March 23, 2010

Supreme Court Affirms Espinosa

The unanimous opinion in United Student Aid Funds, Inc. v. Espinosa can be accessed here.  The outcome is not too surprising.   

March 23, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

March 22, 2010

Hamilton v. Lanning Transcript

The transcript is here.  I will be uploading a summary on Scotus Wiki tomorrow.  JH

March 22, 2010 in Supreme Court | Permalink | Comments (1) | TrackBack

March 15, 2010

Great Article on John Paul Stevens by Jeffrey Toobin

John Paul Stevens will be 90 on April 20, 2010.  You can access Jeffrey Toobin's short biography hereJohn_Paul_Stevens

March 15, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

March 14, 2010

Further Thoughts on Hamilton v. Lanning

Jan Hamilton

Just to put the whole thing in context, I went to the Marrama oral argument a few years ago.  One of the justices asked whether or not there are trustees in chapter 13 cases – I’m not kidding.  
I’m surprised the briefs don’t have more “big picture” arguments.  Congress makes the law, we do what Congress says – let Congress fix the problem if it isn’t working the way they intended and leave it at that.  In fact, if Congress were to meet tomorrow and pass a resolution something like “we intended the mechanical test,” there would be no discussion about whether it reaches an absurd result.  It reaches an absurd result only because it makes no sense in cases like Kagenveama to permit someone to pay less than they can afford.  But it makes no sense because we have this view of how it should work.  Pay as much as you can afford – that it the way it has worked since it was invented.  The briefs, even the amici briefs, jump right into the textual arguments and don’t seem to give the Supreme Court a way out.  That is what they will be asking the parties at oral argument.  
People are always surprised when I tell them that Congress can get rid of bankruptcy any time they want, or chapter 7, or the discharge, or require repayment of 50% of debts to get the discharge, or require 10 year plans, or 25% of the debtor’s income.  Bankruptcy is not a constitutional right (see In re Kras).  So Congress defined chapter 13 and defined the computation of the plan payment – “So what’s the problem?” (quoting Mona Lisa Vito in My Cousin Vinny).  Ms. Lanning does not qualify – I feel bad for the lady but she needs to tell her Congressman about her problem, not the Supreme Court.  
Requiring a debtor to “project” income by looking back 6 months is silly I think but that’s what Congress did.  And permitting the plan to be modified the next day is silly.  At oral argument in Milavetz, one attorney said the DRA rules are silly – Scalia responded, “where does it say it’s unconstitutional for Congress to make stupid laws.”  (That’s a direct quote)
I think that for the court to affirm Lanning they are going to have to ignore the plain language Congress wrote and try to fix the mess it created.  The only possible way they affirm is to say that the mechanical test is the way it works except in weird cases.  Stevens will write that Congress knew how it worked before and since the code (forget legislative history) specifies the mechanical test which doesn’t always fit right, Congress must have intended the old way to continue in the weird cases.
Milavetz teaches us that the Court hates to say Congress blew it.  Everyone – all the briefs except Hamilton's - seem to agree that the mechanical test is the way it works except in weird cases.  So it’s a matter of what do we do about the weird cases.  I say let Congress fix it.  The “projected,” the “as of the effective date of the plan,” the “in the future” are problematic but everyone agrees that they are not problematic except in weird cases.   So let Congress fix it.  
For whatever its worth, I file about one chapter 13 a year and have not had a chapter 13 plan confirmed in probably twenty years.  It may be easier for me since I am not in the trenches in chapter 13 world.   

March 14, 2010 in Supreme Court | Permalink | Comments (1) | TrackBack

My Article on Hamilton v. Lanning on

My article on Hamilton v. Lanning has been posted on  You can access it here

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March 11, 2010

Some Thoughts on Milavetz - Disappointing Decision and Opinion

As I have said, the issue of whether attorneys are DRAs was really a no brainer.  Congress makes the laws and bankruptcy assistance is defined in section 101(4A) as "providing legal representation with respect to a case or proceeding..."  A DRA is someone who provides bankruptcy assistance.  The real issue was the part of section 526(a)(4) which says a DRA cannot "advise an assisted person to incur more debt in contemplation of” filing bankruptcy.  As Justice Roberts pointed out at oral argument, there is all kinds of advise relating to incurring debt in contemplation of bankruptcy which might be perfectly appropriate but there is also all kinds which is inappropriate.  So where is that line and if the attorney is worrying about where the line is, doesn't that chill speech between the client and attorney? 

