Cases

Extrinsic evidence admissible to determine character of support in settlement agreement

In re Aken (6th Cir. BAP 2005)

Bankruptcy Court properly held:

(i) obligations bore required indicia of support under State law to render them non-dischargeable;

(ii) extrinsic evidence may be admitted to explain or vary terms of a marital settlement agreement.

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Unquantifiable benefit not adequate basis for turnover

In re International Management Assoc. (11th Cir. 2005)

An unquantifiable benefit that bears no necessary correspondence to the value of the property transferred or received cannot form the basis for recovery under 550(a)(1) from a person "for whose benefit" the transfer was made.

Find Bank Addresses and Contact Information

Bank accounts can pop up on Schedule B, in the Statement of Financial Affairs and on Schedule D or F for a credit card or line of credit. A handy way to find the address of the relevant Bank's headquarters or branch offices is via the Federal Reserve's website. Select whether you are looking for a head or branch office, followed by the Bank's name and the city in question. The site does not always include every branch address. Another site that may fill in the gap is LocalLender.info.

Case Roundup

Trustee need not settle case

In re Consolidated Industries Corporation (7th Cir. 2005)

A Trustee does not abuse his discretion when he refuses to settle an $8 million claim for $20,000 where settlement of the claim might jeopardize a prior multi-million dollar §544(b) judgment against a third party.

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Employer may not fire worker exclusively based on his/her Bankruptcy

White v. Kentuckiana Livestock Market, Inc. (6th Cir. 2005)

While §525 prohibits a private employer from terminating a Debtor when Bankruptcy is the sole cause of termination, the fact that Bankruptcy is a substantial factor is not sufficient to make the firing inappropriate.

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Clayton Act lawsuit not a violation of the Stay

Lockyer v. Mirant Corp. (9th Cir. 2005)

A State Attorney General's suit under the Clayton Act to force a Debtor In Possession to divest assets was an exercise of police or regulatory powers that was not subject to the Automatic Stay.

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Administrative expenses need not be paid out of specific funds

In re Farmland Industries, Inc. (8th Cir. 2005)

Neither §330 nor §503 provides that payments to professionals that qualify as administrative expenses must be paid from any specific funds of the Debtor. When the Bankruptcy Court determines that two advisors representing two competing classes of Creditors are "necessary to the administration of the case," §330(a)(4)(A)(ii) does not preclude the Court from providing at the outset that the contingent portion of each advisor's fees will be paid out of the recovery enhanced by that advisor's services.

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Secured creditor entitled to proceeds plus repaired collateral

In re Tower Air, Inc. (3rd Cir. 2005)

Scured Ceditor in a Chapter 7 case may recover the insurance proceeds intended to pay for damage to its collateral, while retaining the fully repaired collateral

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Ruling on Fair Debt Collections Practices Act

Schmitt v. FMA Alliance (8th Cir. 2005)

For FDCPA purposes, a Creditor's knowledge of a Debtor's Bankruptcy, acquired prior to the time an account is assigned to a third-party debt collector, will not be imputed to the debt collector.

CM-ECF Information

Your tax dollars at work! The CM/ECF home page of the Administrative Office of United States Courts can answer a lot of "how-to" questions. The website includes a list of frequently asked questions covering almost everything. This is simply a good resource to check out before calling the Clerk of the Bankruptcy Court. It just may save a phone call.

Confirmation of Plan does not substitute for adjudication of objections to discharge

In re Hanson (7th Cir. 2005)

Where the Code requires commencement of an Adversary proceeding and entry of particular findings before a discharge can occur (i.e. student loans), confirmation of a Plan providing for such a discharge is ineffective until said hearing takes place because the alternative deprives the creditor of due process.

