BankruptcyProf Blog

Circuit Court of Appeals Cases from Last Week

6th Circuit Court of Appeals, March 06, 2009
CIT Small Bus. Lending Corp. v. Kendrick, --- F.3d ---, 2009 WL ---- (6th Cir 2009)(appeal dismissed for lack of jurisdiction where district court remanded to bankruptcy court to determine the preferential transfer issue and thus there was no final order)

Thanks to Findlaw.com

Bankruptcy and Tax Program - March 21, 2009 at Southwestern Law School

CENTRAL DISTRICT CONSUMER BANKRUPTCY ATTORNEYS ASSOCIATION

GENERAL MEMBERSHIP ASSSEMBLY

March 21, 2009 at 10:00 a.m.

Location:
Southwestern Law School
3050 Wilshire Blvd., Room 611
6th 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

Legal Ethics: 0; Substance Abuse/Emotional Distress: 0; Elimination of Bias: 0; Law Practice Management: 0; Legal Education: 2.0

"TAX ISSUES IN BANKRUPTCY”

Speakers:
Chuck Rosen, Esq.
David Tilem, Esq.

*CDCBAA certifies that an application is pending for approval for this activity for MCLE credit by the State Bar of California*

Upcoming Event:
April 29, 2009 at 12:00 noon

The San Fernando Valley Bankruptcy Court Judges will present a program on the Bankruptcy in Roman Times, the intersection of bankruptcy and criminal law and stories behind the enactment of the 1978 Act. This program is co-sponsored by SFVBA with CDCBAA and will take place at the Bankruptcy Court at 21041 Burbank Blvd., Woodland Hills CA 91367. 

Report on Foreclosures By Congressional Oversight Panel

Dated March 6, 2009, "Foreclosure Crisis: Working Towards a Solution," the 189 page report can be accessed here. 

The Congressional Oversight Panel was created by Congress in October, 2008.  Elizabeth Warren is the Chairperson of this panel.  According to its website, it was created to “review the current state of financial markets and the regulatory system.”

"COP is empowered to hold hearings, review official data, and write reports on actions taken by Treasury and financial institutions and their effect on the economy.

Through regular reports, COP must:

Oversee Treasury’s actions
Assess the impact of spending to stabilize the economy
Evaluate market transparency,
Ensure effective foreclosure mitigation efforts
And guarantee that Treasury’s actions are in the best interest of the American people.

Lastly, Congress has instructed COP to produce a special report on regulatory reform that will analyze 'the current state of the regulatory system and its effectiveness at overseeing the participants in the financial system and protecting consumers.'”

COP has an Executive Director and office space.  I would love to know its budget for this year. 

Credit Card Exchange - Priceless

A lady died this past January, and a credit card company billed her for February and March for their annual service charges on her credit card, and added late fees and interest on the monthly charge. The balance had been $0.00 when she died, but now somewhere around $60.00.

A family member placed a call to the credit card company.

Here is the exchange :
Family Member: 'I am calling to tell you she died back in January.'
Company: 'The account was never closed and the late fees and charges still apply.'
Family Member: 'Maybe, you should turn it over to collections.'
Company: 'Since it is two months past due, it already has been.'
Family Member: So, what will they do when they find out she is dead?'
Company: 'Either report her account to frauds division or report her to the credit bureau, maybe both!'
Family Member: 'Do you think God will be mad at her?'
Company: 'Excuse me?'
Family Member: 'Did you just get what I was telling you - the part about her being dead?'
Company: 'Sir, you'll have to speak to my supervisor.'

Supervisor gets on the phone:
Family Member: 'I'm calling to tell you, she died back in January with a $0 balance.'
Company: 'The account was never closed and late fees and charges still apply.'
Family Member: 'You mean you want to collect from her estate?'
Company: (Stammer) 'Are you her lawyer?'
Family Member: 'No, I'm her great nephew.' (Lawyer info was given)
Company: 'Could you fax us a certificate of death?'
Family Member: 'Sure.' (Fax number was given )

After they get the fax :
Company: 'Our system just isn't setup for death. I don't know what more I can do to help.'
Family Member: 'Well, if you figure it out, great! If not, you could just keep billing her. She won't care.'
Company: 'Well, the late fees and charges will still apply.' (What is wrong with these people?!?)
Family Member: 'Would you like her new billing address?'
Company: 'That might help...'
Family Member: ' Odessa Memorial Cemetery , Highway 129, Plot Number 69.'
Company: 'Sir, that's a cemetery!'
Family Member: 'And what do you do with dead people on your planet???'

