Confirmed Ch. 13 Plan Partially Binds IRS In re Swanson (N.D.Ill. 2004) This cause is before the Court on the Objection to Proof of Claim of the Internal Revenue Service ("IRS") filed by Lydia S. Meyer, standing Chapter 13 Trustee ("Trustee"). Trustee objects to the Proof of Claim on the basis that it indicates that the claim is partially secured even though the confirmed Plan provides for payment as an unsecured priority claim. Because the Proof of Claim is contrary to the treatment of the claim provided in the Plan, the Trustee asserts that the confirmed Plan fixes the value of the secured claim at zero and extinguishes the IRS' lien. For the reasons set forth below, the Trustee's Objection to the Proof of Claim is overruled. The IRS filed a response in opposition to the Trustee's objection and a Cross-Motion to Vacate or Revoke Confirmation Order. For the reasons set forth below, the IRS's cross-motion is denied. Thus, the question to be resolved is whether the IRS is bound by the Amended Plan or whether its claim is controlled by its Proof of Claim. Relief from a confirmation order brought pursuant to Federal Rule 60 can be granted only when a party has been deprived of a constitutional right. Accordingly, the IRS must demonstrate that notice was constitutionally inadequate to get relief from the Confirmation Order pursuant to Federal Rule 60. Because the Amended Plan does not treat the IRS claim as secured, despite the fact that a tax lien exists, the Amended Plan and Confirmation Order do not affect that lien. However the IRS is still bound by the treatment of its claim as set forth in the Amended Plan and will receive its payments accordingly. _____________________ Business Debtor Must Maintain Appropriate Records In re Jacobowitz, 309 B.R. 429 (S.D.N.Y. 2004) One objecting to discharge under §727(a)(3) is required to show only that a Debtor's records are not reasonable in light of the circumstances, not that the Debtor actually failed to keep records to deceive its Creditors, See Goldstein, 123 B.R. at 525-26: Harman v. Brown (In re Brown), 56 B.R. 63, 66 (D.N.H.1985). The purpose of this section is to allow a determination of whether the Debtor is indeed "honest." When the Debtor fails to keep records pertaining to his business income and expenses, it is impossible for creditors to formulate any objections to discharge, and the Debtor's failure to keep such records cannot be used to his own advantage.

Staying Current on Payments Does Not Require Secured Lender to Allow Debtor to Retain Collateral In re Chubb (Bankr. E.D. Tenn. 2004) A Debtor that is current on payments related to a secured debt does not obtain the right to retain the collateral over the objections of the creditor. So said the Bankruptcy Court in Tennessee, observing: This case presents an issue that has been considered by numerous Courts, including at least 9 Circuit Courts of Appeal: namely, whether a Debtor current on his secured debt can retain the collateral simply by continuing to make contractual payments. Because this Court concludes that 11 U.S.C. § 521(2) interpreted in light of the Sixth Circuit Court of Appeals’ decision in General Motors Acceptance Corp. v. Bell (In re Bell), 700 F.2d 1053 (6th Cir. 1983), does not permit this result, the Creditor’s motions for relief from the Automatic Stay will be granted. In a Chapter 7 case, because a Debtor will generally receive a discharge well before the completion of his or her contractual installments, a Secured Creditor may lose all 3 of the contemplated benefits provided by its bargain: repayment of its debt, collateral which was security for the debt, and the ability to hold the Debtor personally responsible for the obligation. Absent express statutory authority, the Court will not permit such a result over the Secured Creditor’s objection. See In re Boodrow, 126 F.3d at 60 (J. Shadur, dissenting) (Because Congress explicitly provided for retention of collateral in the cram-down process in chapter 13, it would be improper to infer congressional approval of a similar cram-down option in chapter 7. “When Congress wants to provide for a ‘cram down’ that enables a debtor to keep property over the objection of a secured creditor, it knows full well how to do so.”) _______________________ Pre-Petition Attorneys' Fees Not Dischargeable in Chapter 13 In re Busetta-Silvia (10th Cir. BAP 2004) The Bankruptcy Court erred in holding that services performed pre-Petition by an Attorney for a Chapter 13 Debtor must be fully paid before filing or be treated like any other prepetition claim. Section 1322(a)(2) states that unless the holder of a priority claim agrees to different treatment, a Chapter 13 Plan shall "provide for full payment, in deferred cash payments, of all claims entitled to priority under section 507[.]" Section 507(a)(1) affords first priority to "administrative expenses allowed under section 503(b)[.]" Section 503(b) states, in relevant part, that "there shall be allowed administrative expenses,... including-... (2) compensation and reimbursement awarded under section 330(a) of this title[.]" Reading these statutes together, an Attorney fee awarded under § 330(a) is entitled to first priority under § 507(a)(1) and must be paid in full under the terms of the Chapter 13 plan, unless the Attorney agrees otherwise. FUrthermore, compensation for an Attorney representing a Chapter 13 Debtor is authorized under § 330(a)(4)(B), which states: "In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section." ______________________ Attorney Sanctioned for Frivolous Assertion of Plan Treatment In re Brooks Hamilton (Bankr. N.D. Cal. 2004) Sanctions were appropriate when a Debtor's Attorney contended that a Secured Creditor's claim, which was supported by a timely-filed Proof of Claim and which the confirmed Plan stated would be paid in full, was not entitled to payment as a Secured Claim nor as an unsecured claim. The Debtor's Attorney contended that the City’s secured claim could not be paid through the Plan because the Plan did not provide for its payment as a Secured Claim. Second, he contended that the City could not be paid through the Plan as an Unsecured Creditor because the City did not file a proof of claim for an Unsecured Claim, only for a Secured Claim. The Court finds both contentions frivolous. While an Attorney may not be sanctioned for making a creative argument, the argument must be plausible. The Debtor's Attorney's contention is ridiculous. A Creditor must be able to rely on a Proof of Claim asserting secured status to preserve its underlying monetary claim in the event its security interest is avoided. Otherwise, it would have to file multiple claims or plead in the alternative in every case on the chance that a Debtor might challenge its lien. The sanctions imposed must be limited to what is sufficient to deter repetition of comparable conduct by others similarly situated and may include nonmonetary sanctions. In this case the Debtor has a history of prior disciplinary problems in connection with Bankruptcy practice. In order to constitute a sufficient deterrent to similar conduct in the future, the Court imposed sanctions of Attorney's Fees of $10,671 plus suspension from practice in the Bankruptcy Courts for 6 months. _____________________ Debtor's Plan Providing for Hardship Discharge is Binding if Creditor Fails to Object In re Poland (10th Cir. 2004) Generally speaking, a Chapter 13 Debtor is relieved of her debts following completion of the Plan; in other words, the debts are discharged. 11 U.S.C. § 1328(a). There are, however, exceptions to discharge, including a student-loan debt. §§1328(a)(2); 523(a)(8). But there is also an exception to this exception: if excepting a student loan debt from discharge would impose an "undue hardship" on the Debtor and the Debtor's dependents, the debt will be discharged. § 523(a)(8). In Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), the Appellate Court held that where the Debtor's plan contained an express finding of undue hardship, the Creditor's failure to object to confirmation barred its attempt to collect the debt because the plan with its finding of undue hardship was res judicata. Unlike the factual scenario in Andersen, it was not established in this case that excepting the student-loan debt from discharge would impose undue hardship on the Debtor. As a result, the debt was not discharged, and, consequently, the Court reversed the District Court's order upholding discharge of the debt. _______________________ 9th Circuit Affirms Rule That Ommitted Creditor in "No-Asset" Case is Discharged In re Nielsen (9th Cir. 2004) Failure to list a Creditor in no-assets Chapter 7 Bankruptcy does not justify revocation of discharge. The Court published this opinion primarily to reaffirm established 9th Circuit law on the effect of failure to list a creditor in a no-asset, no-bar-date Chapter 7 Bankruptcy. The Court had previously held in In re Beezley that such a failure does not justify revocation of the discharge, but much of the reasoning in that decision was set out in a concurrence rather than in the per curiam opinion. The 9th Circuit therefore adopted the holding of that opinion and the reasoning of the concurrence.

