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 Bankruptcy Cases  Listed cases are intended as suggestions for areas of research. They may not be applicable in all jurisdictions and may be subect to contrary rulings.
 
 
 







 

§ 101(12A) defines "Debt Relief Agencies";  § 526(a)(4) restricts debt agencies from advising clients to incur debt; §§ 528(a)(4) and (b)(2) require disclosures in advertising ("We are a debt relief agency.  ...")
Are attorneys "debt relief agencies" under 11 U.S.C. § 101(12A), and 11 U.S.C. § 527(b), and if so, are they are subject to the prohibition of § 526(a)(4) against advising an assisted person to incur any additional debt and the disclosure requirements of §§ 528(a)(4) and (b)(2)[Rev. 12-2008]

 

MILAVETZ v. U.S., 08-1119 (U.S. Supreme Court 3-8-2010)
Attorneys who provide bankruptcy assistance to assisted persons are debt relief agencies under 11 U. S. C. §101(12A)§526(a)(4) prohibits advising an assisted person  to incur more debt only where the impelling reason for such advice is the bankruptcy filing.  The disclosure requirements of §528 are directed at misleading commercial speech, impose only a disclosure requirement, and are valid as applied to attorneys.

HERSH v. U.S., 07-10226 (5th Cir. 12-18-2008)
Attorneys qualify as debt relief agencies under 11 U.S.C. § 101(12A), and 11 U.S.C. § 527(b) does not violate the First Amendment.

MILAVETZ v. U.S., 541 F.3d 785 (8th Cir. September 4, 2008)
Attorneys that provide "bankruptcy assistance" to "assisted persons" are "debt relief agencies" under § 101(12A), but the prohibition of § 526(a)(4) against such agency advising an assisted person to incur any additional debt  is substantially overbroad and unconstitutional as applied to attorneys.  The disclosure requirements of §§ 528(a)(4) and (b)(2) ("We are a debt relief agency.  ...") are constitutional and apply to attorneys.

ZELOTES v. ADAMS, (Conn. 2-27-2007)
The restriction in § 526(a)(4) against advising an assisted person to incur more debt is overbroad and unconstitutional as applied to bankruptcy attorneys.

OLSEN v. GONZALES, (Or. 8-6-2006)
Attorneys are included in the definition of "debt relief agency" in § 101(12A). § 526(a)(4) is overly restrictive in violation of the First Amendment.

 

§ 362 places a stay against collection activities of all entities into effect with the filing of a Bankruptcy case.
What activities have been found to be stopped or voided by the stay?  [Rev. 1-2009]

 

CAMPBELL v. COUNTRYWIDE HOME LOANS INC., 07-20499 (5th Cir. 10-13-2008)
Increase in mortgage payments to pay escrow arrears stayed.
Increasing post-petition mortgage payment to include an amount to pay an arrearage in escrow payments for insurance and property taxes which resulted from the debtor's pre-petition default in mortgage payments would violate the automatic stay under § 362(a).  However, including including these amounts and a statement that future monthly mortgage payments would be increased to  recover the escrow arrearage in a Proof of Claim (and making no additional efforts to collect such amounts) does not  violate the automatic stay.

BURKART v. COLEMAN (In re TIPPETT)  (9th Cir. Sept. 4, 2008)
Debtor's sale of real not stayed.
The automatic stay of § 362 triggered by a debtor’s bankruptcy petition does not void transfers of estate property initiated by the debtor where no notice of bankruptcy was filed with the County Recorder and debtors sold their home to bona fide purchasers without authorization.

 

§ 507(a)(8)(A)(i) - Chapter 7 & 13-3 year period making taxes under due and unfiled tax returns nondischargeable under 11 U.S.C. § 507(a)(8)(A)(i) is tolled during pendency of a prior bankruptcy.

 

YOUNG v. UNITED STATES, 535 U.S. 43 (2002) 122 S.Ct. 1036, March 4, 2002.

 

§ 554 - Chapter 7-Technical Abandonment Is Revocable
Abandonment of estate property following close of case under 11 U.S.C. § 554 may be revoked under Federal Rule of Civil Procedure 60(b).

 

LPP MORTGAGE v. BRINLEY, 07-6211 (6th Cir. 11-24-2008)

 

§ 706(a) - Chapter 7-Limitation on ability to convert Chapter 7 case to Chapter 13 under 11 U.S.C. § 706(a).

