RES JUDICATA DOES NOT APPLY UNLESS ISSUES ARE SUFFICIENTLY RELATED In re EXDS, Inc. (Bankr. DE 2004) Where claims by a Debtor are subject to arbitration it is proper for the Court (rather than an arbitrator) to determine whether res judicata arising form confirmation of the Debtor's Plan bars claims before they are sent to arbitration. Here, res judicata did not bar the Debtor's claims, even though both the Debtor and the Defendant were involved in the underlying Bankruptcy case. The relief sought in the Adversary proceeding was not sufficiently related to the issues resolved at confirmation to give rise to res judicata. In addition, where a Disclosure Statement or Plan specifically reserves actions for further adjudication res judicata does not apply. Likewise, where fraud is not discovered until after confirmation, res judicata does not apply to bar the fraud claim. Finally, where at the time of confirmation the Debtor was not aware of facts giving rise to a claim against its consultant, failure to disclose such a claim in the Debtor's Disclosure Statement will not bar the claim under principles of judicial estoppel.

Another one bites the dust! From cardforum.com Congress finished most of its lame-duck session and left town Saturday, leaving a bankruptcy-reform bill to die on the vine once again, the Credit Union Journal Daily reports. Lawmakers may return for a brief attempt to vote on recommendations by the 9/11 Commission, but only if an agreement can be reached on their key recommendations, according to John McKechnie, Chief Lobbyist for the Madison, Wisconsin-based trade group Credit Union National Association. "It doesn't look as if they're going to get to our stuff," McKechnie, referring to the bankruptcy measure, told CUJ Sunday. The bill, long sought by credit card issuers and other lenders, would make it tougher to dischrage unsecured debt, thus steering more consumers into reorganization. The proposal has been lingering since the House and Senate passed it last year because both chambers have yet to agree on a single version to send to President Bush. This would be the fourth straight Congress in which a bankruptcy bill died before the end of the session. _________________ FREE CREDIT REPORTS START DECEMBER 1 Beginning December 1, 2004 free annual credit reports will be made available upon request by a consumer as required by the Fair and Accurate Credit Transactions Act of 2003 ("FACT"). Reports will be available across the country in four stages: Dec. 1, Alaska, Hawaii, and other Western states March 1, Midwestern states June 1, Southern states Sept 1, New England and other Eastern states Consumers will be able to request their reports from all 3 major credit reporting agencies at a special web site, AnnualCreditReport.com; the credit report will appear on the screen and may be printed out, consumer may call 1-877-322-8228, or they may write to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, Georgia 30348-5281 ______________________ FEDERAL DEBT SKYROCKETS (spin alert!) Kevin Collins, DailyPennsylvanian.com On Nov. 19 Congress raised the debt ceiling by $800 billion, meaning the government can now go $8.18 trillion in debt. Congress had already breached its previous limit and was taking money out of pension accounts to keep functioning. At President Bush's first inauguration, the national debt was about $5.6 trillion. Since then the debt has increased by about 30%. In the fiscal year that ended in September, the government paid $321 billion in interest. A recent Washington Post editorial estimated that at the current pace interest costs will account for almost 10% of federal spending in the next decade.

