Supremes Accept Another Chapter 13 Case:
Can You Appeal the Denial of Confirmation?
a nasty split among the circuits, the Supreme Court will decide
whether the denial of confirmation of a plan is a final, appealable order.
In several circuits, the debtor must suffer dismissal of the case or
confirmation of a plan to which the debtor objects to gain access to
appellate review of the denial of confirmation. Bullard v. Hyde Park Sav.
Bank, No. 14-116 (U.S. Dec. 12, 2014).
Supremes Grant Cert: Who Gets $ at Conversion After Confirmation?
Supreme Court today granted certiorari to resolve this circuit split:
When a debtor in good faith converts to Chapter 7 after confirmation of a
Chapter 13 plan, undistributed funds held by the Chapter 13 trustee are
refunded to the debtor -- as the Third Circuit held in In re Michael, 699
F.3d 305 (3d Cir. Oct. 26, 2012) (Ambro, Roth, Sloviter) -- or distributed
to creditors -- as the Fifth Circuit held in Viegelahn v. Harris (In re
Harris), 757 F.3d 468 (5th Cir. July 7, 2014) (Graves, Benavides, Clement).
Supremes Grant Cert: Strip off of Wholly Unsecured Lien in Chapter 7 Case
The question presented: "whether section 506(d) permits a Chapter 7 debtor to 'strip off' a
junior mortgage lien in its entirety when the outstanding debt owed to a senior lienholder exceeds the current value of the
collateral." Bank of America, N.A. v. Caulkett, No. 13-1421, 2014 WL 2207208 (Nov. 17, 2014)
(Petition for Writ of Certiorari available at 2014 WL 2213197).
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Tenth Circuit BAP: “Derived” Means “Received”
In a Chapter 7 case,
to determine current monthly income under § 101(10A), wages received during six-month look-back period are included
notwithstanding that work was performed and wages were earned before period began.
Miller v. United States Trustee (In re Miller), No. WY-14-002, 2014 WL 5018464
(B.A.P. 10th Cir. Oct. 8, 2014) (Karlin, Nugent, Somers).
Chapter 13 Debtor Lacks Standing to Sue Mortgagee
discussion of § 1303 or of contrary authority from other circuits,
Chapter 13 debtor lacks capacity to sue Nationstar for predatory and deceptive practices and
to undo prepetition foreclosure; cause of action passed to Chapter 13 estate and only the trustee
has standing to pursue the action. Rugiero v. Nationstar Mortg., LLC,
No. 13–2126, 2014 WL 4549003 (6th Cir. Sept. 15, 2014) (Batchelder, Boggs, White).
Funding Plan from Legal Marijuana Sales Is "Means Forbidden by Law"
Citing Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 127 S. Ct. 1105, 166 L. Ed. 2d 956 (Feb. 21, 2007),
conversion from Chapter 7 to Chapter 13 is bad faith when any confirmable plan would be funded from sales of marijuana that are legal in
Colorado but illegal under federal law; production and sale of a controlled substance is a means forbidden by law under § 1325(a)(3).
In re Arenas, Case No. 14-11406 HRT, 2014 WL 4288991 (Bankr. D. Colo. Aug. 28, 2014) (Tallman).
Restitution Trumps Automatic Stay
U.S.C. § 3613(a) empowers federal government to collect criminal restitution
from property of a Chapter 13 estate without regard to the automatic stay or relief from the stay.
United States v. Robinson (In re Robinson), No. 13-5857, 2014 WL 4116476 (6th Cir. Aug. 22, 2014) (Cole, Griffin, Pearson).
Proof of Claim Violates FDCPA
proof of claim to collect a stale debt is actionable under the
Fair Debt Collection Practices Act: filing the proof of claim was a "collection activity;"
filing a time-barred claim is "unfair . . . unconscionable . . . deceptive . . . and misleading."
Crawford v. LVNV Funding, LLC, No. 13-12389, 2014 WL 3361226 (11th Cir. July 10, 2014) (Goldberg, Hull, Walter).
Eleventh Circuit Agrees: No-Discharge Lien Strip Is Allowed
Eleventh Circuit has joined the Fourth Circuit
(Branigan v. Davis (In re Davis), 716 F.3d 331 (4th Cir. May 10, 2013)
(Niemeyer, Keenan, Diaz)), in holding that a "Chapter 20" debtor can strip off a
wholly unsecured junior mortgage notwithstanding that the debtor is not eligible for
discharge because of § 1328(f). Wells Fargo Bank, N.A. v. Scantling (In re Scantling),
No. 13-10558, 2014 WL 2750349 (11th Cir. June 18, 2014) (Tjoflat, Moore, Schlesinger).
