Bankruptcy Case Law

[LadynRed]

I thought it would be helpful to add some Case Law links here for bankruptcy decisions.

THE FIRST CIRCUIT STATES THAT A SECURED CREDITOR'S HOBSON'S CHOICE BETWEEN REPOSSESSION AND MONEY CAN CONSTITUTE A DISCHARGE INJUNCTION VIOLATION

On September 1, 2006 the First Circuit Court of Appeals handed down In re Pratt, No. 05-2453, which helps define whether a secured lender can just sit on its lien and do nothing with regard to taking possession of its property after a Chapter 7 discharge is entered without violating the discharge injunction.

The 1st Circuit found that GMAC WAS in violation of the discharge injunction when they refused to take possession of a surrendered vehicle in a Ch 7 case. So, if you're ever stuck with a worthless vehicle that the lender refuses to take, you may have recourse against them.
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Court upholds rule that it is the responsibility of the creditor to comply with the automatic stay and not the duty of the debtor to inform it of its violation.

In what is still an unpublished case, Idaho Bankruptcy Judge Jim Pappas upholds the basic tenant of law that says that a creditor is responsible for its own compliance with the automatic stay (or injunction of the court), and it is not the responsibility of the debtor to figure out how to prevent the violation. In In re Gorring, 05-42291 (Bankr. Idaho 7/7/2006)

http://www.stayviolation.com/2006/08...upholds_r.html
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[LadynRed]

A recent decision handed down by 7th Circuit Court of Appeals on March 13, 2007 entitled Ross v. RJM Acquisition Funding.

Bottom line.. if someone is trying to collect on a discharged debt DO NOT sue for FDCPA violations, but go for the jugular in bankruptcy court !!!

In this case a debt buyer sent dunning letters to the Debtor discharged in bankruptcy. The Debtor filed suit under the FDCPA in order to obtain statutory damages greater than any action damages, including attorneys' fees and costs. It is important to point out that litigation of a discharge injunction violation, although not statutory (and as a result often not referred to as a "private cause of action") allows for all the same recoveries under FDCPA, with the exception of the statutory damages of up to a $1,000.00, but the discharge injunction violation does not allow the creditor the same liberal defenses.

Read the rest here:
http://www.stayviolation.com/2007/03...may_not_b.html

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http://www.bankruptcyorlando.com/200...ts_i.html#more

2 more recent Fl. rulings on this issue.


In re Schwarz,(Bankr. SD Fla. Olson

The January 30, 2007 case of In re Schwarz, (Bankr. SD Fla. Olson) held certain real property as exempt from administration in the estate under 11 USC 522 (b)(3)(B) which allows for the exemption of any interest in property which the debtor held as tenants by the entireties to the extent that it is exempt from process under applicable non-bankruptcy law.

In this case, the debtor was unable to exempt his real property under the Florida homestead provision of Art. X Section 4 (a)(1) of the Florida Constitution as the new provisions of BAPCPA of 11 USC 522 (b)(3) required the debtor to use the Maryland exemptions as the debtor had not been a domiciliary of Florida for the entire 730 day period prior to filing of the bankruptcy case. The parties agreed that Maryland does not provide for a specific homestead exemption. Nonetheless, the debtor was able to exempt his entire interest in the real property in Florida as he held it as tenants by the entireties on the date of filing pursuant to section 522 (b)(3)(B).

It is significant that the Court looked to Florida tenants by the entireties law as the "applicable non-bankruptcy law" for such determination and not Maryland law.

Property held by a debtor in a tenancy by the entireties is exempt from the claims of individual creditors in bankruptcy under Florida common law with certain exceptions for joint creditors or fraudulent conveyances. In this case, there were no joint creditors nor any indication of a fraudulent conveyance.

Interestingly enough, section 522 (b)(3)(B) does not require the debtor to be residing in the property on the date of filing, but only requires that the debtor hold an interest in the property as a tenant by the entireties immediately before the commencement of the case. In this case, the debtor did not move into the property until after the filing of the case but held an interest in the property as a tenant by the entireties before the commencement of the case.