 

MARRAMA v. CITIZENS BANK OF MASSACHUSETTS, 549 U.S. 365 (2007) 127 S.Ct. 1105, February 21, 2007.

 

§ 707(b)(2) - The Means Test  [See also The Means Test Flowchart]

§ 707(b)(2)(A)(ii)(I), § 1325(b)(2)(A)(I) and (ii) and vehicle expenses.

§ 707(b)(2)(A)(ii)(I) specifies the debtor's  monthly expenses as including "applicable monthly expense amounts" in the Local Standards issued by the Internal Revenue Services. Courts have been divided as to whether the expense for vehicle ownership costs in the Local Standards should be included as an expense when no debt owed on the vehicle in question.  [Rev. 12-2008]

 

ROSS-TOUSEY v. NEARY, 07-2503 (7th Cir. Dec. 17, 2008) - Vehicle ownership NOT required to use expense.
In applying the Means Test, the court adopted a plain language view of § 707(b)(2)(A)(ii)(I), based on the Congressional intent to remove the discretion given to courts under the former version of § 1325(b), and allowed the deduction of the "applicable" monthly expenses for vehicle ownership even though the debtor did not have a payment on a vehicle loan.

IN RE PEARSON (10th Cir. BAP 7-28-2008) - Vehicle ownership NOT required to use expense.
The BAP adopts a "Plain Language View" of 11 U.S.C. § 1325(b)(2)(A)(I)  in keeping with the policy behind BAPCPA to impose rigid expense standards, and thereby allowing debtors an ownership expense when there is no loan on that vehicle.

IN RE KIMBRO, 07-8052 (6th Cir. BAP June 12, 2008) - Vehicle ownership NOT required to use expense.
The BAP allowed calculation of disposable income under 11 U.S.C. § 1325(b)(2)(A)(I) and (ii), in which debtors deducted an ownership expense from the Local Standards referenced in the Means Test calculation of 11 U.S.C. § 707(b)(2)(A)(ii)(I)  for a second vehicle even though there was no loan on that vehicle.

IN RE WILSON, 07-6050 (8th Cir. BAP 3-14-2008) - Vehicle ownership REQUIRED to use expense.
Debtors not making vehicle payments do not incur vehicle ownership expenses and are not permitted to claim the IRS Standard deductions for such expenses because such expenses are not applicable under § 707(b)(2)(A)(ii)(I).

IN RE RANSOM, (9th Cir. BAP 12-27-2007) - Vehicle ownership REQUIRED to use expense.
Based on the "plain meaning" of the language of § 707(b)(2)(A)(ii)(I), the BAP concludes that the debtor cannot deduct a vehicle ownership expense for a vehicle owned free and clear of any liens and encumbrances.

IN RE RAGLE, (E.D.Ky. 9-29-2008) - Vehicle ownership NOT required to use expense.
In applying the bankruptcy "means test" of 11 U.S.C. § 707(b)(2)(A), a debtor may deduct from his monthly income "Ownership Costs," for a car he owns free and clear of any debt under 11 U.S.C. § 707(b)(2)(A)(ii)(I).

