BankruptcyProf Blog

Bankruptcy Ethics Symposium

6th ANNUAL BANKRUPTCY ETHICS SYMPOSIUM

December 18, 2009
Time: 9:00 a.m. - 12:45 p.m.
Registration 8:30 a.m. - 9:00 a.m.

Topics include: Ethics of Pre-Bankruptcy Planning; Issues in Client Confidentiality: An Ethics Conversation with Professor Klee

Location:  United States Trustee 341(a) Meeting Room
725 S. Figueroa St, Los Angeles

Cost: $20.00 FBA Members; $25 CDCBAA and LABF members; $35 non-members
Please RSVP by December 14th.  At door registration is $45
Click here for registration flyer and additional information

 
E-FILING TRAINING PROGRAM
FBA approved e-filing classes are offered through an outside provider.  These classes are designed to enable attorneys and support staff to comfortably utilize the District Court's CM/ECF filing system and to satisfy the Court's mandatory training requirement for attorneys.  For more information or to schedule a class, please contact:
Patrick Watkins, Watkins Consulting, LLC
 www.traincm-ecf.com
email: watkinsconsult@yahoo.com
Tel: 213.400.0175
  

Solicitor General Supports Cert in In re Lanning

The Solicitor General has filed an invitation brief with the Supreme Court in the In re Lanning case.  Lanning presents nicely the issue of what means "projected disposable income" in chapter 13?  It reaches a contrary conclusion to Kagenveama, that is, Lanning holds that the bankruptcy court can look into the future when deciding whether or not the debtor is paying her projected disposable income into the plan, rather than the mechanical approach of Kagenveama.  Lanning is an above median debtor but only because she received a sizable one-time bonus in the previous six months.  Using the mechanical approach, she cannot make the required plan payment. The bankruptcy court took a practical approach and confirmed the plan even though the payment was below the mechanical payment approach.  Maybe we will get another Supreme Court case this year. 

McCourt Divorce Pleadings

Sorry, it's the voyeur in me.  This is the McCourt pleadings filed in Superior Court yesterday.  I got them from the L.A. Times' website.  I do intend to use the pleadings in my Business Organizations class tonight to discuss the mechanics of pitching Jamie out of the various entities and the corporate obligations of each to each other. 

Overview of Current Supreme Court Term - Georgetown Law Supreme Court Institute

Preview of this term (47 pages stolen from the Scotusbog.com which you are hereby ordered to look at every day).  . 

LACBA Bankruptcy Program - November 17, 2009 - With Yours Truly as a Speaker

Recent Bankruptcy Decisions in the Ninth Circuit: What You Need to Know 
  
11/17/2009

Presented by: Commercial Law and Bankruptcy Section

Subsection/Committee: Bankruptcy Committee

Program Information:
A distinguished panel of bankruptcy lawyers will discuss the pitfalls, problems, and detours around the bankruptcy decisions within the Ninth Circuit.

Speakers:
Bernard D. Bollinger Jr., Buchalter Nemer
M. Jonathan Hayes, Law Office of M Jonathan Hayes
Aram Ordubegian, Arent Fox LLP
Jason D. Wallach, Gladstone Michel Weisberg Willner & Sloane ALC

Location:
Los Angeles County Bar Association, 1055 West 7th Street 27th Floor , Los Angeles

Parking:
1055 W. 7th Street: $10 with validation
Other parking lots in area at prices starting at $5.00

Times:
Registration: 12:00 - 12:30 p.m.
Meal/Reception: 12:00 p.m.
Program: 12:30 - 1:30 p.m.

Prices:
CLE+ Members (meal not included) FREE
CLE+ Plus Members with meal $15.00
Commercial Law & Bankruptcy Section Members with meal $60.00
LACBA Members with meal $70.00
All Others with meal $85.00

1 hr CLE credit

Registration Code: 010656

Space is limited. Advance payment required to guarantee seating. Attendees must arrive within the registration period. If this program does not state that it is sold out, please feel free to register at the door. 48-hours (2 business days) cancellation notice required.