Before I complain about the opinion, I would point out that I long ago stopped worrying about whether I can tell the prospective client that it is okay to rent a different apartment or buy a new car or borrow money from mother to pay the fees "in contemplation of filing bankruptcy."  It is just too clear that that that is appropriate advice.  But I am aware of attorneys who are afraid and wobble giving that kind of advice.


So the Supreme Court ruled that the restriction only prohibits bad stuff and there are good reasons for Congress to do that so it's okay.  But Sotomayor really sort of wanders in the opinion trying to tell us what "bad advice is" which is good but then makes broad statement which resurrect the fears.  For example, "we conclude that §526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing forbankruptcy, rather than for a valid purpose."  I tease my students regularly about words I hate and tell them don't utter those words in my classroom or on the test.  I do that to emphasize that words are important and because they look up from their laptops and blackberrys when I say something funny.  The worst is "bad faith."  The second worst is "valid."  What does that mean?  I can give my client advice as long as it is for a valid purpose? 

Sotomayor writes, "advice to incur more debt because of bankruptcy, as prohibited by §526(a)(4), will generally consist of advice to 'load up' on debt with the expectation of obtaining its discharge—i.e., conduct that is abusive per se."  That's good to hear and helps a lot - it does. "[W]e conclude that §526(a)(4) prohibits a debt relief agency only from advising an assisted person to incur more debt when the impelling reason for the advice is the anticipation of bankruptcy."  "Impelling"?  Some definitions from google, "To urge to action through moral pressure; drive"  "markedly effective as if by emotional pressure" "to urge or drive forward or on by or as if by the exertion of strong moral pressure."  Huh?   

She helps us understand impelling by saying, "Covered professionals remain free to 'tal[k] fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.'”  "Section 526(a)(4) requires professionals only to avoid instructing or encouraging assisted persons to take on more debt in that circumstance."  So I can tell them the consequences of various alternatives, just don't impell them to do one or the other - don't instruct or encourage the conduct.  "Under our reading of the statute, of course, the prohibited advice is not defined in terms of abusive prefiling conduct but rather the incurrence of additional debt when the impelling reason is the anticipation of bankruptcy."  "It would make scant sense to prevent attorneys and other debt relief agencies from advising individuals thinking of filing for bankruptcy about options that would be beneficial to both those individuals and their creditors."  "Section 526(a)(4) by its terms prevents debt relief agencies only from 'advis[ing]' assisted persons 'to incur' more debt.  Covered professionals remain free to 'tal[k] fully and candidly about the incurrence of debt in contemplation of filing a bankruptcy case.” 

"Our construction of §526(a)(4) to prevent only advice principally motivated by the prospect of bankruptcy further ensures that professionals cannot unknowingly run afoul of its proscription.  Because the scope of the prohibition is adequately defined, both on its own terms and by reference to the Code’s other provisions, we reject Milavetz’s vagueness claim."  In footnote 5 there is a helpful comment, "Reiterating the significance of such dialogue, we note that §526(a)(4), as narrowly construed, presents no impediment to “ ‘full and frank’ ”
discussions."  But don't give advice "principally motivated by the prospect of bankruptcy"?  What do you think I do all day?

So we have lots of sound bites to show the court in the event the UST or a client comes after us - something I'm not sure has ever happened.  But what about advice designed to help the client pass the means test, i.e., stop paying your taxes which will be a priority debt and deductible on the means test.  Buy a new car which will be deductible on the means test so you can pass.  Is that "valid."  I guess if you say, "Mr. Client, if you buy a new car whether you need it or not, you will pass the means test," that is only "frank discussion" or it is impelling the debtor to incur debt only because the debtor wants to file and cannot otherwise file.  Someone who files when they could not otherwise file would hurt creditors I assume.  That makes it not a valid purpose?

I better get to my office.  Let me know what you think.     

March 11, 2010 in Supreme Court | Permalink | Comments (3) | TrackBack

March 08, 2010

Supreme Court Rules on Milavetz

We are debt relief agencies as I predicted but the Supreme Court refused to rule that the speech restrictions in section 526(a)(4) are overbroad, for which I am shocked given the tenor of the oral argument. "[W]e conclude that §526(a)(4) prohibits a debt relief agency only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose."  It is essentally a unanimous decision with Scalia and Thomas writing concurring opinions.  You can access the opinion here. 