In Buonopane B.R M.D.Fla, 2007

Judge Williamson of the Middle District of Florida issued his decision in the case of In Buonopane B.R M.D.Fla, 2007 On January 26, 2007 in which he held that the cap imposed by BAPCPA on the state homestead exemption that a debtor can claim in residential property acquired within 1,215 days of the petition date applied only to the Florida homestead exemption that the debtor could claim under 522(b)(3)(A) and not to the separate entireties exemption available under section 522(b)(3)(B). Section 522(b)(3)(B) provides for the exemption of property held as a tenant by the entireties. This decision is in accord with Judge Olson's recent decision in the Southern District of Florida in the case of In re Schwarz of the S.D. Fla.).The Court stated while its ruling would appear to provide a way for a debtor to "end run" the $125,000 cap contained in section 522(p), that its ruling is consistent with the legislative history of section 522(p)(1) which was directed to close the "mansion loophole" and not against a state's common law on tenancy by the entireties..

All of the case law on "tenanct by the entireties" include inherently to only ONE maried debotor filing "married but not filing solo."

This strategy is worthless if both spouses have substantial unsecured debt in both names.

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Very interesting case involving high income debtors where the majority of the debt is business related.

http://www.ca3.uscourts.gov/opinarch/063199p.pdf

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Chapter 20's alive and well in the 4th Circuit.

http://west.thomson.com/bankruptcy/n...008-02-20.aspx

Chapter 13 Repeat Discharge Bar Interpreted

A provision of the Bankruptcy Code added by the Bankruptcy Abuse Prevention and Consumer Protection Act that restricts the ability of Chapter 13 debtors to obtain a discharge through a serial bankruptcy filing, 11 U.S.C.A. § 1328(f), did not apply to preclude the granting of a discharge to Chapter 13 debtors whose Chapter 13 filings were made more than seven years apart, the Fourth Circuit Court of Appeals has ruled as a matter of apparent first impression at the circuit level. Moreover, the Court of Appeals held, in a decision addressing a consolidated appeal from two Chapter 13 cases, a debtor is not precluded from filing in good faith a new Chapter 13 case by his ineligibility for a discharge under § 1328(f). Thus, the dismissal of the debtors' cases, sought by the standing Chapter 13 trustee under § 1328(f), was not warranted.

In one of the cases before the Court of Appeals, the debtor had previously sought Chapter 7 relief and obtained a discharge. Later that same year, the debtor filed a Chapter 13 petition to stop a pending foreclosure on his home. Although his confirmed plan, if effectuated, would fully pay all allowed claims, the debtor would not receive a discharge, given a default judgment obtained by the United States Trustee (UST), pursuant to 11 U.S.C.A. § 1328(f), on the ground that the Chapter 13 filing was made within four years of the filing of the debtor's Chapter 7 petition. The Chapter 13 trustee moved to dismiss the Chapter 13 petition under § 1328(f), contending that the debtor's ineligibility for a Chapter 13 discharge precluded him from filing a Chapter 13 petition. The Maryland bankruptcy court denied the motion to dismiss and confirmed the debtor's plan over the trustee's objection. On appeal, the district court affirmed.

In the second case, the debtors also filed a Chapter 13 petition to stop a pending foreclosure, and likewise obtained confirmation of a plan that would pay all allowed claims in full. These debtors had previously sought Chapter 13 relief, and obtained a discharge after five years of making plan payments. As in the first debtor's case, the Chapter 13 trustee moved to dismiss the debtors' current Chapter 13 petition, contending that they were ineligible to receive a discharge under § 1328(f)(2) and thus were ineligible to file a petition. According to the trustee, the statute barred a discharge in a Chapter 13 case filed within two years of the date of a discharge received in a prior Chapter 13 case, and thus applied to the debtors, who received their earlier discharge in the two-year period preceding their current petition filing. The UST opposed the Chapter 13 trustee's motion, arguing that the two-year period during which a discharge was barred ran from the date of the filing of the earlier Chapter 13 case and the date of the filing of the current Chapter 13 case. The Maryland bankruptcy court denied the Chapter 13 trustee's motion in part, finding that the debtors could file a petition even if ineligible to receive a discharge, and that the issue of eligibility for discharge was premature. The court ultimately concluded that the debtors were eligible for a discharge and confirmed their plan over the Chapter 13 trustee's objection.

