February 21, 2008
Senate Getting Close on Legislation to Help Homeowners
This is a message from Henry Sommer, President of the National Association of Bankruptcy Attorneys (NACBA).
We just learned today that Senate Bill 2636 (Harry Reid, D, NV), which contains a provision that would allow for the modification of home mortgage loans in bankruptcy, will be up for a vote by the full Senate next week.
We urgently need every NACBA member to contact their two Senators IMMEDIATELY to urge support of S. 2636, and specifically Title IV of the legislation, which is the loan modification in bankruptcy provision. Please be specific in supporting Title IV ...it is the most controversial provision in the bill and if there isn't enough support for it it will be stripped out.
Please ask your fellow attorneys, family members, and clients to do the same. We have been told that this is our best - and perhaps only chance - to get the bankruptcy remedy through the Senate this year. So, the time to act is now.
The legislation obviously faces formidable opposition from the mortgage bankers and their allies. Now is the time that we must demonstrate show strong constituent support for the legislation.
We are asking that EVERY NACBA MEMBER, no later than 5:00 p.m. EST on Monday, February 25th, do the following:
Send a fax in support of the legislation to your two Senators at both their Washington and local offices. HERE IS A SAMPLE LETTER
Call your Senators - both in their DC office and in their local district office - to urge their support. HERE ARE SOME TALKING POINTS Reach out to other bankruptcy attorneys in your area to ask them to place calls and send letters as well.
Let families, friends and clients know about the legislation and encourage them to make their voices heard with their senators.
For Washington, DC and in-state contact information for your senator, click here.
We must act now. This is our only opportunity to see this legislation become a reality. Please contribute to this effort.
If you have any questions or concerns, please contact Maureen Thompson, NACBA's legislative director. Her email address is email@example.com and her phone number is (703) 276-3251.
February 20, 2008
Judge Richard Mednick 1933-2008
Former Bankruptcy Judge Richard Mednick, Central District of California, died on February 5, 2008. See the LA Times Obituary here.
Sharper Image Files Chapter 11
Sharper Image filed chapter 11 in Delaware on Tuesday, February 19. According to news reports, the San Francisco based company has $251 million in assets and $199 million in debt as of January 31. Apparently part of the problem is litigation involving the air purifiers it sells but sales have been falling for the past few years. One source says the company will close about half of its 184 store.
9th Circuit to Hold Oral Arguments at UNLV
From the 9th Circuit Website:
SAN FRANCISCO – The United States Court of Appeals for the Ninth Circuit will hold a
special sitting February 27 at the William S. Boyd School of Law on the campus of the
University of Nevada at Las Vegas. Oral arguments will be heard in the Thomas & Mack Moot
Court Facility, beginning at 10 a.m. A photo ID will be required to enter the courtroom.
An appellate panel consisting of Chief Judge Alex Kozinski of Pasadena and Circuit Judges
Marsha S. Berzon of San Francisco and Jay S. Bybee of Las Vegas will consider appeals of three
cases decided by the federal trial court for the District of Arizona.
The specific cases to be heard can be found on the website. One is a wrongful discharge matter, one is money laundering and one is bribery by a former Clark County Commissioner.
February 18, 2008
8th Circuit Rules on the Hanging Paragraph
Capital One Auto Finance v. Osborn (In re Osborn) ---- F.3d ----, 2008 WL 304750 (8th Cir. Feb. 2008)
Issue: When the debtor surrenders a vehicle under Section 1325(a)(5)(C), is the surrender in full satisfaction of the debt or does the secured creditor continue to have a right to a deficiency?
Holding: The secured creditor continues to have the right to a deficiency.
Appeal from the 8th Circuit BAP
The chapter 13 debtors proposed the surrender of a vehicle in full satisfaction of the debt owed to Capital One. The plan proposed to pay 100% of unsecured claims. Capital One objected. The bankruptcy court ruled for the debtor saying that the hanging paragraph made Section 506 inapplicable. It adopted the argument that since the secured claim cannot be bifurcated, it is therefore an “allowed secured claim” in full, and surrender satisfies the allowed secured claim. The BAP affirmed.
The 8th Circuit reversed. “A Chapter 13 debtor has three options to deal with allowed secured claims of creditors: (1) obtain the creditor’s acceptance of the plan, (2) retain the collateral but make full payment of the creditor’s allowed secured claim, or (3) surrender the collateral to the creditor.” Section 1325(a)(5). “BAPCPA eliminated the cram down option for cars purchased less than 910 days before the Chapter 13 bankruptcy, by adding the hanging paragraph at the end of § 1325(a)(9).” “By the plain language of the hanging paragraph, § 506 does not apply to a 910- claim. Therefore, as with the retention option, the claim is considered secured because it is secured according to state law (citing Butner).” “Unlike the retention option in § 1325(a)(5)(B), the surrender option in § 1325(a)(5)(C) does not speak to satisfaction of a claim.” “The hanging paragraph has no effect on state-law rights.”
Note: the 9th Circuit reached the same result in Rodriguez.
February 17, 2008
4th Circuit Rules on Chapter 13 Discharge Issue
Branigan v. Bateman (In re Bateman) ---- F.3d ----, 2008 WL 283001 (4th Cir. Feb. 2008)
Issue: 1) Does the two-year rule in Section 1328(f) run from the date of filing the previous case or the date of entry of the discharge in the previous case? 2) May a debtor file a chapter 13 case even though the debtor does not qualify for a discharge in the case because of a prior discharge?
Holding: 1) The time in Section 1328(f) runs from filing date to filing date. 2) Yes
Appeal from Bankruptcy Court
The chapter 13 trustee moved to dismiss two pre-BAPCPA chapter 13 cases on the grounds that the debtors did not qualify for chapter 13 because they had received a discharge in previous cases and therefore did not qualify for a new discharge. The bankruptcy court denied the motion in both cases. Under Section 1328(f), a chapter 13 debtor cannot receive a discharge if he has received a discharge in a chapter 7 or 11 “during the 4-year period preceding the date of the order for relief under this chapter,” or if he has received a discharge in a chapter 13 “during the 2-year period preceding the date of such order.”
As to the first debtor, Bateman, he received a discharge in a chapter 7 several months before filing a new chapter 13. He proposed a 100% plan which was confirmed. He agreed that he did not qualify for a discharge. As to the second debtor, Graves, he had filed a chapter 13 in 1999 and received a discharge five years later in 2004. Within two years after that, he filed a new chapter 13 to stop a pending foreclosure sale. The trustee argued that Graves received a discharge within two years after the previous discharge which was within two years “preceding the date of such order,” i.e., the discharge order. The bankruptcy court ruled that Graves was entitled to a discharge and confirmed his plan as well.
The Court of Appeals permitted a direct appeal of both cases and affirmed the bankruptcy court in both cases. They ruled that, as to Graves, the plain language of the statute, two years “preceding the date of the order” refers to the order for relief as stated in the previous subsection of Section 1328(f). The court says this makes sense because it promotes chapter 13s and Graves could have received a chapter 7 discharge had he filed a chapter 7 instead of the second chapter 13. As to Bateman, Section 1328(f) is not an eligibility provision.