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September 6, 2008

10th Circuit BAP Rules That Debtor May Deduct Vehicle Ownership Table Even Though Vehicle is Owned Free and Clear

In re Pearson,  --- B.R. ---, 2008 WL ----------- (10th Cir BAP,  July, 2008)

Issue:   May a debtor take the ownership deduction for a vehicle even though the vehicle is owned free and clear?                   

Holding:    Yes.   

These are above-median chapter 13 debtors who are appealing the confirmation of their Third Amended chapter 13 Plan.  On the B22, the debtors claimed ownership deductions for two vehicles.  They intended to surrender one of the vehicles; the other vehicle was “fully paid.”  When the trustee objected, the debtors decided to keep the vehicle they were paying on.  The bankruptcy court ruled that they could not take an ownership deduction for the fully owned vehicle.  They amended their plan to comply with this ruling.  The amended plan proposed 54% to unsecured creditors.  The amended plan was confirmed and the debtors appealed the denial of confirmation of the previous plan.   

The BAP reversed.  “The Debtors argue that the bankruptcy court erred because the wording of the statute specifically differentiates between ‘applicable’ and ‘actual’ monthly expenses and therefore, applicable expenses are all those that could apply regardless of whether such expenses are actual.”  Applicable refers to the table which applies even though the IRS manual would not permit the deduction outside of bankruptcy.  “We conclude that the Plain Language View is better reasoned.”  “The means test refers to both ‘applicable expenses’ and ‘actual expenses.’”  Congress knew what it was saying.  The BAP said the IRS does not consider the bankruptcy code when it fashions its rules and Congress did not indicate that the IRS manual is to be followed when determining what may be deducted.  Since Congress did not say “actual,” the “applicable” table may be used.   

September 6, 2008 in Other Circuit Briefs | Permalink | Comments (0) | TrackBack

September 5, 2008

9th Circuit 2007 Annual Report

This report, just issued, is really nice, judges, cases and goings-on in the district, packed with information - 71 pages.  You can access it here. 

September 5, 2008 in 9th Circuit Briefs | Permalink | Comments (0) | TrackBack

September 4, 2008

Prof. Nancy Rapoport Article on Ethics in Bankrupty Court

"(Almost) Everything We Learned about Pleasing Bankruptcy Judges, We Learned in Kindergarten," July, 2008 can be accessed here.  This is an amusing way of looking at very old rules, "Be Prepared," "Don't Lie," etc.

September 4, 2008 in Article Reviews | Permalink | Comments (0) | TrackBack

September 2, 2008

August Bankruptcy Filings

Total bankruptcy filings for August were 93,987 or 4,476 per day.  This compares to 96,385 for July or 4,381 per day.  At this rate, the third quarter will be about 285,000 compared to 272,000 in the second quarter and 240,000 in the first quarter.   If the 4th quarter is roughly 300,000, the total for 2008 will be about 1.1 million.  2004 was 1.6 million; 2003 was 1.7 million; 2002 was 1.6 million.  These were years when home values were rising dramatically and many individuals could not file anything because there was too much equity in their home.  We are back to the times when debtors call me and tell me they are ready to walk from the home because there is no equity.  The point of this is that bankruptcy filings are still drastically down in my opinion. 







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September 2, 2008 in Bankruptcy Statistics | Permalink | Comments (0) | TrackBack

Judge Eileen Hollowell of Tucson Appointed to 9th Circuit BAP

The announcement is here.  It doesn't say who she replaced. 

September 2, 2008 in Judicial Announcements | Permalink | Comments (0) | TrackBack

September 1, 2008

Over-Spending is Cause for Personal Bankruptcy According to New Study

Well, I'm glad we cleared that up!  Professor Ning Zhu, Professor at University of California, Davis, has some great statistics which show what I have been saying for years: over-spending by consumers is the biggest cause for consumer bankruptcies, not medical problems, divorce and unemployment.  The article is here.  According to Zhu, the overspending makes the consumer "more susceptible to adverse events" but the spender knows that he can file bankruptcy and only partially bear the cost of the overspending. 

Having agreed with him on the cause for filing, I still have no problem with the consumer bankruptcy rules and ease of bankruptcy.  The credit card companies extend credit every day to people with marginal ability to repay and now want rules preventing bankruptcy so that the telephone collectors won't be impeded from bludgeoning these people into paying the credit card before anything else.    

Professor Zhu writes, "In terms of policy implication, our findings indicate that by imposing greater costs, the more stringent requirements for filing in the new law may deter some households from over-consumption."  I disagree with that comment completely.  With credit card issuers bombarding consumers with easy credit and ridiculously high interest rates, the only thing "greater costs" accomplishes is more and more people "going underground" after running their credit cards to unacceptable limits.  Without the bankruptcy fresh start, these consumers will work "under the table," cash their paychecks so there is no bank account to seize or simply work less or not at all so there is no paycheck to seize.   The primary accomplishment of bankruptcy is it stops that phone from ringing - the collector gorillas - and the consumer can rejoin society.   

Zhu points out that credit card debt equals almost a full year of income for "the bankrupt households" he studied.  That means something like a third of their pre-tax income goes to pay the interest alone.  How can credit card issuers extend that kind of debt to those kinds of consumers?  And now they want Congress to simply prevent the bankruptcy filing!  My vote is to rescind the 2005 Amendments. 

September 1, 2008 in Article Reviews | Permalink | Comments (2) | TrackBack

August 31, 2008

Circuit Court of Appeals Cases for Last Week

5th Circuit Court of Appeals, August 27, 2008
Campbell v. Countrywide Home Loans Inc., --- F.3d ---, 2008 WL 3906382 (5th Cir. 2008)(Countrywide did not violate the automatic stay)

5th Circuit Court of Appeals, August 29, 2008
In the Matter of SI Restructuring, Inc., --- F.3d ---, 2008 WL 3974311 (5th Cir. 2008)(bankruptcy court's order granting a plan administrator's motion authorizing disbursal of a reserve fund is vacated and remanded)

6th Circuit Court of Appeals, August 26, 2008
In re Hamilton, --- F.3d ---, 2008 WL 3905437 (6th Cir. 2008)(violation of 524(a) makes a state-court judgment void)

8th Circuit Court of Appeals, August 26, 2008
In re Porter, --- F.3d ---, 2008 WL 3897513 (8th Cir. 2008)(bankruptcy court correctly gave collateral estoppel effect to state court judgment re willful and malicious injury)

8th Circuit Court of Appeals, August 29, 2008
PW Enterprises v. North Dakota Racing Commission, In re Racing Services, Inc. --- F.3d ---, 2008 WL 3981809 (8th Cir. 2008)(creditor may obtain derivative standing to pursue avoidance actions under circumstances in which the trustee (or debtor-in-possession) either unjustifiably refuses to bring the creditor's proposed claims or consents to the creditor pursuing such claims in his stead)

Thanks again to Findlaw.com

August 31, 2008 in Other Circuit Briefs | Permalink | Comments (0) | TrackBack