The Chapter 13 trustee appealed from the district court's decision in the first case and obtained a direct appeal to the Fourth Circuit Court of Appeals in the second case. The appeals were consolidated. The appeals raised two issues requiring the interpretation of 11 U.S.C.A. § 1328(f). That statute indicates that a court cannot grant a discharge of debts to a Chapter 13 debtor if the debtor had received a discharge under one of two circumstances: in a case filed under Chapter 7, 11, or 12 during the four-year period preceding the date of the order for relief under Chapter 13, or "in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order."

The first issue addressed by the Court of Appeals concerned "whether the 2-year and 4-year periods described in § 1328(f) run from the date of filing of the previous bankruptcy petition or from the date of discharge with respect to the previous petition." This, the court said, was a matter of grammar. Focusing on the two-year period in § 1328(f)(2), but noting that the same analysis applied to the four-year period in § 1328(f)(1), the court explained that the question was whether the statutory language "during the 2-year period preceding the date of such order" modified the phrase "received a discharge" or the phrase "filed under chapter 13 of this title." The Chapter 13 trustee advocated a "discharge date to filing date" reading, contending that the phrase being modified was "received a discharge." The debtors, on the other hand, argued for a "filing date to filing date" interpretation, contending that the "during the 2-year period preceding the date of such order" modified the "filed under Chapter 13 of this title" language.

The Court of Appeals found the statutory language to be plain, adopting the debtors' "filing date to filing date" interpretation. This interpretation, the court explained, gave effect to the logical sequence of the language used. Moreover, it was consistent with the doctrine of last antecedent, under which a limiting clause or phrase is ordinarily read to modify only the noun or phrase which it immediately followed. In addition, the Chapter 13 trustee's reading rendered superfluous the statute's use of the word "filed." "In contrast to the Chapter 13 Trustee," the Court of Appeals said, "we believe that when Congress used the phrase 'filed under,' it meant 'filed under' and not just 'under.'"

In addressing the trustee's contention that a "filing date to filing date" interpretation would essentially render the statute meaningless, since most Chapter 13 plans run for five years, the Court of Appeals agreed with the reasoning of the bankruptcy court. That court acknowledged that many plans, on their face, were for five years, but pointed out that the Bankruptcy Code did not compel that result in all cases, and also allowed for one- or two-year plans in certain circumstances. The Court of Appeals noted, further, that many Chapter 13 plans were predicated on refinancings or property sales occurring in less than three years. A bankruptcy treatise, the court remarked, had taken the same plain-meaning approach to the statute, even though a "filing date to filing date" interpretation would cause the statute to be applied only rarely.

The Court of Appeals found additional support for its interpretation in the congressional preference for individual debtors to proceed via Chapter 13, rather than Chapter 7. The "filing date to filing date" interpretation served this preference, the court opined, whereas, as the debtors' case showed, a "discharge date to filing date" would produce results contrary to Congress's preference. Under the trustee's reading, the court explained, the debtors could not receive a discharge in a new Chapter 13 case, which would pay all claims in full, until two years after the date of their earlier discharge. Because their previous Chapter 13 plan paid at least 70 percent of the allowed unsecured claims, was proposed in good faith, and represented the debtors' best efforts, however, the debtors would have been eligible for a Chapter 7 discharge on the same day they received the previous Chapter 13 discharge. "This would produce the strange result that the [debtors] would not be able to receive a Chapter 13 discharge, which would pay the creditor claims in full, but would be permitted to file a Chapter 7 bankruptcy and thereby avoid payment of a larger portion of their outstanding debts," the Court of Appeals indicated. "The Chapter 13 Trustee's interpretation thus would encourage debtors that had intended to pay back all of their debts to instead opt for a Chapter 7 discharge merely because a Chapter 13 discharge would not be available to them at the height of their financial difficulties."