The LACBA Online Event Registration System will not allow multiple registrations (e.g. one person registering multiple people), although one person may register him or herself for multiple events.

For assistance with multiple registrations or if you wish to register by Phone with Visa, MasterCard or American Express please call our Member Services Department at (213) 896-6560 Mon-Fri, 9 a.m.- 4:30 p.m.

For questions about programs or program registration, send e-mail to our Member Service Department: msd@lacba.org

The Los Angeles County Bar Association is a State Bar of California MCLE approved provider. If this is a CLE event, the Los Angeles County Bar Association certifies that this activity has been approved for MCLE credit. CLE events will state the amount and type of credit offered in the calendar listing. 

9th Circuit to Hold Oral Arguments at UCLA - October 28, 2009

The announcement can be accessed here.

California Homestead Exemption Increases January 1, 2010

A thanks to Matt Reznik:

Under the "did you know" category...

Just stumbled upon this info:

HOMESTEAD EXEMPTION RAISED

Homestead Exemptions Increased (Assembly Bill 1046) - Effective January 1, 2010: California Homeowner'’s equity protected from creditors is now $75,000 for individuals and $100,000 for married couples and $175,000 for seniors (over 65), disabled or over 55 with limited income.

Writ of Craving Oyer - I'm not Kidding!

From mega bankruptcy attorney Marc S. Stern marc@hutzbah.com.  Note:  This is a real motion.

Introduction
Debtor, by and through counsel, hereby responds to the Objection to Confirmation filed by [...] Bank, Requests that matter be continued until the her primary counsel can return from bar meetings out of state and discovery can be completed, and requests this court issue a Writ of Craving Oyer.

FACTS
1. The debtor operates the property in qustion as a rooming house.
2. The debtor derives revenue from providing room and board to foreign students.
3. The Debtor has done this since before the inception of the loan.
4. The loan being modified herein was obtained using the rental income from the room and board as part of the income considered in granting the loan.
5. This objection was filed on Tuesday of last week. Marc S. Stern, the debtor's primary counsel left on Wednesday morning for Bar Meetings in Los Angeles and Los Vegas and has not had the time necessary to devote to this response. Ms. [Jones] has refused a request for continuance.
6. The debtor is out of state until October 26 and is unavailable to sign a declaration.  The debtor is entitled to adjust the interest rate on the home loan in question because as a rooming-house, the property is not solely the principal residence of the debtor.

MOTION FOR CONTINUANCE
The debtor has not had any chance to complete discovery. The decision to make the loan, the collateral relied upon, and the documents received in support of the loan require that the debtor be given time to complete discovery. See, Motion for Craving Oyer, infra.

This Objection was filed at the very last minute, and a continuance was requested, informally. Ms. A refused, as is her right. However, given the important legal issues and the need for a firm factual underpinning for the court's ultimate ruling in this case, the court must continue the hearing until counsel can be present and discovery completed.

II. The Property is Not Solely the Principal Residence of the Debtor
A. Section 1322(b)(2) Does Not Apply  AR has operated use the property herein as a rooming house and income producing property since before the inception of this loan. (she has occasionally suspended renting rooms due to health problems.] [(2) Ms. [R] out of state until October 26th, is unavailable to sign a declaration in support of this reply. 