March 8, 2010 in Supreme Court | Permalink | Comments (2) | TrackBack

March 01, 2010

Supreme Court Transcript in Skilling

You can access the transcript from today's oral arguement here.  Honest services or you go to jail for 26 years?  I need to study this further. 

March 1, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

February 28, 2010

Trustee's Reply Brief in Lanning

Jan Hamilton has filed his Reply Brief in Hamilton v. Lanning.  You can access it here

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February 26, 2010

FDCPA Program Tomorrow at Southwestern Law School

Don't forget the program tomorrow - Southwestern Law School.

Here is a request for cert being considered by the Supreme Court:

Title: Javitch, Block & Rathbone, LLP v. Hartman
Docket: 09-606
Issue: (1) Whether various provisions of the Fair Debt Collection Practices Act are unconstitutional as applied to literally true but potentially misleading representations in pleadings under the First Amendment, Fifth Amendment, and the Commerce Clause; and (2) whether evidence that a debt collector acted in good faith and reasonably under the circumstances qualifies for the FDCPA’s “bona fide error” defense.

For the briefs go to 

February 26, 2010 in Supreme Court | Permalink | Comments (7) | TrackBack

February 21, 2010

Comments on Lanning

I have submitted my article on Lanning to the ABA Preview magazine. It will be published I believe at the end of this month.  I knew I was in trouble when I sent a draft copy to one of the local chapter 13 trustees and her comment was that it was perfect.  My buddy, fellow debtor bankruptcy attorney, and resident bankruptcy genius, Peter Lively, had other thoughts.  Peter was the attorney for the debtor in the companion case argued with Kagenveama.  Here are his comments on my article and on Lanning:

    Jon, I think this article is a great opportunity to show how the Supreme Court hasn't been given the whole picutre.  The Ch13 T has already won the battle by limiting the issue presented only to the computation of a plan payment during a predetermined plan duration.  This is essentially an 1329 modification issue.  It's unfortunate that the Supreme Court isn't being presented with the more difficult question presented to the 9th Circuit.
    I.  The Real Issue:
    The issue is "how did the law change from requiring a 36 month plan with the court's discretion over a budget." 
    My argument is that the best interpretation of BAPCPA is that it essentially left unchanged the debtor's 36 month plan duration requirement coupled with the court's discretion over household expenses and ADDED a mechanical test ONLY to determine a fair amount general unsecured creditors of above-median-income creditors should receive.  Remember 1325(b)(4) [ACP determination] only exists to modify 1325(b)(1)(B) derivation of the amount to be received by the unsecured creditors [general since priority is deducted above the line in the formula; this is straight statory language and a departure from NACBA's political position].  Therefore, what we have now is a base requirement of 36 months and an objective fairness test for general unsecured creditors of above-median-income debtors to receive at least 60 x PDI (an objective test) before a judge can confirm a plan.

    The Ch13 T already won the battle in Lanning because he has the court missing the point entirely by presuming a 5 year duration for above-median-income debtors.  The rest is a no-brainer, go with I-J since we have 1329 anyway.
    If you don't interpret it this way, you get a debtor $1 above median stuck with 2 more years of duration than the debtor $1 below median.   
    II.   Public Policy:
    Remember my brief from Garcia:
   In addition to the argument presented above in favor of interpreting the new Code provisions as not mandating a five year plan for above-median-income debtors, such an interpretation promotes fairness in the bankruptcy system generally and promotes good public policy. The consequences of interpretation of ACP as durational would be to discourage debtors generally from earning more income for fear of becoming above-median-income debtors who would be punished for their better earnings and desire to pay creditors with two additional years of court administration before they can obtain a "Fresh Start."

    It is better public policy to provide people with an incentive to earn more income when faced with changed circumstances that result in financial difficulty and to allow debtors electing Chapter 13 over Chapter 7 to voluntarily pay some of their debts, than it is to provide people with a disincentive to earn more money under those circumstances where doing so may result in the denial of a "Fresh Start" for five years. An above-median-income debtor should not be faced with servitude for 60 months and payment of all future actual disposable income during that duration without any hope of pre-payment through subsequent diligent efforts (second or third jobs), family contributions or hoped for windfalls. 