In summary, the Court of Appeals said, "we hold that under § 1328(f), a debtor may not obtain a Chapter 13 discharge in a bankruptcy filed within two years of filing an earlier Chapter 13 petition that resulted in a discharge, or within four years of filing an earlier Chapter 7, 11, or 12 petition that resulted in a discharge." Consequently, the debtors in the case at bar, whose earlier Chapter 13 filing occurred more than two years before the filing of their current petition, were not barred from receiving a discharge.

Turning to the second issue before it, the Court of Appeals noted that the debtor did not contest that he was barred from receiving a discharge under § 1328(f)(1). His case presented the question of whether such an ineligible debtor may still file a Chapter 13 petition. The Chapter 13 trustee contended that § 1328(f) was intended to end the proliferation of serial filings and bar filings by debtors who would be ineligible to receive a discharge upon the completion of a confirmed Chapter 13 plan. The Court of Appeals, however, agreed with the debtor that the unavailability of a discharge under § 1328(f) did not preclude a good-faith Chapter 13 filing.

The court first rejected the notion that § 1328(f) was an eligibility provision, an issue that was addressed, the court pointed out, by 11 U.S.C.A. § 109(e). The statute's plain language, the court said, "does not prohibit a debtor who is ineligible for a discharge from filing a Chapter 13 petition." Although the trustee contended that, in enacting § 1328(f), Congress was aware that the United States Supreme Court had interpreted similar Chapter 7 provisions as prohibitions on filings, the Court of Appeals found that the statute's plain meaning foreclosed resort to other statutes in interpreting it. Moreover, it remarked, the Supreme Court language relied upon by the trustee was dicta, and had not been applied by the bankruptcy courts in the manner urged by the trustee.

The Court of Appeals likewise rejected the argument that the unavailability of a discharge meant that the debtor's plan was proposed in bad faith, rendering the plan unconfirmable. Rather, it was only one factor to be considered in the determination of whether a plan was proposed in good faith. The court pointed out the possibility that Chapter 13 filings would not always be motivated by the availability of a discharge; a debtor could seek to use Chapter 13 merely to reorganize the debtor's financial life and pay off debt, and not to obtain a discharge. Given that the debtor's plan would pay all allowed claims in full, the court agreed with the lower courts that the debtor's Chapter 13 filing was made in good faith. In re Bateman, 2008 WL 283001 (C.A.4-Md.).

[LadynRed]

An Orlando bankruptcy court issued a decision which curtails the personal property exemptions for debtors who own their own residence. The case is In re: James Matthew Franzese, Case No. 07-3944-KSJ.

Basicallly, if you claim the homestead exemption, you can NOT have the $4k personal property exemption.

http://www.bankruptcyorlando.com/200...a-court-c.html

[FICOrebound]

Keep my homestead is worth more.

[LadynRed]

The case is not linked, mentioned at the bottom of the article:

Failure to Turnover Tax Refund Leads to Discharge Revocation

March 4, 2008 In January, the 8th Circuit Bankruptcy Appellate Panel affirmed a bankruptcy court ruling that revoked the discharge of a debtor who kept his tax refund. The debtor filed his petition on October 10, 2005 and his meeting of creditors took place about one month later. At that meeting, the chapter 7 trustee advised the debtor not to spend any tax refund without contacting the trustee. The trustee gave the debtor a handout which read in part:

Warning: Do not spend any of your tax refunds until you have received approval from my office, even if you have received notice from the Bankruptcy Court that a bankruptcy discharge has been entered. The bankruptcy discharge does not close your bankruptcy case or eliminate your need to turn over non-exemption assets. Failure to comply with the terms of this letter or to cooperate with me in the administration of your bankruptcy estate may constitute cause to revoke your bankruptcy discharge. You will receive only one notice from my office of non-exempt monies due your bankruptcy estate and upon non-compliance, I will seek to revoke your discharge.