Other cases: Footnotes in In re Pearson (10th Cir. BAP 7-28-2008) (above) lists bankruptcy cases by their holding on this issue:
Vehicle ownership NOT required to use expense:
In re McIvor, No. 06-42566, 2006 WL 3949172 (E.D. Mich. Nov. 15, 2006); In re Chamberlain, 369 B.R. 519 (Bankr. D. Ariz. 2007); In re Crews, Nos. 06-13117, 06-15255, 2007 WL 626041 (Bankr. N.D. Ohio Feb. 23, 2007); In re Enright, No. 06-10747, 2007 WL 748432 (Bankr. M.D.N.C. Mar. 6, 2007); In re Sawdy, 362 B.R. 898 (Bankr. E.D. Wis. 2007), vacated by Grossman v. Sawdy, 362 B.R. 898 (E.D. Wis. 2008); In re Scarafiotti, 375 B.R. 618 (Bankr. D. Colo. 2007); In re Swan, 368 B.R. 12 (Bankr. N.D. Cal. 2007); In re Watson, 366 B.R. 523 (Bankr. D. Md. 2007); In re Zak, 361 B.R. 481 (Bankr. N.D. Ohio 2007); In re Demonica, 345 B.R. 895 (Bankr. N.D. Ill. 2006); In re Fowler, 349 B.R. 414 (Bankr. D. Del. 2006); In re Grunert, 353 B.R. 591 (Bankr. E.D. Wis. 2006), abrogated by In re Wilson, 383 B.R. 729 (8th Cir. BAP 2008); In re Haley, 354 B.R. 340 (Bankr. D.N.H. 2006); In re Hartwick, 352 B.R. 867 (Bankr. D. Minn. 2006), rev'd by Fokkena v. Hartwick, 373 B.R. 645 (D. Minn. 2007); In re Naslund, 359 B.R. 781 (Bankr. D. Mont. 2006); In re Prince, No. 06-10328C-7G, 2006 WL 3501281 (Bankr. M.D.N.C. Nov. 30, 2006); In re Wilson, 356 B.R. 114 (Bankr. D. Del. 2006).
Vehicle ownership REQUIRED to use expense:
Grossman v. Sawdy, 384 B.R. 199 (E.D. Wis. 2008); Wieland v. Thomas, 382 B.R. 793 (D. Kan. 2008); In re Meade, 384 B.R. 132 (W.D. Tex. 2008); In re Wilson, 383 B.R. 729 (8th Cir. BAP 2008); Fokkena v. Hartwick, 373 B.R. 645 (D. Minn. 2007); In re Ross-Tousey, 368 B.R. 762 (E.D. Wis. 2007); In re Bennett, 371 B.R. 440 (Bankr. C.D. Cal. 2007); In re Brown, 376 B.R. 601 (Bankr. S.D. Tex. 2007); In re Ceasar, 364 B.R. 257 (Bankr. W.D. La. 2007); In re Cole, 371 B.R. 454 (Bankr. W.D. Wash. 2007); In re Devilliers, 358 B.R. 849 (Bankr. E.D. La. 2007); In re Howell, 366 B.R. 153 (Bankr. D. Kan. 2007); In re Slusher, 359 B.R. 290 (Bankr. D. Nev. 2007); In re Talmadge, 371 B.R. 96 (Bankr. M.D. Pa. 2007); In re Barraza, 346 B.R. 724 (Bankr. N.D. Tex. 2006); In re Carlin, 348 B.R. 795 (Bankr. D. Or. 2006); In re Hardacre, 338 B.R. 718 (Bankr. N.D. Tex. 2006); In re Harris, 353 B.R. 304 (Bankr. E.D. Okla. 2006); In re Lara, 347 B.R. 198 (Bankr. N.D. Tex. 2006); In re McGuire, 342 B.R. 608 (Bankr. W.D. Mo. 2006) abrogation recognized by In re Riding, 377 B.R. 239 (Bankr. W.D. Mo. 2007); In re Oliver, 350 B.R. 294 (Bankr. W.D. Tex. 2006); In re Wiggs, No. 06-B-70203, 2006 WL 2246432 (Bankr. N.D. Ill. Aug. 4, 2006).

 

§ 727(a) - Chapter 7- A debtor that fails to keep or preserve records has the burden to justify the failure in order to receive a discharge.  11 U.S.C. § 727(a)

 

IN MATTER OF CANEVA, 07-15686 (9th Cir. 11-5-2008)
A debtor that fails to keep or preserve records has the burden to justify the failure in order to receive a discharge.  11 U.S.C. § 727(a)

 

§ 1325(b)(2) - Chapter 13-Above-median Chapter 13 debtor's plan must extend for five years when the debtor has a negative "disposable income" as defined in 11 U.S.C. § 1325(b)(2).

 

IN RE FREDERICKSON, 07-3391 (8th Cir. 10-27-2008)

 

§ 1325(b) - "Projected disposable income" in Chapter 13 Plan

Courts have adopted two main approaches to calculation of "Projected disposable income" under § 1325(b).  The first approach has been called "multiplicative" or "mechanical" applying the definitions for "current monthly income" in § 101(10A) and deductions in § 707(b)(2) literally.  The second approach, called "forward looking,"  stretches the code language to project the debtor's disposable income during the period of the plan in an attempt to better approximate the debtor's reality.  The second approach has been adopted by the majority of courts.  [Rev. 1-2008]

 

IN RE LANNING, 08-3009 (10th Cir. 11-13-2008) - Forward Looking
"Projected disposable income" under § 1325(b)(1)(B) is presumed to be the debtor's "current monthly income," as defined in 11 U.S.C. § 101(10A)(A)(i), subject to a showing of a substantial change in circumstances.