N.J. Panel Curbs Solicitations for Bankruptcy Work Lawyers' letters called 'formulaic,' hyperbolic in predicting disaster Mary P. Gallagher, New Jersey Law Journal For the second time this year, a New Jersey Supreme Court committee is reining in lawyers who market their services through mass mailings to people whose names appear on court dockets. In an opinion published Monday, the Committee on Attorney Advertising sharpened the pencil on what bankruptcy lawyers can say in solicitation letters and what disclosures they must make. Examples of "overreaching and improper statements," include: "If you do not act quickly, you could very likely lose your property or home." "YOU NEED NOT LOSE YOUR SINGLE MOST IMPORTANT INVESTMENT, BUT YOU MUST ACT SOON." "In order to save your home you must act quickly and you must do so having been given the right advice... Time is limited." The committee faulted lawyers for touting themselves with language like: "YOUR BANKRUPTCY SPECIALIST." "I have been helping people just like you save their homes and improve their financial condition for the past XX years." "My practice is exclusively devoted to debtor relief and I have developed an expertise in assisting homeowners in saving their property." "I urge you to compare my experience, reasonable fees, and personal attention." The letters also exaggerate the benefits of bankruptcy by making unqualified statements that it can stop foreclosure, car repossession, utility shutoffs and creditor harassment and wipe out credit card debt, said the committee. __________________ BANKRUPTCY FILINGS SOAR TO NEW RECORD Last year, appeals filed in the U.S. courts of appeals increased 6 percent, to 60,847. In the district courts, civil filings dropped 8 percent, largely because of a reduction in asbestos-related cases, but criminal filings rose 5 percent and immigration cases increased 22 percent. Bankruptcy filings increased 7 percent to a record 1.6 million. ____________________ CONSUMERS VICTIMS OF WISHFUL THINKING The "Reality Gap," which is the difference between the amount of debt consumers say they will pay off in the next month versus the amount of debt they actually paid off a month later, narrowed by 2 percentage point from October to 9 points. A month ago, 78% of Americans planned to pay off debt, while a month later only 69% actually did so. _____________________ HELD, NO DEADLINE FOR FILING POSTPETITION CLAIM IN RE WOODS, (N.D.Ill. 2004) This Chapter 13 case is before the court on the debtor's motion to compel the trustee to pay a postpetition tax claim. The trustee has refused to pay the claim, principally on the ground that it was not timely filed. However, as discussed below, there is no deadline for filing postpetition claims in Chapter 13, and because other objections posed by trustee also fail, the debtor's motion will be granted. ____________________ COURT EXPLAINS GUIDELINES FOR SETTLEMENT OF CONTROVERSIES In re Commercial Loan Corp. (Bkrtcy.E.D.Ill. 2004) The pivotal question in approving a bankruptcy settlement is “whether the settlement is in the best interests of the estate.” In re Andreuccetti, 975 F.2d 413, 421 (7th Cir. 1992); In re Energy Co-op., Inc., 886 F.2d 921, 927 (7th Cir. 1989). To answer that question, the court must compare “the settlement’s terms with the litigation’s probable costs and probable benefits.” LaSalle Nat’l Bank v. Holland (In re Am. Reserve Corp.), 841 F.2d 159, 161 (7th Cir. 1987). Relevant factors the court should consider include the litigation’s probability of success, its complexity, and its “attendant expense, inconvenience and delay.” Id. Approval of a settlement is committed to the court’s sound discretion. 5/ Andreuccetti, 975 F.2d at 421; Energy Co-op., 886 F.2d at 926. There is a similar middle ground when it comes to how critically the court should scrutinize the trustee’s settlement decision. The court cannot simply “rubber stamp” the decision and must do more than take the trustee’s word that the decision is reasonable. ____________________ RETROACTIVE RELIEF FROM AUTOMATIC STAY NOT ALLOWED In re Brown (Bankr. N.D. Tex. 2004) An innocent creditor who, without knowledge of the pendency of bankrutpcy, proceeded to obtain a judgment and sanctions against the debtor during the debtor's three bankruptcy cases was not entitled to annulment of the automatic stay to validate its secured position as to debtor's National Football League deferred contract payments. ______________________ IN RE FOUST, (W.D.Tenn. 2004) Plaintiff, James Darryl Foust ("Debtor"), has filed a complaint under 11 U.S.C. § 523(a)(8) seeking a judicial determination that the particular debts owed by him to the above-named defendants on the date of the filing of his chapter 7 petition in the amount of approximately $230,000 arising out of student loan obligations are dischargeable. The ultimate and sole issue here is whether the debtor's student loan debts owed to these defendants are dischargeable, in whole or in part, because of the asserted undue hardship it would create for him not to discharge the debts. Based on the entire case record ... ____________________ HELD, PREVAILING PARTY MAY BE ENTITLED TO ATTORNEY'S FEES In re Bertola (9th Cir. BAP 2004) Whether fees may be awarded in bankruptcy proceedings generally depends, in part, on whether the case involves state or federal claims and whether the applicable law allows such fees. A prevailing party in a bankruptcy proceeding may be entitled to an award of attorney fees in accordance with applicable state law if state law governs the substantive issues raised in the proceedings. In cases under § 523(a)(2), however, "the determinative question . . . is whether the successful plaintiff could recover attorney's fees in a non-bankruptcy court. In a nondischargeability action based upon misappropriation of goods delivered under a bailment, the essential nature of the action was in tort and not in contract, and the award of fees was not warranted. ______________________ HELD, NOTICE OF MOTION MUST BE TO SPECIFIC NAMED OFFICER In re Villar (9th Cir. BAP 2004) Where a debtor served a contested matter on a corporate creditor by mailing the moving papers to the creditors P.O. Box: "To Officer, General Manager, and Agent for Service of Process," the services was ineffective and deprived the creditor of due process. Nationwide service of process by first class mail is a rare privilege which should not be abused or taken lightly and, thus, the service has to be made to a specifically named officer. Concurrent service on the creditor's State court attorney was also ineffective in the absence of proof that the attorney was either explicitly or implicitly appointed by the creditor to receive service of process on its behalf.

