August 8, 2009
Sotomayor Sworn in Today
Circuit Court of Appeals Cases from Last Week
1st Circuit Court of Appeals, August 05, 2009
In re Rudler, --- F.3d ---, 2009 WL 2385469 (1st Cir. 2009)(means test allows debtors to deduct payments due on a secured debt notwithstanding the debtor's intention to surrender the collateral)
2nd Circuit Court of Appeals, August 05, 2009
In re Chrysler LLC, --- F.3d ---, 2009 WL --------- (2nd Cir. 2009)(1.bankruptcy court did not abuse its discretion in approving the sale as the sale did not constitute an impermissible sub rosa plan and prevented further, unnecessary losses; 2) the court properly held that although the plaintiffs did not consent to the sale order's release of all liens on Chrysler's assets, consent was validly provided by the collateral trustee, who had authority to act on behalf of all first-lien credit holders; 3) the plaintiffs lack standing to raise the issue of whether the Secretary of the Treasury exceeded his statutory authority by using TARP money to finance the sale of Chrysler’s assets as they cannot demonstrate that they have suffered an injury in fact; and 4) arguments advanced by present and future tort claimants against the portion of the sale order extinguishing all existing and future claims against New! Chrysler are rejected)
7th Circuit Court of Appeals, August 03, 2009
Smith v. Duffey, --- F.3d ---, 2009 WL --------- (7th Cir. 2009)(defendants had no duty to tell plaintiff that defendants' employer was about to declare bankruptcy, and none of the their actions were actionable as fraud)
10th Circuit Court of Appeals, August 03, 2009
Ford v. Ford Motor Credit Corp., --- F.3d ---, 2009 WL ------------- (10th Cir. 2009)(bifurcation of "negative equity" owed by debtors on a car loan was impermissible under the "hanging paragraph" of 11 U.S.C. section 1325(a))
10th Circuit Court of Appeals, August 05, 2009
Johnson v. Smith, --- F.3d ---, 2009 WL ---------- (10th Cir. 2009)(sanctions against defendant is affirmed; dismissal of Chapter 13 case did not divest the Bankruptcy Court of jurisdiction over automatic stay violation adversary proceeding)
Thanks to Findlaw.com.
August 7, 2009
Filings Rise in July (again)
Total bankruptcy filings for July, 2009 increased 4.6% to 130,500, up from 124,800 in June, 120,400 in May, and 128,720 petitions filed in April. At the July rate, we would have 391,000 for the quarter compared to 374,000 for the second quarter and 322,000 for the first quarter.
1st Circuit Rules that Debtor may Deduct Mortgage Payments on the Means Test, Even if He Intends to Return the Property
In re Rudler --- F.3d ---, 2009 WL 2385469 (1st Cir. Aug, 2009)
Issue: Is a debtor permitted to deduct on the means test, mortgage payments he does not intend to make?
The chapter 7 debtor’s mortgage payments were about $4,000 per month. Including them on the means test, his net disposable income was minus $2,376. His statement of intentions said that he was giving up the home. Without the secured payments, his means test net was plus $1,430. In a footnote, the 1st Cir said, the debtor “actually deducted both the housing allowance and his mortgage debt, which is clearly impermissible. Accordingly, his disposable income amount needs to be revised regardless of the treatment of his mortgage debt.” The UST filed a motion to dismiss. The bankruptcy court denied the motion and the 1st Cir. BAP affirmed. “The BAP held that the means test calculation is meant to be ‘a 'snapshot' of the debtor's situation as of the petition date,’ rather than a "'forward-looking'" consideration of "only those payments that will actually be made.’"