The debtor received his discharge in January of 2006, and in February he filed his tax returns. His refunds totaled approximately $3,500, which was spent on living expenses.
In June of 2006, the trustee filed a motion to seek a Rule 2004 examination (which is similar to but not the same as a deposition) of the debtor. The trustee also requested that the debtor produce the 2005 tax returns. Debtor produced the returns, but did not appear for the examination. Later in June, the trustee made demand for $1,556.11 of the tax refunds: the amount of non-exempt assets that belonged to the bankruptcy estate. The debtor failed to do so.
In July, the trustee sought an order from the bankruptcy court seeking again to examine the debtor under Rule 2004 and requesting that the debtor bring the $1,556.11 to the examination. Debtor did not attend nor did he pay the amount.
The US Trustee filed a complaint seeking a revocation of the discharge for knowingly and fraudulently failing to deliver the refunds to the chapter 7 trustee. Debtor offered many reasons for why he spent the refunds, but those excuses were not believed. The debtor was warned, and in spite of the warning, spent the money. The discharge was revoked….all for $1,556.11. The case is Fokkena v. Klages, 8th Cir. BAP, 07-6051 SI.

Taken from: http://mcleodlawoffices.com/2008/03/...evocation.html

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Posting Sign About The Debtor Can Constitute A Stay Violation (Judgment Achieved On One Of Our Cases)
United States Bankruptcy Judge Bill Parker of the Eastern District of Texas issued JUDGMENT against a creditor in one of our adversary proceedings finding that posting a sign concerning the pre-petition debt owed by the Debtor constituted a willful violation of the stay. Worse for the creditor was the fact that the Court found that the creditor should pay actual and punitive damages of $21,820.00.

In James Bradley Collier v. Paul Hill the Court found that Hill's Mobile Home Parts & Service sold various mobile home parts and materials to Brad Collier prior to Mr. Collier filing a Chapter 13 bankruptcy, and Mr. Collier owed Paul Hill a pre-petition debt of $984.23.

Initial errors by Mr. Collier and the Bankruptcy Court failed to provide actual notice to Paul Hill and his company, Hill's Mobile home Parts & Service. However, after confirmation by Paul Hill that Brad Collier had filed Chapter 13 bankruptcy, Paul Hill engaged in two improper acts in violation of the automatic stay. First, he retained Josh B. Maness to represent him in regard to collection of the pre-petition claim. Mr. Maness sent a letter to Brad Collier's bankruptcy attorney, Jean H. Taylor, confirming the bankruptcy, yet demanding the full balance of the pre-petition debt. Misstatements were made in the letter that Mr. Maness attributed to an unfamiliarity as to how to use the Bankruptcy Court's PACER/ECF system. Regardless, the Court found the letter constituted a willful violation of the automatic stay issued in Mr. Collier's Chapter 13 bankruptcy because no good faith defenses are allowed as to stay violation. The Court concluded this "ill-informed conclusion based upon an insufficient investigation" was "not a technical violation based upon an innocent mistake" as "[t]his is precisely the type of behavior that the automatic stay is intended to preclude".

Based on the letter alone, litigation was not initiated. Jean Taylor contacted Josh Maness and informed him that his assumptions as stated in the letter were incorrect.

Second, and more concerning, Paul Hill and his company posted a large sign near a major intersection of US Highway 80 and FM 2199 in Scottsville, Texas, not far from where Brad Collier, his family, his friends, and his employer lived and worked, which read - "BRAD COLLIER OWES ME $984.23 WILL YOU PLEASE COME PAY ME!" (Emphasis in original). It is unclear if Mr. Maness encouraged the sign to be posted by Paul Hill, but he did continue to represent Mr. Hill in his refusal to remove the sign. It remained posted in public view for a period of 21 days, and Paul Hill only agreed to remove the sign at the hearing scheduled by the Bankruptcy Court on Brad Collier's requested expedited hearing for an injunction.

Following the precedent of the 5th Circuit Court of Appeals in Campbell v. Countrywide and In re Chesnut, the Bankruptcy Court found the sign constituted a willful violation of the automatic stay pursuant to 11 U.S.C. § 362(k).

Paul Hill vigorously contended that the posting of the Scottsville sign did not constitute a violation of the automatic stay, "[n]otwithstanding the actual languageusd in the sign" because it was not posted to collect a debt but rather "to inform the public that Collier wouldn't pay his debts and not to give him any credit". Mr. Hill testified that he had already "written off the debt" and that the threat of a judgment and the sign were intended to create embarrassment for Mr. Hill.

