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February 16, 2008

"medically distressed debtor" H.R. 5138

A new bill was introduced in the House on Jan 28, 2008 called the "Medical Bankruptcy Fairness Act of 2008."  It adds a definition in Section 101 of the "medically distressed debtor" which is a person who has more than $10,000 of medical debt (not paid by insurance) in a 12 month period in the last 3 years or lives in a household with someone who was out of work for 4 weeks in 12 months. 

This poor soul can exempt his residence up to $250,000 even if he is using the state exemption scheme which allows less than that amount.  Also the means test under Section 707(b)(2) will not apply to this person. 

February 16, 2008 in Legislation | Permalink | Comments (0) | TrackBack

February 14, 2008

9th Circuit BAP Rules on Ipso Facto Clauses

Dumont v. Ford Motor Credit (In re Dumont),  --- B.R. ---  (9th Cir. BAP Jan, 2008)

Issue:   Can an purchase money secured creditor enforce an ipso facto default clause post-bankruptcy when the debtor has not reaffirmed, redeemed or surrendered the collateral?       

Holding:      Yes.   

Judge James Meyers, San Diego
Baum, Montali, Dunn
Opinion by Redfield Baum, Arizona

This post-BAPCPA chapter 7 debtor valued her car in her schedules at $5,800.  She owed FMC $8,300.  In her Statement of Intention, she checked the box, “Debtor will retain collateral and continue to make monthly payments.”  FMC sent her a reaffirmation agreement which she did not sign.  After the bankruptcy case was closed, Ford repossessed the car.  The debtor was post-petition current.  The debtor reopened the case and asked for contempt which the bankruptcy court denied.  The debtor argued the debt is covered by Section 521(a)(2) and that she performed her stated intention. 

The BAP affirmed.  It said the “ride-through” provisions allowed by In re Parker, 139 F.3d 668 (9th Cir. 1998) have been overruled by BAPCPA.   Parker held that the code only required the filing of the form and doing one of the three choices on the form “if applicable,” i.e., if the debtor chose one of the three options.  That language is still in the code but now there is Section 362(h) which gives Ford relief if the debtor does not chose and perform one of the three options i.e., surrender, reaffirm or redeem. 

The BAP said the debtor also did not comply with Section 521(a)(6) (added by BAPCPA) which requires the debtor to “not retain possession” of personal property secured by a purchase money lien unless the debtor reaffirms or redeems.  If he does not, the creditor is given relief and permitted to take any act “permitted by applicable nonbankruptcy law.”  The BAP said that new Section 521(d) “allows ipso facto default clauses to be enforced.” 

February 14, 2008 in 9th Circuit Briefs | Permalink | Comments (1) | TrackBack