 At any given time, the property in question houses several, primarily foreign, students. The students receive room and board, with meals prepared by the debtor. This makes the obligation not secured solely by residental real property. This is a question of first impression in this Circuit, however, it is the clear holding of  the 3rd Circuit in. In re Scarborough 461 F.3d 406, 2006 WL 2466859 (C.A.3 2006 (Pa.)) the court held that
 By using the word "is" in the phrase "real property that is the debtor's principal residence," Congress equated the terms "real property" and "principal residence." Put differently, this use of "is" means that the real property that secures the mortgage must be only the debtor's principal residence in order for the anti-modification provision to apply. We thus agree with the reasoning of the Bankruptcy Court for the District of Connecticut when it noted that § 1322(b)(2) "protects claims secured only by a security interest in real property that is the debtor's principal residence, not real property that includes or contains the debtor's principal residence, and not real property on which the debtor resides." In re Adebanjo, 165 B.R. 98, 104 (Bankr.D.Conn.1994). A claim secured by real property that is, even in part, not the debtor's principal residence does not fall under the terms of § 1322(b)(2). Consequently, "real property which is designed to serve as the principal residence not only for the debtor's family but for other families is not encompassed by the clause." Id.; see also In re Maddaloni, 225 B.R. 277, 280 (D.Conn.1998) ("[T]he use of 'is' without any modifier ( e.g., 'in whole' or 'in part') does not evince an intent by Congress to apply the antimodification provision to real property that includes, but is more than, a debtor's residence."); In re McGregor, 172 B.R. 718, 720 (Bankr.D.Mass.1994) (relying on plain language of § 1322(b)(2) to permit modification of claim secured by "the debtor's residence and property which has 'inherently income producing' power"); In re Legowski, 167 B.R. 711, 714 (Bankr.D.Mass.1994) (same). [emphasis supplied]

It is believed that the deed of trust in this case contains a security interest in rent. It is also clear that the rental income was part of the original collateral package and the existence of rent was used in making the determination to make the loan. As the term is defined, the property includes the debtor's residence but is not the debtor's principal residence.

MOTION FOR CRAVING OYER
The debtor askes the court for a Writ Directing the bank to Crave Oyer, or, more literally, bring the original document to court. A Motion for Craving Oyer is one of the lesser known Common Law writs. The common law was adopted in the State of Washington and in the United States. Craving Oyer predates the formation of the United States of America. Literally, it requires that the document be read in court.

In today's world, it is impossible to tell who owns the document. Were this a law suit in King County, where the property is located, local rules require hat the Original Document be filed in the court. This court should not be less vigilent than its state court counterpart. In fact, since the plan requires modification of the terms of the Note and Deed of Trust, the original should be produced so that the terms of the Order Confirming Plan can be attached to the document as an allange thus providing notice to future holders that there has been a modification.

In the event that the original can not be produced, with appropriate assignments evidencing that Deutsch Bank is indeed the holder of the instrument, its claim must be denied and its objection over ruled.
 

CONCLUSION
This matter is not ripe for a decision. The bank has not demonstrated that it is entitled to any relief. The debtor has requested a continuance and there is still discovery to do. In any event, it is clear that section 1322(b)(2) does not apply to this case because the obligation in question is not secured solely by the debtor's principal residence. This court should continue the matter for 120 days in order to complete discovery or it must overrule the objection.

Response from fellow listmember Dan Press

Well, here in VA we crave oyer all the time. But I would think that because it's purely procedural, it has been superseded by the Rules Enabling Act and the All Writs Act. In Federal Court, if you want the original, just ask for it in discovery.

The reason we crave oyer so much in state court is that there is really no effictive motion for summary judgment (we can only rely on the pleadings and requests for admission), so if the document is not attached to the complaint but is part of the cause of action, craving oyer not only gets the document produced, but it is deemed part of the pleading so that it can be included in a demurrer (the equivalent to a 12(b)(6) motion to dismiss). In Fed. Court (including bk court), you can use the document if they produce it in discovery, so that's not necessary.

Of course, this doesn't relate much to foreclosure litigation in VA (what's that??!!), because our foreclosures are strictly non-judicial.

Dan Press
Chung & Press, P.C.
6718 Whittier Ave. #200
McLean, VA 22101

Circuit Court of Appeals Cases from Last Week

1st Circuit Court of Appeals, October 08, 2009
In re Simply Media, Inc., --- F.3d ---, 2009 WL ------------- (1st Cir 2009)(appeal dismissed and OSC set re sanctions against attorney for frivolous appeal) 

1st Circuit Court of Appeals, October 15, 2009
In re Reale, --- F.3d ---, 2009 WL ------------- (1st Cir 2009)(preference judgment for trustee affirmed where 1) debtor exercised sufficient control over the funds at issue to demonstrate that they were an interest of the debtor in property; and 2) successor judge had no obligation to recall witnesses or to order a new trial)

Thanks to Findlaw.com

SFVB Program October 26, 2009

San Fernando Valley Bar Assn - Business Section

Review of the '09 Woodland Hills Bankruptcy Judges' Opinions

    Panel:   Amy Goldman, Esq.; Stella Havkin, Esq. and Steve Fox, Esq. 
 