Debt limits under §109(e) may block Debtor's right to convert to Chapter 13 In re Hansen (Bankr. N.D. Ill.) A Debtor has an absolute right to convert from Chapter 7 to 13 -- but only so long as he/sheis eligible to be a Chapter 13 Debtor under the Code. In other words, the Schedules constitute presumptive evidence of the Debtor's liabilities as of the Petition filing date, such that if they show the Debtor to be ineligible for Chapter 13 on the Petition date then post-Petition reductions in liabilities cannot remedy that problem. Why? Because the Code states that eligibility is measured on and determined at the Petition date. Note: This situation is to be distinguished from that in which a claim that is unliquidated on the date of filing becomes liquidated post-Petition; the only kinds of debts that count for eligibility under §109(e) are those, including tax claims, that were liquidated as of the date of filing. For example, a tax liability, the amount of which has not been determined, that is unliquidated on date of filing may be liquidated post-Petition through litigation of the claim, or through a compromise, but such a claim need not be included in the § 109(e) count. _____________________ Debtor's Attorney may be deemed it's agent for service of process In re Focus Media Inc. (9th Cir. 2004) In an adversary proceeding a Lawyer can be deemed to be a Client's implied agent to receive service of process when the Lawyer repeatedly represented that Client in the underlying Bankruptcy case and the totality of the circumstances demonstrates the intent of the Client to convey such authority. _____________________ A "failed business" may turn out to not be a proper Chapter 11 candidate In re Liberate Technologies (Bankr. N.D. Ca. 2004) Though a Debtor’s business is unsuccessful, dismissal of the Debtor's voluntary Ch. 11 case is appropriate where the Debtor has cash well in excess of its liabilities and does not need Bankruptcy protection to avoid the wasteful liquidation of its business assets. ______________________ Time spent by Paralegals on "routine tasks" not compensable In re Fibermark, Inc. (Bankr. Vt 2004) Where a professional fee applicant affirms that it bills its non-Bankruptcy clients for reasonable CALR usage charges, such charges are reimbursable in Bankruptcy cases. Travel charges are allowed at 1/2 of the timekeeper's normal hourly rate. Para-Professional time devoted to administrative activities such as mailing or delivering papers, photocopying, word processing and organizing files constitutes overhead that is not compensable form the Estate. "After hours support" also constitutes overhead not compensable form the Estate.

The Buzz About Bankruptcy "Reform" Bush supporters talk about a new reform push By Tom Hamburger, L.A. Times Staff Writer Editor's Note: See if you can discern the viewpoint of this L.A. Times staff writer. No left leaning bias here(?). Lobbyists for the nation's leading business groups have been toasting the success of what they describe as an unprecedented effort this year to reelect President Bush and Republican congressional candidates. Now they plan to collect on their investment. "With his victory and better numbers in the Senate and the House, we hope we would get to some things we believe are long overdue," said Dirk Van Dongen, President of the National Assn. of Wholesaler-Distributors and a leader of this year's effort to mobilize the business community behind the Bush candidacy. According to interviews with lobbyists and trade associations, the list includes tax cuts for capital gains and dividends permanents, limiting liability lawsuits, changing Bankruptcy laws and opening previously restricted land in Alaska and elsewhere for energy exploration. Banks and credit card companies list Bankruptcy reform on the priority list. ____________________ Will Daschle's defeat make it easier to get reform passed in the Senate? By Kimberley A. Strassel, Wall Street Journal Editor's Note: I tried to filter out some of the bias in this one. Can you tell the difference? On November 2 Republicans pulled off the electoral equivalent of Sherman's march to Atlanta, picking up Democrat seats in both of the Carolinas, in Georgia, in Louisiana and in Florida. They weathered storms in Kentucky, Oklahoma and Alaska. But the Blessed Event was surely the overthrow of Tom Daschle, the Senate Minority Leader seen as the architect of obstructionism by Republicans. That ouster, which constituted the first time in more than 50 years a Senate party leader was exiled, was as much a repudiation of obstructionism as it was Mr. Daschle's own record. The harder question however is whether the GOP has the goods to beat the 60-vote filibuster that was the Daschle trump card. Yet dig into the record and the stonewalling was never all that solid. The 51-strong GOP may not have been able to rustle up nine Democrats on any one issue, but they usually managed a handful. That's all they'd need now. The trick will be picking off the willing on an à la carte basis. To name just a few examples, tort reforms have had the support of Democrats like Dianne Feinstein, Tom Carper, Jeff Bingaman and Blanche Lincoln, while drilling in the (so-called) Arctic Wildlife Refuge in Alaska failed to overcome a Democrat filibuster by only a single vote and is sure to be revisited. Similar bipartisan support exists for Bankruptcy reform, an energy bill and tax reform.

