Pension Benefits/Bankruptcy Reform: joint State and Federal effort in Southern Illinois to revamp Bankruptcy law moving ahead By Jim Muir, the Southern U.S. Reps. Jerry Costello, D-Belleville, and John Shimkus, R-Collinsville, and state Rep. John Bradley, D-Marion, are working toward the same goal: changing Bankruptcy laws so that health and pension benefits are entitled to a higher priority if a company goes belly up. The action by Costello, Shimkus and Bradley was prompted by the ongoing situation involving more than 3,100 coal miners and retirees who lost health care benefits after Horizon Natural Resources filed for Bankruptcy. Lawyers for Horizon argued successfully last July and August that -- as part of its Plan of Reorganization -- Horizon should not be responsible for health benefits for union miners and retirees who previously worked for Zeigler Coal and Old Ben Coal. _________________________ Post-Petition interest on educational loan not dischargeable in Chapter 13 In re Delgado, Kan. 2000 Educational Credit Management Corporation (ECMC) objected to the confirmation of a Chapter 13 Plan. In their Plan the Debtors sought to discharge accrued post-petition interest and collection charges on a student loan. Debtors made no assertion of so-called "undue hardship." In its objection ECMC asserted that Debtors' educational loan, including post-petition interest and any other charges, was excepted from Discharge by §§523(a)(8) and 1328(a)(2), and that the Debtors should not "bootstrap" a discharge of this portion of ECMC's claim into their Plan. The Court held that the Code is clear that debts for the repayment of educational loans are not dischargeable: however, the Court noted that the Code contains no direct reference to whether post-petition interest on a nondischargeable student loan can iteslf be discharged. The leading case on the dischargeability of post-petition interest is Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L.Ed.2d 772 (1964), decided under the Bankruptcy Act, which dealt with the dischargeability of post-petition interest on tax debts. In Bruning, the Supreme Court held that although post-petition interest on a nondischargeable tax debt could not be paid by the Estate, it accrued during the pendency of the case and became a personal liability of the Debtor when the Bankruptcy was complete. The Supreme Court reasoned that because Congress excepted the tax debt from discharge, it "clearly intended that personal liability for unpaid tax debts survive Bankruptcy." Held: Personal liability of a debtor for post-petition interest accruing on a Pre-Petition, non-dischargeable student loan is not dischargable in a Chapter 13 plan. ___________________ Medical Hardship discharge for school loan requires competent (but not necessarily expert) evidence In re Folsom, M.D.Fla. 2004 Generally, a disability that nts a Debtor from working constitutes "additional circumstances" sufficient to satisfy prong 2 of the so-called Brunner test. However, Bankruptcy Courts have held that a Debtor whose additional circumstances involve the Debtor's health or medical condition must present more than the Debtor's own, unsupported testimony. See In re Swinney, 266 B.R 800, 805 (Bankr. N.D. Ohio 2001) (noting that "[a]lthough such evidence does not have to necessarily consist of extensive expert testimony, such evidence should consist of more than simply bare allegations; that is, whenever a Debtor's health, whether mental or physical, is directly put at issue some corroborating evidence must be given supporting the proponent's position.") Cf. Ryan v. Department of Education, (In re Ryan), 310 B.R. 387, 389-390 (Bankr. S.D. Ill. 2004) (finding that medical records, that acknowledged Debtor's problems but did not specifically find that they prevented her from working, were insufficient). ______________________ Concealment of books and records not found In re Hall, E.D.Va. 2004 William L. Hall filed a voluntary Chapter 7 Petition on June 18, 2003. An adversary proceeding was filed September 22, 2003. In that complaint the Plaintiff alleged that Hall should be denied a discharge under the auspices of 727 (a)(3) due to his alleged concealment and failure to preserve financial records; and under 727(a)(5) for failure to explain and/or disclose the loss of assets. Held: The Plaintiff did not meet his burden of proof. Hall kept books and records of his financial affairs consisting of bank statements, tax returns and other ordinary documentation. In addition, he subpoenaed and provided bank records of Europa Salon and Susan Hall. Furthermore, he provided joint tax returns for 2001 and 2002 and the tax returns of Europa Salon for 2001, 2002 and 2003.