============================================================ Automatic Stay stops actions in other Bankruptcy Courts (brain teaser)

In re Miller (9th Cir. 2005)

Though the Automatic Stay does not affect proceedings in the same Court in which the Debtor's Bankruptcy case is pending, it does preclude actions filed in another Bankruptcy Court from working at cross purposes against the Debtor in the newly-filed case. ============================================================ Dismissal of Appeal unduly harsh In re Beachport Entertainment (9th Cir 2005)

Dismissal of an Appeal based on the Trustee/Appellant's failure to provide the BAP with the Judgment or Order being appealed, the Complaint, or the Answer, in violation of FRBP 8009, was an unduly harsh sanction. ============================================================

Party in interest has standing In re Moss (Bankr. E.D. Mi. 2005)

Where the amount owed to the Debtor by a party in interest may be reduced based on the outcome of a dispute in that Bankruptcy case, said party has a sufficient "pecuniary interest" to appear and be heard in the dispute. Although the Debtor in a no-asset Chapter 7 does not ordinarily have standing, where the outcome of a dispute would result in more funds being made available for payment of a debt for which the Debtor would remain personally liable, the Debtor had standing. There is authority for the proposing that, to the extent an award of the maximum compensation allowable under § 326(a) does not result in what would appear to be an unconscionable windfall, Trustees may reasonably expect to receive the maximum allowable fee. However, the subject Court rejected the notion that the maximum fee is presumptively reasonable, ruling that such a standard would be inconsistent with the Code. Nothing in the Bankruptcy Code or Rules dispenses with the need for a trustee to maintain detailed billing records.

Find any State or Federal Exemption instantly

Self-explanatory. There is no charge for using this site, and it appears to be reasonably current on dollar amounts. Use this site to find State Exemptions or Federal Exemptions. Please let me know if you have any feedback after using the site.

And another thing ...

Sorry -- that last post got cut off and left out the most important point. The Bankruptcy Reform Bill was passed by the Senate Judiciary Committee and will be presented to the full Senate next week. Thanks again to Tony Mankus.

Bankruptcy Reform About to Pass (...apparently they mean it this time)

This is a paraphrase of a message forwarded by Bankruptcy Committee Member and stand-up guy Tony Mankus about the pending Bankruptcy Reform Act.

SEE: http://www.abanet.org/genpractice/advocacy/index.html

Ninety (90) law professors form across the country have analyzed the legislation and asked that it be rejected.

A Harvard University study shows 1/2 of all personal Bankruptcies filed in 2001 resulted from inability to pay medical bills. This legislation does nothing to help these Americans. See the study at www.getsickgobroke.org

Seventeen Hundred (1700) American Physicians signed a letter opposing the legislation: SEE: http://nacba.org/maxdocs/S._256_Release_FINAL.pdf

Take the following actions now:

(1) Call or email your two (2) United States Senators now. Senator Boxer is already voting no, but needs support. Senator Feinstein is wavering and considered a key target for our lobbying effort. It is too late to do this by mail. You can find your Senators by clicking on the following link: http://www.visi.com/juan/congress/. Once there, call and/or email your Senators to alert them of your concerns. If making a phone call (as opposed to sending an email message), ask to speak to the staff person handling the bankruptcy bill. Here is one way you may want to frame your argument:

S. 256, the Bankruptcy bill, soon will be considered on the Senate floor. I urge Senator (last name) to vote against the bill. It is not fair, it is not balanced and it needs to be defeated. Overwhelmingly, American families file for bankruptcy because they have been driven there -largely by medical and economic catastrophe - not because they want to go there. The bill should respect that harsh reality and the families who face it. Instead, the bill assumes everyone is in bankruptcy for the same reason - too much unnecessary spending. It doesn't take into account the circumstances of those who face overwhelming medical debts, those who have lost their jobs, those whose breadwinners have been called to active military duty, those who are caring for elderly parents or those caring for sick children. I can tell you from my own experience representing debtors that bankruptcy most often is the last resort. At the very minimum, we hope the Senator will vote for amendments that will inject some fairness and balance to the bill. If those amendments are defeated, I hope the Senator will vote "NO" on the bill.

(2) Generate at least 20 emails opposing the bill to the Senators from your State. hese can come from Cients, colleagues, family or friends. See the text above as an example.