Proof of Claim faxed to Trustee's Counsel does not constitute timely delivery In re Outboard Marine Corporation (7th Cir. 2004) A Creditor that faxed its Proof of Claim to the Trustee's Counsel on the bar date rather than delivering it by mail to the post office box for the Claims Agent was not entitled to have the Claim treated as timely. The Bankruptcy Court erred, however, in disallowing the Claim. Instead, said the Appellate Court, the procedure should have been to allow the Claim but subordinate it to other, timely filed Claims. Edtor's Note: Either way, that Attorney is going to have a malpractice headache to deal with. This one may have come from our own Judge Squires, who I believe is handling the Outboard Marine case. If anyone knows please e-mail and let us know. ___________________ ... But how will it play in Peoria? Debtor's plea of guilty to Bankruptcy fraud justifies denial of Discharge (surprise!) In re Peterson, (C.D.Ill. 2004) The U.S. Trustee moved for summary judgment on its adversary complaint objecting to the discharge of Debtor/Defendant Kelly R. Petersen on the basis that his plea of guilty to the crime of Bankruptcy fraud established conclusive grounds for denial of discharge. In granting the summary judgment request the Court held that since the elements of the Bankruptcy crime and the grounds for denial of discharge were identical, and since the Debtor had enjoyed an opportunity to litigate the criminal proceeding but elected not to do so, collateral estoppel applied. ___________________ Beware the heavy hand of the Bankruptcy Court: Divorce Attorney's Fees slashed In re Powell (N.D.Tex. 2004) A Debtor in Chapter 13 need not obtain Court approval to retain an Attorney to represent him or her in divorce proceedings, but said Attorney must apply to the Court for approval of fees. In this case the firm representing the Debtor in divorce proceedings applied for approval of fees and the Court reduced the amount requested based on "vague" service descriptions in the billing statement, excessive staff conferencing time, and because the Fee Application did not break out billable time into distinct subject areas. The Debtor's estranged husband objected, arguing in part that 11 U.S.C. � 330 only allows compensation from the estate for services directly related to the Bankruptcy. The Court rejected that argument and held that services provided to the Debtor personally need not be solely for Bankruptcy services in order to be compensated from the Estate. Editor's Note: For more on when an Attorney can be paid from a Bankruptcy Estate, see the article in the DCBA Brief, written by your humble narrator and found online at http://www.dcba.org/brief/febissue/2004/art20204.htm ___________________ License forfeiture not a violation of the Stay In re McMullen (1st Cir. 2004) The Bankruptcy Court did not err in finding that the post-Petition commencement of license forfeiture proceedings before the State Board of Realtors was not a violation of the Automatic Stay in the realtor's Bankruptcy case. ___________________ Chapter 7 case dismissed under �707(b) due to excessive mortgage payment In re Cox (8th Cir. BAP 2004) (Southern District of Iowa) A mortgage on a house in which the Debtor resides, and wishes to continue to reside, is a consumer debt regardless of the fact that the Debtor intends to ultimately sell the house and use the funds for retirement. A Bankruptcy Appellate Panel held that since the Debtors' primary purpose in incurring the mortgage debt secured by his residence was to furnish and complete construction of that home for family and personal use, the Bankruptcy Court had not "clearly erred" in finding that the Debtor held primarily "consumer debts" as defined under �101(8). By the same token, the Bankruptcy Court did not err in dismissing the Debtor's Chapter 7 case under �707(b) where the Debtor's mortage payment was "excessive" and reducing the payment would have contributed to funding a Chapter 13 Plan. Here the Debtors' monthly payment was $2,930 on the first mortgage and $482 on the second. The UST produced the testimony of a Bankruptcy analyst in support of its motion, who testified that the maximum reasonable housing expense in that market was $1,175 per month based on the 2001 Consumer Expenditure Survey produced by the United States Bureau of Labor and Statistics. The expert also noted that the Debtor would have had enough to fund a Chapter 13 Plan if he reduced his housing expense to $1,175 per month and included the $1,083 that he had ceased remitting to the IRS in his calculation. ___________________ Chapter 13 Debtor may return collateral and amend Plan In re Mason (Bankr. N.D. Cal. 2004) A Debtor operating under a confirmed Chapter 13 Plan is entitled to return collateral to a Secured Creditor and modify his Plan to treat the Creditor's Claim as unsecured.