The Court found that "[w]hile embarrassing the Debtor in their shared community was certainly a motive of the Defendant, the Court finds that such a motive had an objective - to coerce the Debtor into paying his debt".

Mr. Hill contended throughout the litigation that the directive on the sign -- "WILL YOU PLEAS COME PAY ME!" - did not constitute an effort to collect a debt because there was no question mark at the end of the sentence. However, the Court found that the use of an exclamation mark in lieu of a question mark demonstrated that the opposite was true. "The exclamation mark transforms the sentence into a directive, which demands that the Debtor pay the debt." The Court further found that the Bankruptcy Code was clear. "Any effort, action, or demand by a creditor to collect a pre-petition debt violates the automatic stay".

Regardless of the stay violation, Paul Hill contended that he could not be sanctioned for his action of posting the sign because of his entitlement to exercise his free speech right under the First Amendment to the United States Constitution, citing Turner Advertising Co. v. National Serv. Corp. (In re National Serv. Corp.), 742 F.2d 859 (5th Cir. 1984). Since the Scottsville sign constituted free speech, Hill through his counsel contended, it could not be curtailed by 11 U.S.C. §§ 362(a) and (k).

As to this argument the Court found:

"While there are certainly components of speech involved in virtually every expression offered about the filing of a bankruptcy case, the automatic stay and the restrictions contained therein focus not upon speech but rather upon the restraint of actions -- actions that threaten the core objectives of the Bankruptcy Code and the judicial system designed to achieve those objectives. It proscribes conduct — conduct that threatens the “breathing spell” and the “fresh start” to which an honest debtor under this system is entitled as it fulfills the duty of full disclosure of its assets and liabilities — as well as conduct that threatens the efficient marshaling of those assets in order to insure a fair and equitable distribution to creditors. The scope of the automatic stay may at times incidentally impact free speech, but those isolated intrusions are justified in order to accomplish the significant governmental interest in providing uniform bankruptcy laws and an effective means by which to implement them".

Paul Hill's decision to continue with the sign and stating it was intended to embarrass Mr. Collier might have proved fatal. The Court awarded actual and punitive damages of $21,820.00 as against Mr. Hill.

http://www.stayviolation.com/2009/04...our-cases.html

What a moron! And he even had a lawyer. Talk about forming a circular firing squad!

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http://www.bankruptcylawnetwork.com/...e-preferences/

Balance Transfers Can Be Avoidable Preferences
By Wendell Sherk, Missouri Attorney on Apr 19, 2009 in Bankruptcy Cases & Legislation, Chapter 7 Bankruptcy, Featured, Missouri

Bankruptcy law allows a trustee to recover payments made to creditors on the eve of bankruptcy, even if the payment was made with borrowed money the debtor never touched, according to the Sixth Circuit Court of Appeals.

The situation is very typical. A consumer carrying too much debt gets an offer to transfer balances from one credit card to another, often with a low teaser interest rate. Feeling like they’ve just been offered a lifeline, they grasp it only to discover soon that the situation is just too far gone. And they file bankruptcy soon thereafter.

In this case, the court was confronted with these common facts. Since the balance transfer occurred within 90-days, the trustee argued that the bank which received the payoff should give it back as a preference. The bank argued n part that the debtor didn’t really give up anything of value — her estate was not diminished — by the payment. The court shot this argument down.

The court reasoned that since the debtor exercised control over the loan proceeds (by writing the transfer check), this was enough. Relying on precedent, the court reasoned that the “determinative factor in the diminution-of-estate analysis is the degree of control exercised by the debtor over distribution of the funds.” In other words, because the debtor could have taken the cash and held it as an asset, or used it to repay all creditors equally, the ability to direct the funds to only one creditor was the decisive fact.

At one level, of course the decision is obviously right. The law should keep up with evolving technology and commerce. Simply because you can direct one bank to pay another bank on your debts without actually taking the money in your own hands should not mean the substance of the deal is ignored.