IN RE FREDERICKSON, 07-3391 (8th Cir. 10-27-2008) - Forward Looking
Chapter 13-A debtor's "disposable income" calculation is a starting point for determining the debtor's "projected disposable income," but the final calculation can take into consideration changes that have occurred in the debtor's financial circumstances as well as the debtor's actual income and expenses as reported on Schedules I and J.
Above-median Chapter 13 debtor's plan must extend for five years when the debtor has a negative "disposable income" as defined in 11 U.S.C. § 1325(b)(2).

IN RE PETRO, 08-8009 (6th Cir. 10-17-2008) - Forward Looking
A debtor's projected disposable income under § 1325(b)(1)(B) should be calculated based on the realities of the debtor's circumstances as of confirmation and as reasonably anticipated to be during the length of the plan, and may differ materially from a mechanical calculation of disposable income under  §§ 1325(b)(2), (3) and § 707(b).

IN RE ZAHN, 06-6072 (8th Cir. 8-14-2008) - Multiplicative
The Bankruptcy Code does not require a debtor with above median income and negative disposable income under the means test to propose a 60-month plan, citing  In re Kagenveama (9th Cir. Amended June 23, 2008) for calculation of projected disposable income.  An IRA distribution was not income under § 101(10A).

IN RE KAGENVEAMA, (9th Cir. June 23, 2008) [Amendment of order of June 5, 2008]] -Multiplicative
"Projected disposable income" under § 1325(b)(1)(B)  means "disposable income," as defined by § 1325(b)(2), projected over the "applicable commitment period."  Further, a debtor above the median monthly income, but with no "projected disposable income" was not required to propose a plan with an "applicable commitment period" of five years.

IN RE JOHN PAK, (9th Cir. BAP 11-7-2007) - Forward Looking
A debtor's "disposable income" calculation is a starting point for determining the debtor's "projected disposable income," but the final calculation can take into consideration changes that have occurred in the debtor's financial circumstances as well as the debtor's actual income and expenses as reported on Schedules I and J.
Above-median Chapter 13 debtor's plan must extend for five years when the debtor has a negative "disposable income" as defined in 11 U.S.C. § 1325(b)(2).

 

§ 1325(a)(5) - The last paragraph of this section prohibits splitting claims into secured and unsecured portions if they are secured by purchase money security interests in vehicles acquired for the debtor's personal use within 910 days preceding the filing of the Chapter 13.  But, must the plan pay interest?  And must that interest be paid on just the value of the collateral, or on the full amount of the claim?  [Rev. 12-2008]

 

TILL v. SCS CREDIT CORP. (U.S. Supreme Ct. May 17, 2004)
§1325(a)(5)(B)(ii) requires that the creditor receive disbursements whose total present value is no less than the amount of the allowed claim.  The U.S. Supreme Court held that to insure that the creditor receives the present value of the claim, it must receive interest on the claim at the prime rate plus an additional percentage to compensate for the risks in receiving payments from the bankruptcy.  The Court did not specify the additional percentage, but noted that the Bankruptcy Court had applied an additional 1.5% in this case, and other cases have generally added 1% to 3% to the prime rate.

IN RE DEAN (11th Cir. Aug. 7, 2008)
Follows In re Jones (10th Cir. 2008) [below] requiring that a Chapter 13 plan under § 1325(a)(5)(B)(ii) pay interest on the full amount of a claim based on a purchase money security interest in a vehicle acquired for the debtor's personal use within 910 days preceding the filing Chapter 13, and that the interest be calculated on the  full claim, not just the value of the collateral securing the claim.

IN RE JONES (10th Cir. July 7, 2008)
A creditor holding a purchase money security interest in a vehicle acquired for the debtor's personal use within 910 days preceding the filing Chapter 13 may, under the explicit language of § 1325(a)(5)(B)(ii),  require that the plan pay the present value of its full claim,  which must include the payment of interest on the full claim, not just the collateral securing the claim.

In re Trego (9th Cir. BAP July 30, 2007)
The assignee of purchase money security interest incurred within the 910-day period preceding the filing of a bankruptcy case to acquire a motor vehicle for the debtor’s personal use has the same rights under § 1325(a)(5)(B) as the original creditor.  Further, such creditor is entitled to payment of prime plus interest in accordance with Till v. SCS Credit Corp. [above] on the full amount of the claim.