No "real estate bubble" according to Greenspan -- record household borrowing not a problem Martin Crutsinger, Associated Press The record level of debt being carried by American households and soaring home prices do not appear to represent serious threats to the U.S. economy, Federal Reserve Chairman Alan Greenspan said Tuesday. However, while the Fed Chairman also noted that high personal Bankruptcy levels were a concern because they indicated "pockets of distress," most U.S. consumers "appear able to calibrate their borrowing and spending to minimize financial difficulties." In a speech before America's Community Bankers, an organization representing smaller banks, Greenspan played down worries about the effects of creeping debt-to-income levels and steep increases in home prices in recent years. Some economists have expressed concerns that the big rise in home prices could represent a bubble that may deflate just as the stock market did in the Spring of 2000. Clinton/Dot.Com hangover anyone?

Creditor's failure to raise fraud timely bars RICO claims Regions Bank v. J.R. Oil Company, LLC (8th Cir. 2004) Because a Creditor bank neither raised the issue of fraud during the Debtor's Bankruptcy nor timely moved to set aside the sale of its collateral in the course of that Bankruptcy, its ensuing RICO claim -- based on alleged fraud in the procurement of that loan and subsequent transfer and use of its collateral -- constituted an impermissible attack on the final judgment of the Court approving the sale. _______________________ Late check still considered to have been issued and received in the "ordinary course of business" In re US Office Products Company (Bankr. De. 2004) Despite the fact that a check was honored by a Debtor well after the payment date recited on the invoice to which that check related, that transaction was nevertheless made "in the ordinary course of business." The check was paid after the invoice payment date because the Debtor had refused to pay on the contractual payment date, citing dissatisfaction with the goods and services. The vendor agreed to make modifications, and the debtor paid the invoice (by then overdue) promptly after the modifications were completed. __________________ Court sets forth requirements for "informal proof of claim" In re Pacific Gas & Electric Corp. (Bankr. N.D. Cal. 2004) In order to establish an "informal proof of claim" a putative Creditor must prove: (1) presentment of a writing; (2) within the time for the filing of claims; (3) by or on behalf of the Creditor; (4) bringing to the attention of the Court; (5) the nature and amount of a claim asserted against the Estate. Filings in pre-Petition State Court litigation do not constitute an informal proof of claim. _____________________ Party opposing plan confirmation can raise new issues In re Enriquez (Bankr. N.D. Cal. 2004) Opponents of Plan confirmation can raise issues not addressed in their written Objection at the Confirmation Hearing as long as the Plan-proponent does not object to that evidence and is not prejudiced (i.e. is not prevented from offering opposing evidence).

Debt Settlement and Negotiation Industry forms new Trade Organization The debt settlement and negotiation industry has formed the United States Organizations for Bankruptcy Alternatives ("USOBA") to provide industry education, lobby, promote industry-oriented regulation and advance certain consumer protections. The new organization's first convention will be held in Washington, D.C. on November 18 and 19. The USOBA can be contacted care of Kallie Guimond, Executive Director, 202-232-6500, and online at www.USOBA.org _____________________ Proposed Bankruptcy Bill would bar certain deferred-compensation benefits Employers in Bankruptcy that terminate underfunded pension plans would be barred from paying or promising deferred compensation benefits to Directors and Officers for 5-years under legislation introduced in the House of Representatives. According to the Bill's sponsor, Rep. George Miller, D-Calif., the legislation is needed to ensure fairness. He noted that "[t]here are too many examples of private companies taking care of their executives' retirement compensation plans while they allow their employees "hard-earned retirement plans to be ruined." Rep. Miller is the ranking minority member on the House Education and the Workforce Committee.