August 22, 2009
Circuit Court of Appeals Cases from Last Week
5th Circuit Court of Appeals, August 18, 2009
St. Paul Fire & Marine Ins. Co. v. Labuzan, --- F.3d ---, 2009 WL -------- (5th Cir. 2009)(these particular creditors had standing to claim damages based on violations of the automatic-stay provision, section 362(k))
9th Circuit Court of Appeals, August 21, 2009
Joye v. Franchise Tax Bd., --- F.3d ---, 2009 WL -------- (9th Cir. 2009)(only state taxes incurred post-petition may be treated as postpetition claims under 11 U.S.C. section 1305(a))(Note: 2-1 opinion)
Thanks to Findlaw.com
August 21, 2009
"Medical" Bankruptcy Cases
I try to stay away from soap boxing too much on this blog. That is part of the instructions from our leader Prof. Paul Caron.
But I keep reading here and there about how many bankruptcy cases, indeed often in terms of percentages of total bankruptcies, are filed by persons seeking to escape from medical expenses and/or filings caused by medical problems of the debtor[s]. It's not my experience.
I have filed about 20 chapter 7s this year, maybe 2 or 3 chapter 13s (too complicated), and about 10 chapters 11s. I have spoken to probably 10 times that number of potential debtors this year alone. None of them have any significant medical expenses or had financial problems caused by medical issues. Not a big enough sample you say? I have filed or overseen the filing of probably 2,000 consumer bankruptcy cases in the past 20 years and again I don't remember any "medical" cases although I am sure there were a few. That is still not much of a sample given the big picture but what I see is articles or politicos/blogs or what have you that say that 60% of all cases (or 30%) or some amount of hundreds of thousands of cases per year are caused by the medical problems of the debtors. I haven't seen it in my practice. I'm sure there are studies with lots of mathematical terms and figures which prove the percentage but my off-the-cuff guess would be that the total is 2%.
"The flag is up." Jim Healy
August 20, 2009
cdcbaa Program September 12, 2009 at Southwestern Law School
CENTRAL DISTRICT CONSUMER BANKRUPTCY ATTORNEYS ASSOCIATION
September 12, 2009 at 10:30 a.m.
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. MCLE: 2 hours
“The Chapter 7 Trustees”
We are pleased to announce that at least five Central District Chapter 7 trustees have agreed to attend, and there may be more. We are asking the membership to send in questions of concern and interest to the Chapter 7 trustee panel so that we may propose questions to our discussion panel in advance of the seminar.
At this time we are not yet disclosing the names of our panelists, as we do not want questions aimed at any particular trustee, but instead general questions that all trustee panelists can address. We are hoping to have a portion of our program include an “open forum” element where specific questions may be posed to specific trustees in attendance.
If you have any questions, please e-mail them directly to the CDCBAA Chapter 7 Trustee Liaison Committee chair, Jeffrey B. Smith at email@example.com. The CDCBAA board will assemble your questions and choose those they deem most appropriate considering our time constraints.
Public Counsel Program for new Volunteers
“BANKRUPTCY BASICS: INTRODUCTION TO CHAPTER 7 CONSUMER BANKRUPTCY LAW FOR NEW ATTORNEYS”
Honorable Maureen Tighe
Date: Thursday, September 24, 2009
Time: 9:00 am-1:00 pm
Location: 255 E. Temple Street 9TH FLOOR, RM. 952
This program is designed to provide training to attorneys interested in providing pro bono assistance to pro se debtors Introduction to Chapter 7 Bankruptcy Process Important changes under the New Bankruptcy Law Opportunities to get involved in pro bono work! Refreshments generously provided by Suite Solutions
To register please email your contact information to Maggie Bordeaux at firstname.lastname@example.org. Registration is limited. Attorneys interested in volunteering will be given first priority. *The program has been approved for 3 hours of MCLE Credit *
August 19, 2009
Judge Lisa Fenning (Ret.) Joins Arnold & Porter
Arnold & Porter LLP is pleased to announce that Lisa Hill Fenning has joined our firm’s bankruptcy and corporate restructuring practice as a partner in Los Angeles. As a former bankruptcy judge and a very experienced bankruptcy lawyer and litigator at prominent law firms, she brings to the firm an exceptional background and a reputation for outstanding client service.
Lisa will be working with a team of 20 lawyers in Arnold & Porter’s well-regarded national bankruptcy and corporate restructuring group, which is ranked in the No. 1 band in Washington, DC by Chambers USA 2009.
Chair, Bankruptcy and Corporate Restructuring Practice
© 2009 Arnold & Porter LLP.
California Bankruptcy Judge Rules that Completely Unsecured Secured Debt is Unsecured for Chapter 13 Eligibility Purposes
In re Smith, --- B.R. ---, 2009 WL ------------ (unpublished to date)(Bankr. C.D. Cal. Aug. 2009, Tighe. J.)
Issue: Is secured debt which is entirely unsecured because of the value of the collateral, treated as secured or unsecured for chapter 13 eligibility purposes?
Holding: Completely unsecured secured debt is unsecured for chapter 13 eligibility purposes.
This opinion rules on three similar cases. In each, the debtors filed Lam motions which were granted (one was by stipulation). If the debt covered by the Lam motion is added to the total unsecured debt, the debtors were well over the chapter 13 limits in Section 109(e). Lam motions apply usually to junior mortgages which are completed underwater. A Lam motion which is granted permits a chapter 13 plan to treat the debt as unsecured in the plan and extinguishes the lien at the end of the plan.
Judge Tighe first dealt with the issue of whether the “undersecured debt is ‘liquidated.’” The argument is that it is unknown on the filing date whether the Lam motion will be granted. Judge Tighe responded that usually the Lam motion requires only a simple hearing and that makes the debt liquidated.