    Date:   Wednesday, October 28
 
    Time:   12:00 Noon  Lunch and Program

   Place: SFVBA Conference Room
21250 Califa Street, Woodland Hills
   Ste 113
 
    Cost:     $30 Members prepaid; $40 at the door
  $40 Non-Members prepaid
  $50 Non-Members at the door
 
 
 The SFVBA is a State Bar of California approved MCLE provider.  By attending this seminar, attorneys earn 1 hour MCLE.

Chicago Cubs Chapter 11 - Steve Goodman is Rolling Over in his Grave

U.S. Bankruptcy Court
District of Delaware (Delaware)
Bankruptcy Petition #: 09-13496-KJC

Assigned to: Kevin J. Carey Chapter 11

Date filed:   10/12/2009

Debtor Chicago National League Ball Club, LLC 1060 West Addison Street Chicago, IL 60613 Tax ID / EIN: 26-1700347 fka Chicago National League Ball Club, Inc. dba Chicago Cubs	represented by	J. Kate Stickles Cole, Schotz, Meisel, Forman & Leonard, 500 Delaware Avenue, Suite 1410 Wilmington, DE 19801 usa 302-652-3131 Fax : 302-652-3117 Email: kstickles@coleschotz.com Norman L. Pernick Cole, Schotz, Meisel, Forman & Leonard,  Email: bankruptcy@coleschotz.com
U.S. Trustee  844 King Street, Room 2207 Lockbox #35 Wilmington, DE 19899-0035 302-573-6491

Judge Alan Jaroslovsky - A Warning to Attorneys Representing Individual Chapter 11 Debtors

Read 'em and weep as they say.  I think Judge Jaroslovsky definitely had too much coffee the morning he wrote this.  Its posted on his website so I guess he means it.   

New Median Income Figures

The median income figures beginning November 1, 2009 can be accessed here.

Central District Filings in September, 2009

In September, 2009, the Central District saw a small drop in total filings: 9,089 total filings compared to 9,740 in August, and 9,886 filings in July, 9,578 in June, 8,965 in May, 8,398 in April, 8,518 in March, 6,967 in February and 5,999 in January.  That is 58,436 for the first seven months compared 33,396 for the same seven months last year or a 75% increase.

September filings broken down by chapter:

CACB

7,009, ch 7

74, ch 11

2,006, ch 13

9,089; total

Chapter 13s were 2,180 in August, 2,053 in July, 2,291 in June, 1,988 in May.  Chapter 13 trustees received 400 new petitions each in September.    

There were 96 chapter 11 petitions in August, 71 in July, 110 in June and 66 in May. 

Filings so far in 2009:
 

CACB

59,419, ch 7

836, ch 11

17,027 ch 13

77,288, total

Same numbers Jan through September, 2008;

CACB

34,062; ch 7

604, ch 11

11,212, ch 13

45,880; total

This info can be found at the Bankruptcy Data Project.   

Judge Rules that Spouses' Debts are Considered Separately for Eligibility for Chapter 13

Brief by my law clerk Roksana Moradi

In re Werts, --- B.R. ----, 2009 WL 2563468 (Bkrtcy.D.Kan.)

Issue:  Do the debt limitations for filing chapter 13 apply to a husband and wife separately even though they file a joint case?  Is the unsecured portion of secured debt treated as unsecured for eligibility purposes?  Was the conversion here from chapter 7 to chapter 13 in bad faith and therefore subject to dismissal?

Holding:  The debt limitations apply to the spouses separately.  The unsecured portion of secured debt is treated as unsecured for eligibility purposes.  Here there was no sufficient bad faith to justify dismissal of the chapter 13.