And clearly one of the critical features of preferences is at work here. One creditor is getting treated better than the others on the eve of a bankruptcy filing. One of the reasons a preferential payment is “avoided” in bankruptcy is to discourage creditors from pushing their debtors so hard that they either become insolvent or to drive them into bankruptcy. In theory, it ought to encourage creditors to work with debtors in ways that help them avoid bankruptcy.

In reality though, these balance-transfer-as-preference decisions don’t quite fit the model well. After all, in the case of consumer debts, the balance transfer does nothing to make the consumer less solvent. It moves the “hot potato” of debt from one place to another. And it may actually improve the consumer’s solvency in that a lower interest rate and payment may make it more likely they could avoid bankruptcy — as is almost always the idea behind such transfers.

In theory, these decisions would not do anything to discourage such credit offers from banks, they might even slightly encourage them because the new lender may recover something from the bankruptcy when it would not have otherwise.

On the other hand, as most credit card loans are made by only a few institutions, it is almost as likely that such decisions will reduce the overall offer of balance transfer loans in the long run. These days, the large credit card banks act very similarly, when one raises a fee, the others seem to follow suit shortly. Any given large bank is likely to have to give up more preference recoveries — much of which may be absorbed in trustee fees and costs in the average small consumer case — than it ever recovers from trustee distributions. In an era of tightening credit, it might make sense for such lenders collectively to reduce the balance transfer options for its weakest customers.

some additional info:

6th Circuit Rules that Transfer by "Convience Check" from One Credit Card to Another within Preference Period is an Avoidable Preference to Recipient
Brief by Roksana Moradi, third year student at University of West Los Angeles School of Law.

MBNA Am. Bank, N.A. v. Meoli, --- F.3d ---, 2009 WL 961209 (6th Cir. 2009)

Issue: Are “convenience checks” written by a debtor on a credit card account and sent to a different credit card as payment within the preference period, preferential transfers within the meaning of 11 U.S.C. §547(b)?

Holding: Yes.

Debtor Sharrene Wells wrote two “convenience checks” from her Chase credit card account and sent the checks to MBNA during the 90-day period preceding her petition for bankruptcy protection. Chase Bank had offered these checks and advertised that they could be used to “transfer balances, pay bills, make a purchase, [or] get extra cash.” The chapter 7 trustee sued MBNA to avoid and recover, among other transfers, the amount of the two $5,000 convenience checks. The trustee filed a motion for summary judgment arguing that these were preferential transfers within the provisions of § 547(b). The bankruptcy court granted the trustee’s motion and entered a judgment against MBNA. MBNA appealed to the Bankruptcy Appellate Panel which affirmed.

The 6th Circuit affirmed also. The issue was whether the two $5,000 convenience checks were transfers by the debtor of the debtor’s interest in property. The Appellate Court relied on McLemore v. Third National Bank (In re Montgomery), 983 F.2d 1389 (6th Cir. 1993) in which the court explained that cash equivalents, like credits in a bank account, may constitute property of the debtor. The court explained that the degree of control a debtor exercises over the property transferred is the principal determinant of whether the debtor has “‘an interest’” in the property such that its transfer may be avoided under § 547(b).

The court stated, “Wells was free to use the convenience checks for any reason she chose, including paying down her credit card balance with MBNA.” Further, that “ in making her decision to do just that and then drawing the checks on her Chase Bank credit card account, Wells exercised complete control over the funds drawn, in which she had an ownership interest.”

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Far to long to copy and paste

http://west.thomson.com/practice/ban...1/default.aspx

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Means Test Vehicle Ownership Expense: Another Appeals Court Says “Yes” Even When There’s No Car Payment
By Craig Andresen, Attorney at Law on Jun 15, 2009 in Bankruptcy Cases & Legislation, Featured, Means Testing

The U.S Court of Appeals, Fifth Circuit, recently ruled that on the means test’s Form B22A, a vehicle ownership expense is allowed even when the debtor has no car payment. The court’s ruling in In re Tate, No. 08-60953 (5th Cir. June 10, 2009), agrees with the only other circuit court opinion on this issue, In re Ross-Tousey, 549 F.3d 1148 (7th Cir. 2008).