Judge Tighe next dealt with Scovis, 249 F.3d 975, 981 (9th Cir. 2001) which required a judgment lien avoided under Section 522(f) to be treated as unsecured for eligibilty purposes. The debtors argued that Scovis does not apply because the undersecured lien there was a judgment lien, not a consensual lien. But Tighe said that if the chapter 13 is dismissed, the judgment lien comes back, same as Lam motions.
The debtors also argued that even after the Lam motion is granted, the debt is secured, at least until the discharge is entered. Tighe said that 506(a) says the debt is unsecured and 506(d) says that the lien is void “for bankruptcy purposes.”
Next Tighe dealt with the issue that 1322(b)(2) prevents the debtor from modifying loans when the collateral is the debtor’s residence. She writes, debtors “wish to extend the limitation placed on modifying a partially secured trust deed to wholly unsecured junior liens on the primary residence.” She acknowledges that there is a “problem with applying Scovis and Soderlund to debtor’s primary residence indebtedness.” She concludes, “In order to avoid treating a lien one way for confirmation and another for eligibility, and to treat the partially secured senior trust deeds consistent with Nobleman and Zimmer, any lien which is partially secured on debtor’s primary residence will be treated as a secured debt for §109(e) purposes as well.”
Judge Tighe invited appeals at the end of the ruling and said she would consider stays pending appeal. She also said she would consider certifying the matter for direct appeal.
August 18, 2009
Supreme Court Sets Oral Argument in Schwab v. Reilly - November 3, 2009
The Supreme Court has set oral argument in Schwab v. Reilly (08-538) for November 3, 2009, I think at 11:00 a.m. This is the case that will decide whether an exemption claimed on Sched C protects the asset or some specific amount of the asset. When a debtor claims stock for example as having a value of $10,000 and then exempts $10,000, is the stock exempt or just $10,000 of the stock? In the 9th Circuit it is clearly just the value. The trustee's failure to object to the exemption does not prevent him from selling the stock a year later; he must give the debtor the exemption amount of course. In Schwab v. Reilly, the circuit court ruled that saying something is worth x and then exempting x results in a full exemption for the asset, not just the amount.
I am going to go to Washington to hear oral argument for one of the three cases before the Supreme Court this term. The other cases deal with the Debt Relief Agency rules and the effect of confirmation of a chapter 13 plan. I'm leaning towards the confirmation order issue but have to see when argument is set.
Circuit Court of Appeals Cases from Last Week
9th Circuit Court of Appeals, August 14, 2009
Ransom v. MBNA Am. Bank, --- F.3d ---, 2009 WL ------------- (above-median income chapter 13 debtor may not deduct from his projected disposable income a vehicle "ownership cost" for a vehicle he owns free and clear)
Supreme Court of California, August 10, 2009
Imperial Merchant Services, Inc. v. Hunt, ---- Cal ----, 2009 WL ------------- (2009)(In a bankruptcy action decided on request of the Court of Appeals for the Ninth Circuit, the Supreme Court of California concludes that the statutory damages prescribed in Civil Code sec. 1719 are exclusive in the sense that a debt collector who recovers a service charge on a dishonored check pursuant to Civil Code sec. 1719 may not also recover prejudgment interest on damages under Civil Code sec. 3287)
Thanks again to Findlaw.com.
August 16, 2009
Bankruptcy Court Rules that Non-Payment of Tuition is not a Non-Dischargeable Student Loan
In re Moore, 407 B.R. 855 (Bkrtcy E.D. VA, June 2009)
Issue: Did an on-line law school violate the discharge injunction when it refused, postpetition, to award the debtor his degree and certify his status to employers? Is the unpaid tuition a non-dischargeable student loan?
Holding: Yes, the refusal violates 524. It is not a non-dischargeable student loan.
This chapter 7 debtor owed about $5,800 to Novus Law School. After the petition was filed, Novus “sent the debtor an email on June 10, 2008, informing him that if the debt owed to it was ‘liquidated through bankruptcy,’ he ‘will not be eligible to receive [his] degree’ nor would Novus ‘validate, certify, and/or verify [his] graduate status to employers.’” The debtor filed a motion for contempt for violating the discharge injunction. The debtor “testified that he has completed all of his course work, including the final project, but has not yet received his degree or final transcript.” “The issues here are whether Novus's refusal to issue a degree or transcript because the debtor has not paid the tuition where the debt was discharged in bankruptcy is a violation of the discharge injunction, and if so, whether the debtor is entitled to an award of damages.”
The bankruptcy court found the school in contempt. It ruled that the damages would be “$10,000.00, to be paid within 30 days, unless within that time it has issued the debtor a degree and a transcript reflecting completion of the degree requirements and has filed with the clerk evidence of its compliance.”
The court first ruled that the debt was not a non-dischargeable student loan. “In the present case, the debt owed by the debtor to Novus can be characterized as an unpaid tuition debt. Such a debt is not an ‘educational benefit overpayment,’ which is an overpayment from a program like the GI Bill, where students receive payments even though they are not attending school. Nor does the debt fall into the ‘obligation to repay funds received’ category, because there is no evidence indicating that the debtor received any funds from Novus.” The “unilateral [decision] not to pay tuition when it came due’ did not constitute a loan and that the unpaid tuition debt owed was therefore not excepted from discharge under § 523(a)(8).” “Of significance to the court was the fact that the debt owed to the school did not involve an advance of cash or exchange of money, nor did the debtor make any arrangements to borrow money from the school or sign a promissory note .”
As to the discharge injunction, the court held that the school violates the stay when it “withhold[s] a debtor's transcript . . . for no other purpose than to compel the payment of a pre-petition debt.”