Judge Janice Miller Karlin,

Mr. and Mrs. Werts, had unsecured debts of $161,977.71 and $100,913.37, respectively.  They filed chapter 7 on June 16, 2008.  The debtors were also jointly liable on a second mortgage on their residence.  Further, the debt secured by that second mortgage exceeded the value of the house by $134,760.  Their schedules had numerous deficiencies which they corrected with various amendments (and blamed most on their attorney).  Plus Mr. Werts received a cash settlement from a business deal of $75,000 on October 31, 2008.  The debtors used the “$75,000 to pay some routine bills, make several advanced payments on their first and second mortgages ($21,535 and $7,124, respectively), make car payments ($5,995), buy new furniture for their house ($5,500), make deck repairs ($750), paint their house ($3,650), pay off an unsecured consolidation loan that was guaranteed by a friend and former employer of Mr. Werts ($12,235), pay attorney fees ($3,000) and take a ski vacation in Colorado ($4,117).”
 
In January of 2009, the UST filed an adversary proceeding objecting to Debtors' discharge pursuant to § 727(a)(2) and (4).  The UST also filed a Motion for Dismissal for Abuse under § 707(b)(3).  Three months later, with new counsel, the debtors “filed the motion to convert to Chapter 13. . . [that is] the subject of this order. 

The first issue for the court was whether the debtors qualified for chapter 13.  The Court stated that “this issue is governed, in part, by the answer to the following question: whether the $134,760 undersecured portion of Debtors' second mortgage should be considered unsecured debt for purposes of the § 109(e) debt limitation when another section of the Code, § 1322(b)(2), specifically requires that same debt to be treated as secured for plan confirmation purposes.  This second mortgage note is secured only by a security interest in Debtors' principal residence.”  The Court concluded “that the undersecured portion of a secured debt should be treated as an unsecured debt for § 109(e) debt limitation calculations.”

The Debtors argued in the alternative that “the §506 analysis should not be applied when the debt in question will be treated as fully secured by operation of law, specifically §1322(b)(2), which requires that a claim secured only by a security interest in the debtors' principal residence cannot be bifurcated and crammed down.”  The Court disagreed ruling that the application of §1322(b)(2) does not create an exception to the general rule and declined “to graft additional content onto § 109(e) that Congress did not choose to include, to wit, that the section does not apply to those debts that are truly undersecured, but that will be treated as fully secured for confirmation purposes.”

The debtors next argument was that because each of them, individually, had “unsecured debt less than $336,900, because not all of their unsecured debt is joint debt, they should be allowed to proceed as debtors in a Chapter 13 case. The UST objected saying §109(e) requires both spouse's debts to be considered together when determining whether they fall under the unsecured debt limit.” The parties did not provide ANY case law addressing this issue, and the Court was also unable to locate any cases directly on point.   The UST’s argument focused “ on the portion of the statute that reads ‘an individual with regular income and such individual's spouse ... that owe ... unsecured debts that aggregate less than $336,900’ to support its claim that all debts of both spouses must be combined for purposes of § 109(e).”  The Court found “that a more reasonable reading of the statute, and one that furthers the goal of encouraging Chapter 13 filings, is that the provision dealing with ‘an individual with regular income and such individual's spouse’ is intended to apply in those cases where the spouse could not otherwise be a Chapter 13 debtor, because he or she is not ‘an individual with regular income.’  If each spouse has regular income, and each spouse separately qualifies under the debt limits of §109(e), then each spouse should be entitled to file his or her own Chapter 13 case-even if the debts of both spouses together would exceed the debt limits.”  The Court further stated that “if a husband and wife can each file separate Chapter 13 proceedings, where their own individual debt is within the § 109(e) limits, the Court can think of no reason why a husband and wife could not file a joint petition, as authorized by § 302(b).” 

As to good faith, the Court ruled the “key inquiry” for courts attempting to ascertain a debtor's good faith ‘is whether the debtor is seeking to abuse the bankruptcy process.’ ”  The overwhelming majority of Courts have held that the party moving to dismiss or convert a case under § 1307(c) bears the burden of showing that the case was not filed in good faith.” The Court held that, “although a debtor bears the burden of proving that a plan was filed in good faith under § 1325(a), the burden of showing that a case was filed in bad faith so as to require conversion or dismissal under § 1307(c) falls on the party seeking such conversion or dismissal.”
 