IN RE TARANTO (6th Cir. BAP Mar. 30, 2007)
Determines that a Chapter 13 debtor must pay  interest at the a prime-plus rate to the holder of a claim secured by a vehicle purchased for personal use within 910 days prior to the bankruptcy filing where the debtor proposes to pay the secured claim by making periodic installment payments. The BAP applied Till v. SCS Credit Corp., [above] in which the Supreme Court interpreted § 1325(a)(5)(B)(ii) in a case involving the strip down of a secured claim, to all cases in which a debtor’s plan modifies the rights of a holder of a secured claim.

 

§ 1326 directs debtors to commence payments to the trustee within 30 days after the case is filed.  But does that mean that all payments must be made through the trustee, or can the debtor pay some creditors directly?

 

Cohen v. Lopez (In re Lopez) (9th Cir. Dec. 24, 2008)
Two sentence order affirming & adopting the "well-reasoned" opinion of In re Lopez (9th Cir. BAP Aug. 3, 2007), which held that a plan may, under § 1326(a)(1) and (c), provide for payments on notes secured by deeds of trust on the debtor's residence to be made directly to the creditors, while simultaneously allowing prepetition arrears on those notes to be paid through the trustee under § 1322(b)(5).

In re Lopez  (9th Cir. BAP Aug. 3, 2007)
A plan may, under § 1326(a)(1) and (c), provide for payments on notes secured by deeds of trust on the debtor's residence to be made directly to the creditors, while simultaneously allowing prepetition arrears on those notes to be paid through the trustee under § 1322(b)(5).

 

§ 1328(f) prohibits the granting of a discharge in a Chapter 13 case filed within 4 years after a prior case filed under Chapter 7, 11, or 12, and within 2 years after a prior case filed under Chapter 13.
Does that 4 or 2 year period start from the filing of the prior case, or from its discharge?
Can a Chapter 13 case be filed, and a plan confirmed, even if a discharge will not be granted under § 1328(f)?

 

IN RE SANDERS, 08-1201 (6th Cir. 12-29-2008)
The 4 year period barring a discharge in Chapter 13 under § 1328(f)(1) starts with the filing of the prior bankruptcy case, not its date of discharge.

IN RE: BATEMAN (4th Cir. 02-04-2008)
A Chapter 13 case may be filed to stop a pending foreclosure, and the plan confirmed, even if the debtor will not be entitled to a discharge under 11 U.S.C.A. § 1328(f).  Whether an individual "may be a debtor under chapter 13" is established under § 109(e) , not § 1328(f).
The 2-year and 4-year periods described in § 1328(f) run from the date of filing of the previous bankruptcy petition or not the date of discharge.

 

Chapter 7 (primarily)-Elements of fraud for denial of discharge under 11 U.S.C. § 523(a)(2)(A).

 

In re Slyman, 234 F.3d 1081 (C.A . 9th Cir. 2000)

The elements of fraud which must be proved to deny discharge under 11 U.S.C. § 523(a)(2)(A) are:

(1) misrepresentation, fraudulent omission or deceptive conduct by the debtor;
(2) knowledge of the falsity or deceptiveness of his statement or conduct;
(3) an intent to deceive;
(4) justifiable reliance by the creditor on the debtor's statement or conduct; and
(5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct.

Chapter 7 (primarily)-Reckless disregard satisfies the knowledge of falsity or deceptiveness element of fraud for denial of discharge under 11 U.S.C. § 523(a)(2)(A).

 

In re Kong, 239 B.R. 815 (9th Cir .BAP 1999)

Issuer of credit brought adversary proceeding to except credit card debt from discharge as money obtained by "false pretenses, false representation or actual fraud." Of five elements of fraud, only whether Debtor fraudulently failed to disclose his intent not to repay was at issue. While court found that "reckless disregard for the truth of a representation satisfies the element that the debtor has made an intentionally false representation in obtaining credit" the fact that that debtor took two cash advances from his Advanta account totaling $11,095.96 for gambling did not satisfy that element.

 

Chapter 7 & 13--The $125,000 limitation for homesteads under The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may not apply to opt-out states such as Arizona.

 

In re McNabb, Case No. 2-05-07495-RJH, District of Arizona, June 23, 2005.  (pdf format)

 

Chapter 13--Stripping Second Mortgage:  Wholly unsecured second mortgage may be stripped from homestead.