The 1st Cir affirmed also. “In arguing her view of section 707(b)(2)(A)(iii)(I), the Trustee relies heavily on Congress's purpose in enacting the BAPCPA, i.e., to ensure that individuals who are able to repay a portion of their debts do so. However, we must defer our consideration of Congressional intent because our examination of the statute must begin ‘where all such inquiries must begin: with the language of the statute itself.’" “We thus look first to the specific language at issue, which defines deductible secured debt as amounts that are ‘scheduled as contractually due to secured creditors in each of the 60 months following the date of the petition.’ Unless that language is ambiguous, we consider Congress's intent only to be certain that the statute's plain meaning does not lead to ‘absurd’ results.” The code says the debtor can deduct payments “scheduled as contractually due.” That is looked at as of the petition date. “The word ‘scheduled,’ *** implies *** that such payments, although ‘scheduled,’ may in fact not be made; otherwise, the request would more logically have been for information about all payments that will be made to creditors during the targeted sixty-month period, or all payments the debtor expects or intends to make during that time frame.” The trustee argued that under this interpretation the word “scheduled” is surplusage. It could have said simply “contractually due.” The trustee also argued that “scheduled” means listed on Schedule D rather than some sort of calendar schedule. “The Trustee [also] argues that Congress, in using the word "following," [the date of the petition] contemplated a projection of future expenses – i.e., expenses that will exist ‘following’ the bankruptcy proceedings – rather than a snapshot of current expenses. Again, however, that interpretation is not supported by the words themselves, which are forward-looking only in the sense that the required current calculation is for debts that are scheduled into the future.” “The Trustee also invokes a third phrase from section 707(b)(2)(A) in support of her position, arguing that the requirement that payments be made ‘on account of secured debts’ excludes debts that will remain after the property serving as collateral for them has been surrendered. She reasons that, after title has transferred following surrender, the debtor's obligation either will be eliminated entirely or changed into an unsecured debt – meaning that any future payments will not be ‘on account of secured debts.’"
“The Trustee argues that allowing debtors to deduct only payments they will actually make, rather than all payments scheduled at the time of the bankruptcy filing, better serves the purpose behind the means test because it more accurately reflects the debtor's resources following the bankruptcy proceedings. This argument has force – but it misses the point. There are a number of ways Congress could have effectuated its goal of increased debtor responsibility, and calculating projected income based on actual anticipated expenses is unquestionably one of them. However, based on the plain language of the statute, that is not the approach Congress enacted into law, and we cannot rewrite the statute simply because we think a different method of assessing abuse would be more effective.”
The concurring opinion said that “scheduled” is ambiguous but he is convinced that Congress intended a mechanical test. For one reason, because 707(b)(3) allows the “totality of the circumstances” to be used as a “backstop to catch those whose petitions are not presumptively abusive under the means test but for whom a closer look at their actual financial situation shows that they have the means to repay their creditors under chapter 13 and that they have tried to avoid that repayment.”
August 6, 2009
Sonia Sotomayor Confirmed Today
I'm sure you already know by now but Sonia Sotomayor won confirmation today - the nation's first Hispanic Supreme Court justice. She'll be sworn in Saturday as the court's 111th justice, third woman and first nominee by a Democrat in 15 years. The Senate vote was 68-31 to confirm Sotomayor.
Good luck to her. When Harry Blackmun was sworn in, some clerk walked into his office with boxes of files and told him there were 9 cases pending where the vote was split 4-4 and he needed to rule on each one so they could get them out. Great way to start.
August 3, 2009
My new Book: A Summary of Bankruptcy Law
My new book: A Summary of Bankruptcy Law is now available on Amazon. You can access it here.
This is the description on amazon:
This is a short summary of bankruptcy and how it works. It summarizes the three main chapters, chapter 7, 13 and 11. Bankruptcy code sections are referenced throughout the book as are the Federal Rules of Bankruptcy Procedure. Footnotes are generally Supreme Court cases or 9th Circuit cases. Where state law is relevant, California law is cited. The book is designed for law students, new attorneys to bankruptcy and anyone with a general interest in the subject. It is 228 pages.
Let me know what you think. JH
Lawyers Club Program This Wednesday
I'm the guest speaker at the Lawyers Club MCLE Program this Wednesday. I will go over my Six Golden Bankrutpcy Rules for the group. Stop by if you can.
The Lawyers' Club of Los Angeles County offers monthly noon-time CLE sessions on the first Wednesday of each month at the Stanley Mosk Courthouse downtown. These informal sessions cover a variety of subjects from ethics to technology in a friendly environment that allows for open discussion of each topic. At just $10 per session for members and $15 for non-members, the Club's monthly CLE is today's equivalent of its protest of the high cost to attend the 1938 State Bar Convention!
All Wednesday CLE Programs: 12:30 pm
Stanley Mosk Courthouse,
Cafeteria - 9th Floor,
111 N. Hill St., Los Angeles.