    A plan duration requirement, independent of an opportunity to pre-pay, will obviously deter all debtors from electing Chapter 13 to voluntarily pay their debts. Contrary to the well-funded political forces arguably influencing the BAPCPA and a media blitz focusing on fraudulent debtors, it has been established historically that most debtors are not fraudulent, but suffer from a variety of life’s unanticipated and unplanned for hardships.1 Sound public policy favors a system that encourages debtors to voluntarily pay some of their debt and a reasonable expectation of fairness to above-median-income debtors who elect to do so relative to their below-median-income brothers.

    Administration of Chapter 13 cases will be significantly less burdensome on all parties where a specific dollar amount is calculated under subsection 1325(b)(1)(B) to be paid over any feasible plan length up to five years. Chapter 13 cases are likely to be more successfully completed where debtors have the certainty and the incentive to pay the specific amount derived up-front as opposed to the punishment of a virtual debtor’s prison and disincentive to get ahead. 
Footnote:   "The honest desire of debtors to pay debts rather than go through liquidation and wholly defeat the claims of creditors was verified by the Report of the Bankruptcy Commission 40 years later [following Judge Thomas D. Thacher’s exhaustive study of the administration of bankruptcy throughout the United States in the late 1920s and early 1930s]. The Commission noted that the overwhelming majority of debtors were not crooks or dishonest, but victims of circumstances. Report on Bankruptcy Laws, H.R. Doc. No. 137, 93rd Cong. 1st. Sess. Part I, 45-46 (1973)." Norton Bankruptcy Law and Practice 2ND, Volume 5, Chapter 113, 113-4, 5.
    III.  Other Points
    Its not a MEANS TEST in Chapter 13.  That characterization also presupposes that duraiton is fixed at 5 years and ignores the statute requirement of calculating a fair total payment to Class 5.   
A couple more points:
For a decreasing average income debtor, NACBA's brief is the right approach since this debtor didn't belong in Ch13.  Alternatively, Jim listserve point should be highlighted.  101(10A) allows the court to determine CMI using a different period if the debtor doesn't file the form B22 with the petition.  Both are planning issues requiring some knowlege of the law (CMI calculation).
For increasing average income debtors, their plans are subject to 1329 modification and contribution of all disposable income during the duration they propose.  I just don't believe that there is a requirement of a 5 year plan duraiton except by election.  This pulls in the constitutional arguments and those cases are all about slavery and bondage, etc.  

February 21, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

February 11, 2010

Solicitor General Amicus Brief in Lanning

Amicus Brief supporting the debtor and the "forward looking" test.  All the briefs can be found on the Scotus Wiki page for this case which I edit. 

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February 03, 2010

ABA Preview of the Supreme Court Magazine

This is a great publication I just discovered.  I am going to write the preview of the Lanning case, oral arguments coming in March. 

The current highlights: (on the right hand column)

The archives:

(Click on the link for “Complete PREVIEW Article” to get the url for the Preview for a specific case.)

February 3, 2010 in Article Reviews, Supreme Court | Permalink | Comments (0) | TrackBack

January 26, 2010

Supreme Court in Recess for 3 Weeks


Today at the Court
Beginning of a recess until mid-February
Erin Miller | Tuesday, January 26th, 2010 10:15 am
Today the Court is in recess and no non-capital orders are expected.  The next session of the Court is February 19, when the Justices will meet for a private conference.  As such, we expect this to be the final Today at the Court post until then.

Nice job!  Didn't they just get back from Christmas vacation?

January 26, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

January 21, 2010

Short Article on Justice Ginsburg

Columbia Law School Magazine

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January 14, 2010

Oral Argument in NFL Antitrust Case

The transcript of oral argument is here. 

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January 07, 2010

Oral Argument Next Week in NFL Antitrust Case

Oral argument in American Needle v. NFL is set for next Wednesday.  You can acess the briefs here.   

January 7, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

January 05, 2010

Oral Argument set in Hamilton v. Lanning

Mon., March 22:

Hamilton v. Lanning (08-998) — formula for bankruptcy courts in deciding future income of debtor filing under Chapter 13

January 5, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack

January 02, 2010

Annual Report on the Federal Courts - 2009

Short and sweet from C.J. John Roberts.

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January 01, 2010

NACBA Amicus Brief in Lanning

The brief can be accessed here.

January 1, 2010 in Supreme Court | Permalink | Comments (0) | TrackBack