August 3, 2010
California State Bar Bankruptcy Law Advisory CommissionMore shameless self-promotion. I have been appointed for a three year term to the California State Bar Bankruptcy Law Advisory Commission. Starts on September 26, 2010. As my grandson told me in the outfield at a Diamondback's game, "Now we're gonna see some action."
August 2, 2010
Exemption Fallout from Schwab
I have filed two chapter 7 cases recently where the debtors have no equity in their home and therefore the California wild card exemption is available to them. In both cases, the debtors owned an interest in a small business or partnership or business equipment that they and I are satisfied have no value; the businesses because of the existing debt of the business and lack of buyers. So I am listing the assets on schedule B at a value of zero but the exmeptions on schedule C as the full amount of the wildcard, roughly $23,000. So schedule C says, "Asset - interest in partnership - value zero. Amount claimed exempt - $23,000." I expect to get some guff from the trustee who will say there must be some value if we are exempting it and if no value, the exemption should be zero. I will point to Schwab and I am sure I am right.
It does raise three questions, 1. why not list the exemption at zero and if the trustee goes to sell, amend the exemption? 2. why not list the exemption as "100% of value," as suggested by Clarence Thomas in Schwab? 3. why not list the value at $23,000 and the exemption the same?
Answers: 1. The trustee can seek to surcharge the exemption if the trustee does yeoman's work (according to him/her) discovering the value is actually higher than that listed on the schedules. 2. There is no exemption for 100% of the asset so you are forcing the trustee to object and that is sanctionable in my book. 3. This is the toughest question. Listing any amount, $5,000 - 10,000, 20,000 - gives the appearance that some process was used to value the asset when each of the numbers is a guess - and where "zero" is a firm belief. Clients ask me if they should get an appraisal ahead of time. I tell them no. An appraisal is expensive, a guess by the appraiser, and the trustee does not care about the appraisal - he/she cares only about the amount someone will pay her for it today in cash.
I practice, of course, in the Central District of California. We have roughly the same number of filings each month as the entire state of New York and the entire state of Texas combined. Trustees here do little more than read the schedules (that is not a knock). The message the schedules send is important. A business valued by the debtor at $20,000 is worth looking into. A business valued at zero is usually not. Given Schwab, the asset should nevertheless be exempted to the maximum.
August 1, 2010
Circuit Court of Appeals Cases from Last Week
Still catching up!
Third Circuit, 07/13/2010
In re Visteon Corp.
Debtor-employer may not terminate provision of retiree health and life insurance benefits without complying with section 1114.
Sixth Circuit, 07/22/2010
In re: Darrohn
Bankruptcy court's confirmation of chapter 13 plan reversed in light of the Supreme Court's recent decision in Hamilton v. Lanning where: 1) the bankruptcy court erred when it determined that it was required to use the income calculated on Form B22C, which was derived from the six-month look-back formula, rather than debtors' current monthly income; and 2) the bankruptcy court erred in failing to account for the debtors' intent to surrender properties securing the mortgages in considering reasonable necessary monthly expenses.
Ninth Circuit, 07/16/2010
In re Penrod
Creditor does not have a purchase money security interest in the "negative equity" arising from a vehicle traded in at the time of a new vehicle purchase. (Note: I filed an Amicus Brief in this case)
Tenth Circuit, 07/20/2010
In re Roser
Chapter 7 trustee cannot avoid a creditor's lien, where Colorado Certificate of Title Act (CCTA) did not supersede Colorado UCC section 4-9-317(e) because the provision did not govern the manner or timing of the perfection of liens, and governed only the priority of a lien and was not inconsistent with the CCTA.
Eleventh Circuit, 07/19/2010
In re Tennyson
Above median income debtor, with negative disposable income, may not confirm Chapter 13 bankruptcy plan to last for less than five years when the debtor's unsecured creditors have not been paid in full.
Thanks to Findlaw.com.
Court of Appeals Cases from Last Week
Fifth Circuit, 07/07/2010
In re Texas Pig Stands, Inc.
Trustee liable for a tax deficiency incurred in running the debtor's business, where the trustee exceeded his authority, violated the plan, and committed willful misconduct, and therefore the Trust Agreement did not limit his liability.
Seventh Circuit, 07/09/2010
In the Matter of Solis
Under the terms of the contingent fee agreement, the attorney is entitled to a percentage of only the money he actually recovered from other parties, not a percentage of the money the debtor had received earlier.
Eighth Circuit, 07/09/2010
In re Polaroid Corp.
In a creditor's appeal of the bankruptcy court's approval of a debtor's sale, free and clear of any liens, of its assets, the appeal is dismissed where no party obtained a stay of the sale pending appeal, and thus the appeal was moot.
Ninth Circuit, 07/07/2010
Ta Chong Bank Ltd. v. Hitachi High Techs. Am., Inc.
Complaint dismissed where claims were based solely on plaintiff's interest in the third party's accounts receivable, which the bankruptcy court had determined to be property of the third party's bankruptcy estate.
Eleventh Circuit, 07/09/2010
In re Mouzon Enters., Inc.
Order resolving a claim that has been objected to, but not litigated, does not constitute an order "entered without a contest" for the purposes of Fed. R. Bankr. P. 9024.