(3) Generate at least 10 phone calls to your senators in opposition to the bill. You can find their phone number by looking them up in the link above, or call the Capitol switchboard at (202)224-3121 and ask for your Senators' offices.

(4) Have someone in your office spend a full day calling clients. Ask Clients to call or email their Senators in opposition to the bill. Have the Senator's phone numbers and email addresses available to give them. Ask them to call their Senators immediately to protect the rights of people like them to seek Bankruptcy protection.

(5) Get at least 2 of your current or former clients with overwhelming medical expenses to go to www.getsickgobroke.org and share their stories and learn about how to contact their Senators. We will use their stories (without using names) in an effort to demonstrate how S. 256 is unfair.

(6) Commit to sending NACBA the contact information for at least one compelling current or former client who is willing to be interviewed by the news media. It can be someone with medical debt, someone who has been unemployed, someone who tried to make arrangements with a credit company to pay at least a portion of what was owed by was rebuffed. It should be someone you can personally identify as one with a compelling story who can be articulate in describing their situation. NACBA Executive Director Maureen Thompson is collecting these debtor profiles and contact information. Please send them to her at maureent@nacba.org.

(7) The banks and credit card companies have spent tens of millions of dollars paying for this legislation. Money is needed to tell our lawmakers the truth. The National Association of Consumer Bankruptcy Attorneys (NACBA) is the only organization which solely represents the interests of attorneys representing consumer debtors. Go to www.nacba.org and contribute financially to NACBA's efforts. Is it not worth the amount you earn in just one bankruptcy case to help defeat this legislation? If you are not a member of NACBA - you should be. Join now! www.nacba.org

If I can offer assistance in any way, please do not hesitate to contact me. Sincerely, Bradford W. Botes, President National Association of Consumer Bankruptcy Attorneys

Pre-Petition fees may qualify as administrative expenses

In re CVEO Corp. (Bankr. DE 2005)

Services rendered pre-petition may be entitled to administrative status so long as the services provided a substantial contribution to reorganization efforts. To qualify for such treatment the claimant must show more than a pre-petition agreement that fees would constitute administrative claims -- the claimant must prove that the pre-petition activity directly benefited post-petition reorganization efforts of the Estate.

Here the Chapter 11 Debtor paid pre-petition fees for financial consulting services. A creditors' committee filed an adversary complaint to recover the payments as preferential and/or fraudulent. The recipient argued that its pre-petition services benefited the Debtor's reorganization efforts and therefore should be allowed as administrative expenses. The Court denied Plaintiff's motion for summary judgment, noting that there was a genuine dispute as to whether or not the Defendant's services rendered any actual benefit to the Debtor. The Court also found a genuine dispute of material fact as to the circumstances alleged to have been preferential or fraudulent (i.e. whether or not the Debtor received reasonably equivalent value in exchange for the money paid).

Unprepared for retirement

Nearly 1/2 of U.S. workers (45%) are financially unprepared for retirement and do not believe they will have enough set aside to be comfortable in their golden years. This is picked up by the latest national Hudson retirement survey, which also finds that 3/4 (74%) of U.S. workers plan to work at least part-time during their retirement. An upbeat 41%, however, plan to retire before they reach 65. Good luck.

Consumer Debt up 12% over 2002

National and Statewide results for a study from Experian found that:

A U.S. consumers’ average debt is 12% higher than it was last year. Consumers have an average debt of $11,224 compared to last year’s average of $10,024. 25% of U.S. consumers have debt that is above the national average and their average Experian PLUS Score is 695. By comparison, the average PLUS Score for consumers with debt below the national average is 671.

"It’s important for consumers to remember that having debt is not always a bad thing as long as they manage it well," said Ed Ojdana, President of Experian Consumer Direct. "They should also assess their finances on a regular basis by checking their accounts to be sure everything is in order before making future purchases."