(Priceless!!)
You wondered why the banks are going broke and need the feds to bail them out!!

Public Meeting on Federal Rules of Bankruptcy Procedure

Members of the Bar and the Public are Welcome To Attend and Observe

A Special Open Public Subcommittee Meeting of the Advisory Committee for the Federal Rules of Bankruptcy Procedure

The participating committee members and invited judges, academics, lawyers, court and judiciary personnel will be considering a proposal to revise and restructure Part VIII of the Bankruptcy Rules (governing appeals) to make them clearer, more consistent with the Federal Rules of Appellate Procedure and more comprehensive.

The Meeting Will be Held on

March 25, 2009
from 9:30 a.m. to 2:30 p.m.

in the La Jolla Room of  the
Edward J. Schwartz Federal Building
880 Front Street
San Diego, California

Means Testing Tables Change on March 15, 2009

http://www.usdoj.gov/ust/eo/bapcpa/20090315/meanstesting.htm

New Cramdown Bill Negotiations

By Jessica Holzer
Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Borrowers would be required to consider offers by their lenders of "qualified" loan modifications before they could have their mortgage debts reduced in bankruptcy court, under a compromise on mortgage "cramdown" legislation reached by U.S. House lawmakers.

Bankruptcy judges would also have leeway to slash interest rates for borrowers to as low as 2% in lieu of a reducing the principal balance of their mortgage, according to a draft of the compromise language obtained by Dow Jones Newswires.  Under current law, bankruptcy judges cannot reduce interest rates below market rates.

The changes represent the latest concession to the banking industry over legislation that would give borrowers substantially more leverage in their negotiations with creditors. They come after Democratic leaders last week delayed a vote on the legislation after support among centrists in their ranks began to erode.

The measure is a central plank of the Obama Administration's strategy to right the housing market. Proponents say it will act like a cudgel, encouraging mortgage companies to take advantage of government-backed financial incentives to modify loans.

Under the legislation, bankruptcy judges would be able to reduce the principal amount of mortgage loans for struggling borrowers - a process dubbed "cramdown."

The banking industry warns such a move will raise borrowing costs for all homeowners and clog the bankruptcy courts, prompting judges to write off tons of other consumer debt just when lenders are reeling from the financial crisis.

Earlier Tuesday, House Majority Leader Steny Hoyer, D-Md., cast the negotiations as aimed at ensuring that Chapter 13 bankruptcy is a last resort for borrowers after efforts at a voluntary loan modification had failed.

In order to avoid a cramdown, lenders would have to offer borrowers a loan modification that conformed with the modification guidelines set forth in the Obama housing plan. Specifically, lenders would have to cut mortgage payments to no more than 31% of a borrower's income.

The borrower would be required to consider any offers of such "qualified" loan modifications before receiving a court-ordered modification.

Under the compromise language, judges may also consider reducing the interest rate to as low as 2% instead of slashing the loan's principal balance, as long as the new mortgage payment doesn't exceed 31% of the borrower's income.

The changes don't go far enough to appease the banking industry, which has been lobbying furiously against the bill.

"It doesn't make bankruptcy the last resort. It allows borrowers to decide between bankruptcy and the administration's loan modification plan," Financial Services Roundtable Senior Vice President Scott Talbott said.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com
(Patrick Yoest contributed to this report.)

Circuit Court of Appeals Cases from Last Week

3rd Circuit Court of Appeals, February 24, 2009
Saudi Amer. Bank v. Shaw Group, Inc., --- F.3d ---, 2009 WL ----- (3rd Cir. 2009)(plaintiff had standing to bring a claim as a third party to the purchase agreement but judgment in favor of plaintiff reversed based on contract terms)

4th Circuit Court of Appeals, February 25, 2009
Ennis v. Green Tree Servicing, LLC, --- F.3d ---, 2009 WL ----- (4th Cir. 2009)(in chapter 13, Debtors' mobile home was not "real property" under section 1322(b)(2) and Creditor's secured claim on it thus could be modified)

9th Circuit Court of Appeals, February 23, 2009
Simpson v. Burkart, --- F.3d ---, 2009 WL ----- (9th Cir. 2009)(Debtor's single-premium annuity is not exempt)