 

In re Zimmer, 313 F.3d 1220 (C.A.9 (Cal.), 2002).

Chapter 13 debtor filed adversary complaint seeking to avoid a $39,000 second mortgage.  The value of property ($110,000) securing the mortgage was less than the balance of the first mortgage ($123,000) making the second position deed of trust wholly unsecured.   The Bankruptcy Court dismissed the complaint for failure to state a claim, and debtor appealed to the District Court which affirmed the lower court.  The 9th Circuit Court of Appeals reversed and remanded the case finding that the Bankruptcy Code's antimodification protection of §1322(b)(2) is only available to holders of secured claims, so a wholly unsecured lien on a primary residence may be avoided in a Chapter 13 proceeding.

§1322(b)(2) allows a debtor's plan to "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence."

In re Lam, 211 B.R. 36 9th Cir.BAP (Cal.),1997.

Chapter 13 debtors filed adversary proceeding against holder of a fourth position deed of trust on their residence (valued at $300,000, with first, second, and third deeds of trust of $164,222, $61,824, and $560,000, respectively) asking the court to "strip off" the wholly unsecured fourth lien.  The creditor failed to appear, and debtors moved a default judgment. The Bankruptcy Court, denied the motion based on Nobelman (below).  On appeal, the Bankruptcy Appellate Panel reversed the Bankruptcy Court holding that Bankruptcy Code's antimodification provision does not protect "secured" creditors holding completely unsecured claims.

Nobelman v. American Savings Bank, 508 U.S. 324, 113 S.Ct. 2106, 124 L.Ed.2d 228 (U.S. Supreme Ct. 1993).

Summary of Nobleman quoted from In re Zimmer (above):

In Nobelman, the Supreme Court considered the question of whether a partially-secured claim secured by a homestead lien could be bifurcated into its secured and unsecured components, and "stripped down" to the value of the secured claim. See id. at 326-27, 113 S.Ct. 2106. The debtors argued that, under § 506(a), the holder of an undersecured mortgage--for which the value of the claim exceeds the value of the property--only holds a "secured claim" to the extent of the value of the property, and holds an "unsecured claim" for the excess value of the mortgage. Id. at 328, 113 S.Ct. 2106. Because § 1322(b)(2) only protects the rights of "holders of secured claims," they maintained that only the secured portion of the mortgage was entitled to protection and, therefore, that the value of the mortgage could be effectively reduced to its secured value. Id."

The Supreme Court rejected this approach of bifurcation and stripping down, primarily because the debtors' argument failed to consider the fact that § 1322(b)(2) "focuses on the modification of the 'rights of holders,' " id., not the status of claims. Although the Court found that it was proper to look to § 506(a) "for a judicial valuation of the collateral to determine the status of the [creditor's] claim," id., because the creditor's claim was partially secured, the creditor was "still the 'holder' of a 'secured claim.' " Id. at 329, 113 S.Ct. 2106. Therefore, it was entitled to the protections of the antimodification clause."

 

Chapter 13--Disposable Income:  Debtor not required to turn over tax refunds received during plan.

 

In re Heath, 182 B.R. 557 (9th Cir.BAP 1995)

Bankruptcy court denied the trustee's request that debtors pay postpetition tax refunds to the trustee in addition to plan payments.  The court held that the amount of future income had to be subject to some showing of projected income.  The court noted that the trustee should have been able to determine whether the debtors were overwithholding by reviewing the tax forms prior to the deadline for objecting to the plan.

The Bankruptcy Appellate Panel agreed with the bankruptcy court.

 

Chapter 13--Disposable Income:  Life insurance may be a necessary expense.

 

In re Smith, 207 B.R. 888 (9th Cir.BAP 1996)

Bankruptcy court denied confirmation of a Chapter 13 Plan because the disposable income requirement was not met when the budget included payment of a $300 per month life insurance premium.  The bankruptcy court was applying a blanket rule disallowing life insurance premiums as a necessary expense.  Debtors argued that they were elderly and had two dependents, a mentally handicapped 21 year old son and a three year old granddaughter.  (No findings of fact had been made by the Bankruptcy court.)

In vacating the order of the bankruptcy court denying confirmation and remanding the case, the Bankruptcy Appellate Panel found that a blanket rule was inappropriate and whether such an expense would be allowed was for the exercise of discretion of the court.