Both Tate and Ross-Tousey agree that such an expense is allowed, making it easier for a debtor whose motor vehicle is owned free and clear of lease or car payments to pass the means test. That these courts are among the highest federal appeals court authorities makes these rulings highly persuasive, even in circuits whose appeals courts have not yet spoken on this issue.

In Tate, the appeals court noted that some lower federal courts had followed the Internal Revenue Manual approach to the question of vehicle ownership allowance expenses. Under the IRM approach, a debtor can deduct for a vehicle ownership expense only if he or she has an “applicable” or “relevant” ownership expense. No lease or car payment means no vehicle ownership expense deduction on the means test, under the IRM approach.

The other approach, followed by the appeals court in both Tate and Ross-Tousey, is the plain language approach, which simply interprets the bankruptcy code’s section 707(b)(2)(A)(II)(i) to refer to a debtor’s specific geographic location and the number of vehicles the debtor owns. Thus, the debtor’s “applicable monthly expense” for the vehicle ownership allowance is the expense specified in the Internal Revenue Manual for the debtor’s location for his or her number of vehicles. Having an actual lease or car payment is not required to take an expense for vehicle ownership allowance on the means test under the plain language approach.

The appeals court in Tate found the Ross-Tousey court’s reasoning to be persuasive. There are “costs associated with vehicle ownership even when no lease or car payments are due,” and ”debtors with no car payments may nonetheless need replacement transportation during the bankruptcy proceedings.”

The court also observed that “disallowing the deduction has arbitrary results, punishing a debtor who completes paying for their car before filing for bankruptcy and rewarding those who make purchases closer to the time of filing.” The court therefore adopted the plain language approach allowing deductions without actual lease or car payments.

[debttaxguy]

This has gotten to be very tough on cars. You must reafirm or surrender the vehicle within 45 days of the meeting of creditors. The new reality out there is that coming out of a bankruptcy case you will be able to buy a car but the interest rate will be 14 to 20 percent. You should never reaffirm a vehicle if you can't afford it or you have lost your job. If you do and you don't pay after the case is over, the creditor can attack you again and repo and collect.

In the old days you could just keep making the payments on the car without reaffirming it after the bankruptcy and they would just let you keep the car. Now the creditor has to make a decision as to whether I just let them keep paying for it if they don't reaffim or do I repo it. Most of them are just letting people do that, but be forewarned they can repo a year down the road. This case will help out people in that situation.

[debttaxguy]

I am curious to see how the Supreme Court rules in the case before them, I don't have the cite on Student Loans and their dischargeablity. What a nightmare this has become. It is virtually impossible to discharge under the current law. Then to add to the fun, in 2005 Congress gave coverage to all of the private student loans to make them non-dischargeable.

I talk to clients who have $60,000 to $120,000 of these loans they cannot pay and there is nothing I can do for them in bankruptcy. If you quit paying them you are beyond help. Somehow they got the special abiltiy to garnish without a judgment. That is the question before the Court from the news blurbs I have heard. Guy is discharged in a Chapter 7 and then the student loan creditor took his income tax refund. I hope they come off the hardline approach that has prevailed in this area with the concept of "undue hardship"

[LadynRed]

Is this the case you're referring to ?

Needelman v. Pa. Higher Educ. Assistance Agency, 399 B.R. 695

[ColoradoBelle]

Posting about the Vehicle Expense Case proves very timely in that my Trustee just objected to my use of it on the Means Test. Thanks!

[annelindsay]

Very helpful cases.

[esterlydsl1]

Great discussion is been carried out at this place and I just entered to be a part of it. Thanks for adding to my knowledge.

[wystanfi]

Great post and good info. It does sound great.

Thank You for Sharing....: D

[foreign judgment]

State of TN

Out of state Corporation filed Bankruptcy (MO), caught up in the swoop, I am a small business vendor.
Received summons "foreign judgment" from a out of state law firm whom also a collection agency (Ala)
I will be Pro Se. Any advise will be humbly accepted

Foreign Judgment

A apologize if I am in the wrong forum. Newbie to this blog