Replacement Value Standard Applies to Surrender
standard in § 506(a)(2) applies at surrender of recreational
vehicle under Chapter 13 plan. BAPCPA arrived after Associates Commercial Corp. v. Rash, 520 U.S. 953,
117 S. Ct. 1879, 138 L. Ed. 2d 148 (June 16, 1997), and plain language of § 506(a)(2) requires replacement
value without regard to “disposition or use” by debtor. When replacement value is greater than debt, plan can surrender
collateral in full satisfaction of claim. Santander Consumer USA, Inc. v. Brown (In re Brown), No. 13-13013, 2014 WL
1245266 (11th Cir. Mar. 27, 2014) (Wilson, Bucklew, Lazzara).
Filing Fees Go Up on June 1, 2014
Judicial Conference approved the following increases in bankruptcy fees
effective June 1, 2014: the “administrative fee” charged at the filing
of every Chapter 7 or Chapter 13 case increases to $75 (from $46);
a new fee of $75 will be charged to divide a joint case under Chapter 7
or Chapter 13; the filing fee for an adversary proceeding increases
to $350 (from $293).
Carelessness or Inadvertence Upsets Judicial Estoppel
estoppel does not bar debtor’s disability action because
failure to schedule in Chapter 13 case was error by attorney of which debtor was not
aware and exemption for disability benefits under state law negates motive to benefit
from concealment. Javery v. Lucent Technologies, Inc. Long Term Disability Plan
for Mgmt. or LBA Emps., 741 F.3d 686 (6th Cir. Feb. 3, 2014) (Cole, Clay, Bertelsman).
What Happens When Courts Don’t Understand Chapter 13
court did not clearly err in finding lack of good faith under
§ 1325(a)(3) and (a)(7) when disabled debtor with limited income from Social Security
and no nonexempt assets proposed “attorney-fee-centric” plan that would require 17 months to
pay attorney fees; that 36-month plan would pay all allowed unsecured claims in full did not
change outcome because “abysmal failure rate” of Chapter 13 cases made it unlikely
that debtor would complete plan. Brown v. Gore (In re Brown),
No. 13-10260, 2014 WL 563601 (11th Cir. Feb. 14, 2014) (Carnes, Hull, Cox).
Standing Trustee Acts Under Officer of the United States
Standing Chapter 13 Trustee
is a “person acting under” an Officer of the
United States—the United States Trustee within the Department of Justice—for purposes of removing a
discrimination action to federal court under 28 U.S.C. § 1442(a)(1); trustee had “colorable
federal defense” that employment action was performance of official duties that included involvement
of United States Trustee and of a United States bankruptcy judge after peer review by
National Association of Chapter 13 Trustees. Bell v. Thornburg, No. 13-30155,
2013 WL 6850026 (5th Cir. Dec. 30, 2013) (Stewart, King, Prado).
No Benefit to Estate? No Derivative Standing
derivative standing is possible in a Chapter 13 case, debtor does not have derivative standing
to avoid prepetition foreclosure sale when trustee elected not to pursue avoidance because there was no
equity in the property to benefit creditors. Weyandt v. Federal Home Loan Mortgage Corp.
(In re Weyandt), No. 11-4565, 2013 WL 6052130 (3d Cir. Nov. 18, 2013) (unpublished)
(Chagares, Vanaskie, Shwartz).
Lien Stripping Limitation
In a Chapter 13 case filed by only one spouse, plan cannot strip off valueless junior lien on
residence owned as tenancy by the entireties. Alvarez v. HSBC Bank USA, N.A.
(In re Alvarez), No. 12-1156, 2013 WL 5737704 (4th Cir. Oct. 23, 2013) (Gregory, Davis, Keenan).
Ninth Circuit Finishes Off Kagenveama
A majority of the Ninth
Circuit sitting en banc has overruled the surviving part of Maney v. Kagenveama (In re Kagenveama), 521 F.3d 868
(9th Cir. June 23, 2008) (Siler, Bea, Pregerson): the applicable commitment period in § 1325(b) is temporal;
even a debtor with no projected disposable income must propose a plan that is at least as long as the 3 or 5 year
applicable commitment period. Danielson v. Flores (In re Flores), No. 11-55452, 2013 WL 4566428 (9th Cir.
Aug. 29, 2013) (en banc).