 

Chapter 13--Disposable Income:  Debtor's community  interest in spouse's income must be considered in calculating debtor's disposable income.

 

In re Hull, 251 B.R. 726 (9th Cir.BAP 2000)

Bankruptcy court excluded the income of the debtor's non-filing wife in calculating the debtor's disposable income.

The Bankruptcy Appellate Panel reversed and remanded for the court to include the debtor's interest in his wife's income, which was community property where debtors resided (Washington), in the calculation of the debtor's disposable income.  Possible exceptions to inclusion under Washington state law would include income while the spouses were living separated and apart, and a separation agreement--which might not be given effect as to claims which existed when the agreement was executed.

 

Chapter 13--Disposable Income:  Plan must provide for payment of debtor's projected disposable income, not the actual income.

 

In re Anderson, 21 F.3d 355 (9th Cir. 1994)

Bankruptcy court denied confirmation of a Chapter 13 Plan because the debtors refused to sign a certification agreeing to pay all of their actual disposable income to the trustee during the period of the plan.

In reversing the bankruptcy court, the Court of Appeals followed the explicit language of § 1325(b)(1)(B) which "requires provision for 'payment of all projected disposable income' as calculated at the time of confirmation."  The court rejected "the Trustee's attempt to impose a different, more burdensome requirement on the debtors' plan as a prerequisite to confirmation.

The court sated that it was adopting the Fifth Circuit's interpretation stated in Matter of Killough, 900 F.2d 61(5th Cir. 1990).

 

Chapter 13--Disposable Income:  Contributions to retirement plans must generally be included in "disposable income," even if mandatory.  Plan length may be extended to compensate for the contributions.

 

In re Mendoza, 274 B.R. 522 (Bkrtcy.D.Ariz. 2002)

Bankruptcy Court, Eileen W. Hollowell, (Tucson) sustained the Trustee's objection to debtors' proposed Chapter 13 plan, because under it debtors would continuing making monthly retirement contributions postpetition and would not be devoting all of their disposable income to plan payments.  Judge Hollowel held that: (1) contributions to "mandatory employee retirement plan had to be included in "disposable income," and (2) debtors could continuing to make such contributions postpetition if debtors elected to extend plan term.

 

Chapter 13--Modification of Plan:  A plan may be modified to include the curing of a  postpetition default in mortgage payments.

 

In re Hoggle, 12 F.3d 1008 (11th Cir. 1994)

Mortgage company moved for relief from stay in Chapter 13 because of a default in post-confirmation mortgage payments.  Bankruptcy court denied motion and modified plan to include the curing of the post-confirmation default. 

Court of Appeals cited §1322(b) permitting a plan to:

(2) modify the rights of holders of secured claims other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims;

(3) provide for the curing or waiving of any default;

(4) notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due.

The court stated that the debtor may modify the plan at any time under § 1329 provided that the plan meets the requirements of §1322.

The court concluded:  "Accordingly, we conclude that a confirmed Chapter 13 plan may be modified to allow the Debtor to cure a postconfirmation default pursuant to § 1322(b)(5) with the postconfirmation arrearage to be paid under the modified plan."

In re Mendoza, 111 F.3d 1264 (5th Cir. 1997)

Bankruptcy court refused to modify the debtor's plan to include the curing of postpetition arrears in claim secured by debtors home, believing that it did not have the authority to do so.  The Court of Appeals noted a split in authority as to whether a debtor may cure such defaults and finds In re Hoggle "to be better reasoned and persuasive in holding that a Chapter 13 Plan may be modified to cure postpetition defaults through a plan of reorganization."  The Bankruptcy Court could therefore modify the plan to include such a default.

The court also determined that the Bankruptcy Court may also order payments to cure the payments directly to the mortgage company and may include a "drop dead" clause.

The Court of Appeals remanded the case to the Bankruptcy Court to determine whether to modify the plan, or to order the debtor to make direct payments to the mortgage holder.


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Fourth District
Maryland, North Carolina, South Carolina, Virginia, West Virginia
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Fifth District
Louisiana, Mississippi, Texas
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Sixth District
Kentucky, Michigan, Ohio & Tennessee
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Seventh District
Illinois, Indiana, Wisconsin
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Eighth District
Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota
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Ninth District
Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Washington, Guam, Northern Mariana Islands
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Tenth District
Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming
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This page was last revised: 07/15/12