Democrats predict the sky is falling, see a big win for Kerry, and believe the Moon is made of green cheese! SOURCE: Chronicle Washington Bureau Predicting an economic "catastrophe" fiscal "experts" say the U.S. budget deficit will grow to some $60 trillion in the next 10 years. These experts predict that the government may be unable to meet social security, medicare, education and military needs without doubling taxes and reversing current trends in rising expenditures. The size of the looming deficit is set at $72 trillion by the Social Security Board of Trustees; at $40 trillion by the Government Accountability Office; and $47 trillion by the international Monetary Fund. In the near future much, if not all of the government's disposable income will go to paying interest to foreign entities that are funding today's budget deficit. "This administration and previous administrations have set us up for a major financial crisis," said laurence Kotlikoff, economics chairman at Boston University. In related news, John Kerry plans to vote for an immediate inquiry into the issue before voting against it. ____________________ Happy days are here again: lenders see windfall in the misery of Chapter 13 debtors SOURCE: SpotlightonFinance.org The 1.5 million U.S. households filing for personal Bankruptcy every year offer a sizeable niche market for lenders—if they could just figure out who was least likely to get into financial trouble again. Apparently, First Hallmark Mortgage Corp has found a way to tap this market. The New Jersey-based mortgage lender targets borrowers in Chapter 13 Bankruptcy repayment programs who own their homes. First Hallmark specializes in debt consolidation loans that fold existing mortgage and credit card debt into a 2-year hybrid adjustable rate mortgage. The company markets its product through direct mail and referrals from Bankruptcy attorneys. The key is to find borrowers who are able to stay current on their repayment plans and mortgages for 2-3 years. Borrowers who receive a First Hallmark consolidation loan and stay current with payments are offered the chance to refinance into a lower-cost conventional mortgage. Bruno Viscariello, president of First Hallmark, told the industry newsletter Inside Mortgage B&C Lending (Bethesda, MD) that about 80% of the company's customers are able to take advantage of the refinance option. About 1/2 of the company's $15.5 million in monthly originations comes from borrowers in Bankruptcy. The company operates in New Jersey, New York, Pennsylvania and Florida.

New procedures for processing checks by our banks will cut the time it takes for a bank to clear a check to times as short as hours from the time of deposit. Scanning technologies that will now be employed will make it easier for banks to credit accounts, because they can eliminate dependence of the messenger system currently in use. The news is not all good though. Banks will also be required to archive your checks, and maintain those records for up to seven years, which means someone viewing those records will be able to establish your spending patterns, which could be useful in commiting fraud or forgery. All in all, the advances appear to be positive ones, so make sure when your clients pay your fee by check, that they really have the money in the bank!