Significant Proposed Rules and Forms Changes: Speak Up Now
The Judicial Conference Advisory Committee on Bankruptcy Rules
has just published important proposed amendments to the bankruptcy rules and forms. Comments are due by February 15, 2014. These amendments
dramatically change the content and timing of proofs of claims and include a new form for the Chapter 13 Plan. The proposed amendments and
committee reports are posted at www.uscourts.gov/rulesandpolicies/rules.aspx.
The Chapter 13 Plan form is tied to rule changes that would not become effective until December 1, 2015. Most of the other proposed form changes
could become effective December 1, 2014. The Advisory Committee through its chair, Gene Wedoff, has reached out robustly to the entire bankruptcy community
for comments and suggestions about these important changes. Comments may be submitted
electronically at www.uscourts.gov/RulesAndPolicies/rules/proposed-amendments.aspx.
FIRST CIRCUIT BAP:
WITHHOLDING ORDER IS PREDICATE TO STAY EXCEPTION IN § 362(b)(2)(C)
court contempt proceeding and incarceration for failure to pay alimony violated automatic stay when
state court order required debtor to pay alimony from postpetition income but there was no
garnishment or similar withholding order in effect at the Chapter 13 petition.
In re DeSouza, No. 11-40315-MSH, 2013 WL 2991034 (B.A.P. 1st Cir. June 14, 2013) (
Deasy, Kornreich, Tester).
Seventh Joins Tenth: Dewsnup Applies in Chapter 13 Cases
Woolsey v. Citibank, N.A. (In re Woolsey), 696 F.3d 1266 (10th Cir. Sept. 4, 2012)
(Gorsuch, Holmes, Matheson), Dewsnup applies in Chapter 13 cases: § 506(d) does
not void unsecured portion of undersecured tax lien. Ryan v. United States (In re Ryan),
No. 12-3398, 2013 WL 3380131 (7th Cir. July 8, 2013) (Ripple, Rovner, Williams).
Second Circuit: Car Lender Willfully Violated Stay by Refusing Turnover of Repossessed Car
lender willfully violated stay by refusing to return car lawfully repossessed before petition;
debtor’s equitable interest under state law became property of Chapter 13 estate and lender
exercised control over that property by demanding adequate protection as condition of
turnover. Weber v. SEFCU (In re Weber), No. 12-1632-bk, 2013 WL 1891371 (2d Cir. May 8, 2013)
(Cabranes, Raggi, Carney).
First Circuit BAP: Untimely Claim Filed by Debtor is Disallowed and Dischargeable
Untimely priority claim filed
by debtor on behalf of taxing authority is disallowed on trustee’s objection and will be discharged without
payment upon completion of plan. Municipality of Carolina v. Gonzalez (In re Gonzalez),
BAP No. PR 12-063, 2013 WL 1629235 (B.A.P. 1st Cir. Apr. 12, 2013) (Haines, Feeney, Hoffman).
Third Circuit: Fesq is Alive and Well Notwithstanding Espinosa
In re Fesq,
153 F.3d 113 (3d Cir. Aug. 18, 1998) (Stapleton, Alito, Shadur), was not overruled by United Student Aid
Funds, Inc. v. Espinosa, 559 U.S. 260, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010); bank cannot
challenge confirmation order by Rule 60 motion on any ground except fraud. In re Rodriguez,
No. 12-2146, 2013 WL 1716110 (3d Cir. Apr. 22, 2013) (Jordan, Aldisert, Nygaard) (unpublished).
First Circuit: Claim Disallowance Can Bar Collection of Nondischargeable Debt
of student loan debt “in the amount of $0.00” based on unrebutted evidence that loans were paid in full
before petition precludes post-bankruptcy collection of student loan debt without regard to nondischargeability.
Hann v. Educational Credit Mgmt. Corp. (In re Hann), 711 F.3d 235 (1st Cir. Mar. 29, 2013)
(Torruella, Stahl, Thompson).
Supremes Say "Defalcation" Requires Intentional Wrong
determine dischargeability under § 523(a)(4), defalcation in a fiduciary capacity requires an
intentional wrong: either “conduct that the fiduciary knows is improper . . . [or] reckless conduct of
the kind that the criminal law often treats as the equivalent." Bullock v. BankChampaign, N.A.,
No. 11-1518, 2013 WL 1942393, at *5 (May 13, 2013).
Fourth Circuit: Lien Strip Okay in No-Discharge Cases
did not upset lien-stripping of wholly unsecured mortgage in no-discharge Chapter 20 case; good faith test
provides sufficient protection from abuse. Branigan v. Davis (In re Davis), No. 12-1184,
2013 WL 1926407 (4th Cir. May 10, 2013) (Diaz, Niemeyer; Keenan dissenting).
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