Family Budget Calculator

Whether justifying a Client's expenditures for a Chapter 13 Plan, defending a "substantial abuse" motion under § 707(b), or backing yourself up with your local Trustee about what is a feasible budget in a particular area, the web site of the Economic Policy Institute is where you can look for solid data. Plug in a few variables (number of parents, number of kids) and receive an instant budget. The site also contains a wealth of other statistical information under the heading, Measuring Family Well-being, including information about trends in income, wages, taxes and health spending for middle-class families.

Case Roundup

Collateral Estoppel

Raspanti v. Keaty, 5th Cir. 2005

In a Bankruptcy suit the District Court erred in not applying principles of collateral estoppel to a Louisiana Appellate Court's findings on the issue of whether a debt owed by Defendant was for willful and malicious injury. ___________________________

Chapter 11 Administrative expenses keep their status following conversion

US v. Fowler, 9th Cir. 2005

Post-petition employment tax debt incurred as an administrative expense of a Chapter 11 Estate retains its first priority administrative expense status upon conversion to a Chapter 13. ____________________

Bankruptcy laws preempt State laws regarding avoidance of preferences

Sherwood Partners, Inc. v. Lycos, Inc., 9th Cir. 2005

Federal Bankruptcy law has 2 major goals: discharge of a Debtor and equitable distribution of assets. State laws that implicate either of those goals are presumed to be preempted by the Federal Bankruptcy laws. Hence, a State law that gave an assignee for the benefit of creditors (but not individual creditors) the right to avoid a preference was preempted.

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Res Judicata does not require that prior matter was subject of hearing

In re Keaty, 5th Cir. 2005

In a section 523(a)(6) case, the Bankruptcy Court erred by failing to give preclusive effect to a State Court's findings on the grounds that the issue had not actually been litigated because there had been no hearing. There is nothing in the case law defining the term "actually litigated" to require a trial or evidentiary hearing. The requirement that an issue be "actually litigated" for collateral estoppel purposes simply requires that the issue is raised, contested by the parties, submitted for determination by the Court, and determined.

Bankruptcy filings dip in 2004

Once the data is fully analyzed, the Bankruptcy filing rate, which declined last year for the first time since 2000, will have likely remained flat or continued to decline during the last quarter of 2004, only to rise again this quarter. This conclusion is based on trends in consumer debt levels and credit card default rates found in data analyzed by the American Bankruptcy Institute. The Federal Reserve noted that 3 variables, the financial obligations ratio, the credit card default rate and the credit card charge-off rate, appeared to correlate with and lead the consumer Bankruptcy filing rate. All 3 suggest that the downward trend is likely to continue.

Credit Card fees rise in 2004

Americans shelled out more than $24 Billion in credit card fees last year, an 18% jump over the previous year. The figure does not include balance transfer fees, foreign exchange fees, fees for ancillary services or miscellaneous fees for account research, all of which could easily push the number above $30 Billion. During 2004 consumers were charged $14.8 Billion in penalties, specifically late payment fees and over-limit fees. Annual fees edged up from $3.4 to $3.5 Billion. Cash advance fees increased 9% from $5.6 to $6.1 Billion. According to R.K. Hammer Investment Bankers, U.S. credit card issuers produced an estimated $50.8 Billion in fee income last year, with half the fees coming from merchants.

Find the FMV of a home in seconds online

While nothing can substitute for a written appraisal, Debtors' Attorneys can now obtain a rough estimate of the FMV of their Clients' home in about 60 seconds via Bank of America's online Home Value Search. The provides an almost instant market value for stand-alone homes and condominiums. Just enters the address of the property to receive a report that provides the low and high range of current FMV, plus additional information such as square footage, total number of rooms, the year the house was built, the number of bedrooms, whether or not it has a pool, etc. The service also provides actual comparable recent sales within a 1/2-mile radius. Note however that the value estimates produced tend to err on the high side. They may also not take into consideration recent additions that could raise the value of the house, or needed repairs that reduce the value. Nonetheless, this is a valuable little tool, and there is no charge for the service.