The UST alleged that the deficiencies in the schedules were evidence of bad faith.  The court said it was “troubled by the actions of each Debtor and [their prior attorney] regarding the errors and omissions on the schedules, the Court does not find that those actions rise to the level of bad faith that would render Debtors ineligible for Chapter 13 relief.  Critical to this finding is the testimony of the Chapter 7 Trustee, who testified that once her initial concerns about the schedules were discussed with counsel, Debtors were at all times cooperative in providing follow-up documentation about all bank accounts and other identified issues, they answered all of her questions in a timely fashion, and, most importantly, that she never felt Debtors were being deceptive or uncooperative in their responses to her.”

The Court also found “that Debtors' actions in disposing of the $75,000 payment from the EB buyout in the 7-8 months prior to the filing of the case do not rise to the level of bad faith. Typically, engaging in pre-bankruptcy planning by converting non-exempt assets into exempt assets, without more, does not constitute bad faith.  However, the UST contends that bad faith does exist here because Debtors accumulated a fairly significant amount of unsecured debt in connection with the EB business, itself, and should have used the $75,000 payment to repay some of that debt, rather than using it to pay down their mortgage or for a family vacation.  In response, Debtors testified that they did in fact intend to use the EB payment to repay some of their business debt. However, [their previous attorney] specifically advised them to use the money in a fashion that would best benefit their future financial fresh start, rather than that of their creditors or the bankruptcy estate.  “Debtors stated that they simply followed the pre-bankruptcy planning advice offered by their attorney, and were not acting in bad faith.”

In conclusion the Court held that “Debtors' actions prior to filing this case did not rise to a level of bad faith that would prevent conversion, the Court finds that the case would not be subject to dismissal or conversion under 1307(c).”

Article on Judge Peter Carroll

From the California Bar, Board of Legal Specialization.

cdcbaa Program October 17, 2009

CENTRAL DISTRICT CONSUMER BANKRUPTCY ATTORNEYS ASSOCIATION

GENERAL MEMBERSHIP ASSSEMBLY

October 17, 2009 at 10:30 a.m.

 Location:

Southwestern Law School
3050 Wilshire Blvd., Room W329
3rd Floor in the Westmoreland Building
Los Angeles, CA 90010

MCLE Program, Co-Sponsored by Southwestern Law School,

11:00 a.m. – 1:00 p.m.

Total Hours: 2 hours

This is a two-part program:

"Stripping Liens: Motion vs. Adversary”

 Speakers:
The Honorable Judge Vincent P. Zurzolo
Chief Judge, Bankruptcy Court, Central District of California

The Honorable Judge Alan M. Ahart
Bankruptcy Court Judge, Central District of California

"How to Prepare a Perfect Chapter 13 Plan”

Speakers:
Aki Koyama, Esq
Staff Attorney for Chapter 13 Trustee, Kathy A. Dockery

Melissa Besecker, Esq
Staff Attorney for Chapter 13 Trustee, Elizabeth F. Rojas
 
*CDCBAA certifies that an application is pending for approval for this activity for Bankruptcy Specialization credit by the State Bar of California

The Big Six Oh

Please ignore the last post:  I had'nt had my coffee yet. 

The Big Six Oh

So now you know.  Today I am finishing my 60th trip around the sun.  I stole that quip from my idol, Carl Sagan, who went to that great physics lab in the sky in 1996 at age 62, way too young.  Turning 30 blew me out; 40 and 50 didn't bother me at all, kids growing up and all.  But 60 is pretty tough.  I'm way too young to be 60. 

Oh to be a child again.
Oaks from acorns grew
One and one make two
I believed it all
Didn't you?

The Poco Seco Singers, 1967
   

Filings in September 2009 Remain Steady

Total bankruptcy filings for September, 2009 were 125,500 compared to 120,000 in August; 130,500 in July; 124,800 in June; 120,400 in May; 128,700 in April, 131,000 in March, 102,000 in February and 89,000 in January.