9th Circuit Court of Appeals, February 23, 2009
McKay v. Ingleson, --- F.3d ---, 2009 WL ----- (9th Cir. 2009)(Debtor's financial arrangement with her university constituted a non-dischargeable educational loan)

Thanks to Findlaw.com

UST Analyst Position Open in Los Angeles

TITLE, SERIES, GRADE:   Bankruptcy Analyst, GS-301-11/12/13/14         

VACANCY ANNOUNCEMENT NUMBER:   LA09-001          
 
SALARY RANGE:    $62,678 - $137,242
 
PROMOTION POTENTIAL TO:  GS-14
 
WHO MAY BE CONSIDERED:   Applications will be accepted from U.S. citizens and nationals.  You need not be a current or former Federal employee to apply.
 
OPENING DATE:   February   27, 2009
CLOSING DATE:   March 30, 2009                                 
 
DUTY LOCATION:  U.S. Trustee Program, Los Angeles, California 90017
 
NUMBER OF VACANCIES:  1 Position
 
THIS IS A FULL-TIME, PERMANENT, EXCEPTED SERVICE APPOINTMENT
 
JOB SUMMARY:  The U.S. Trustee Program (USTP) is a component of the Department of Justice and has the legal authority to appear in every bankruptcy case filed in the United States, from chapter 7 liquidations to major chapter 11 business reorganizations.  As a result, USTP employees headquartered in Washington, D.C., and in our 95 field offices throughout the country handle a wide range of challenging and significant matters as we strive to promote the integrity and efficiency of the bankruptcy system by enforcing bankruptcy laws and providing oversight of private trustees.  Of particular importance is this Program’s efforts to address fraud and abuse by debtors, creditors, attorneys, and others in the bankruptcy system by taking formal and informal actions in a civil context and making criminal referrals to and working with the U.S. Attorneys.  If you are interested in a challenging and rewarding career and access to a generous benefits package, consider the USTP as your employer of choice!  DOJ has been ranked in the Top 5 Best Places to Work in Federal Government for 2007.  See www.bestplacestowork.org.

Bankruptcy Internet Data Project

I just found the greatest website for statistical junkies - I'm embarrassed that I didn't know about it before.  Its called the Bankruptcy Internet Data Project, hosted by Harvard Law, and run by Profs. Bob Lawless, Elizabeth Warren and a bunch of others.  You click in what data you want to see and how you want it presented and its instantaneous.  The project is at http://bdp.law.harvard.edu/fellows.cfm

Month	Ch. 7 Total Petitions	Ch. 11 Total Petitions	Ch. 12 Total Petitions	Ch. 13 Total Petitions	Ch. 9 Total Petitions	Ch. 15 Total Petitions	All Chapters Total Petitions
Jan/09	58759	1087	35	29344	0	16	89225
Feb/09	71451	1047	28	30406	2	3	102932

A 22% increase in chapter 7 and a 3% increase in chapter 13, from January to February, 2009.  A decrease in chapter 11 filings.  You can access this data by district as well.   

Cramdown Bill to Come to a Vote in the House on Tuesday

HR1106, Helping Families Save Their Homes Act of 2009 can be accessed here. 

A summary (of the big stuff) is as follows:

1.  Secured debts where the collateral is the debtor's underwater home will not be included in the chapter 13 eligibility test in Section 109.  A debtor who has received notice from the lender that it may commence foreclosure will not have to do the credit counseling. 

2.  A pre-existing loan on the debtor's home where the debtor has been told by the lender that a foreclosure may be commenced, may be modified in a chapter 13 to pay only the secured portion per Sec 506(a)(1); provide for payment of the secured portion over 40 years at a fixed and reasonable interest rate.  If the home is sold before the chapter 13 discharge, the profit must be shared with the lender. 

3.  The debtor must certify in the chapter 13 that he attempted, at least 15 days before filing, to "contact the lender regarding modification" unless a foreclosure sale is scheduled within 30 days after the petition date.

4.  This applies to existing chapter 13 cases provided the debtor tries to work it out first before filing a request for modification. 

5.  To permit bifurcation of the secured claim, the court must find that the modification is proposed in good faith and the debt was not incurred by fraud. 

6.  The Effective Date is the date of enactment.

Article on Los Angeles Bankruptcy Judge Geraldine Mund

Judge Mund is one of my favorite people.  The Daily News article can be accessed here.