S. Trustee 701 E. Broad St., Suite 4304 Richmond, VA 23219 804-771-2310

Knowing When to File for Bankruptcy

This post was contributed by Kelly Kilpatrick.   She invites your feedback at kellykilpatrick24@gmail.com.  She is a graduate of the University of Houston living in Houston and a regular contributor for education and Criminal Justice sites.

Knowing When to File for Bankruptcy
Filing for bankruptcy can be a tough decision for many people, but it is sometimes a necessary step to move forward with one’s life.  Waiting to make this tough decision can only serve to exacerbate the situation, so time is of the essence.  What follows is a list of factors that may indicate that it’s time for you to take the next step and begin the process of filing for bankruptcy.

Inability to Make Timely Payments
In light of recent economic circumstances, your liquid assets may be tied up in a number of ways.  This can greatly affect your ability to pay your creditors on time.  If you are finding it difficult to make timely payments and see no end on the horizon, you may want to begin preparing for bankruptcy, rather than letting things get out of control.

Inability to Make Minimum Payments
Perhaps you are still trying to pay your creditors on time, but are unable to pay the minimum payments.  Although what you are trying to do is noble, you are still incurring interest charges and late fees for your inability to pay the minimum balance.  Speak with a qualified bankruptcy attorney and explore your options now rather than later.

Receiving Calls from Creditors at Work
Calls from creditors, whether harassing or not, can be very intrusive and counter-productive for you and your career.  If you are unable to keep the creditors at bay, you should see what can be done to help you with this matter.  Visiting a bankruptcy lawyer can benefit you in this and other situations related to your outstanding debts.

Feelings of Being Harassed
Debt collector harassment is a real thing that happens to consumers every day.  Handling debt collectors and their sometimes questionable collections practices is something that should be left to a qualified professional.  If you decide to file for bankruptcy, the calls will be handled by your attorney, who will be working for you to rectify your situation; this will leave you to be able to take care of business without the extra headaches.

On the Verge of Repossession and/or Foreclosure
If you have let things go long enough for either one of these things to happen, you certainly need to speak with a bankruptcy lawyer right away.  You have the right to retain a vehicle and a home in bankruptcy filings, and payment schedules can be arranged to prevent these devastating things from happening to you and your family.  Act now before it’s too late to recover your vehicle or home from your creditors.