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.