ABI Online Chat Seminar (New BK Law)

Tuesday, May 3, 2005 at 3:00 p.m. (EST)

The co-chairs of the Consumer Committee of the American Bankruptcy Institute, along with ABI Resident Scholar Jeffrey Morris and Executive Director Samuel J. Gerdano, will hold an online discussion regarding the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (S. 256). Panelists will answer questions submitted online about the new law and how it will impact consumer bankruptcy practice. A transcript of the program will be posted afterwards.

Case Round Up

Strip-down and strip-off disallowed

In re Pistritto (Bankr. DE 2005) There is no principled method available to distinguish stripping off an undersecured lien from stripping down a wholly unsecured lien under section 506(d). Neither is allowed. "Substantial Abuse" must be found to deny pleading amenment

In re Fleming Companies, Inc. (Bankr. DE 2005)

The amount of prejudice needed to justify the denial of leave to amend a pleading is significant; it must be "substantial or undue." Inconvenience to a party or the strengthening of the movant's legal position does not provide sufficient prejudice. The nonmoving party must "demonstrate that its ability to present its case would be seriously impaired were amendment allowed." Where the need for amendment was caused by defendant's withholding of information, serious prejudice was not present.

Specific findings required to justify sale

In re Popp (9th Cir. BAP 2005) Real property of bankruptcy estate not subject to sale absent specific findings as to estate's ownership interest.

Annuity may be exempt as life insurance

In re Payne (9th Cir. BAP 2005) Single-premium annuity may qualify for bankruptcy exemption as life insurance under California state law only if primary purpose is insurance and not investment.

Q & A on the new bankruptcy law

Probably not a bad list of Q&A's to discuss with new Clients. Follow the link to the title of this post or click here to see the Q&A.

President Bush signed the Reform Bill today!

Thanks to Vice-Chair Kathryn Harry for delivering the good news!

Last Case Roundup before Reform

Objections to claim governed by R.3007

In re State Line Hotel, Inc. (9th Cir. BAP 2005)

Service of claim objections are not governed by Rule 9014, as a more specific Rule (3007) "otherwise giverns" this subject. Rule 3007 requires an "objection" rather than a "motion," and requires "notice" rather than "service."When the debtor listed a law firm on her proof of claim firm as the person to receive notices, that listing was the appointment of the law firm as an agent to receive process.

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Trustee's objection to retirement fund exemption sustained

In re Davis (9th Cir. BAP 2005)

The bankruptcy court erred in finding that the trustee had failed to satisfy his burden of proof in objecting to the amount of a debtor's retirement fund exemption.

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Intent to decieve negated by Debtor's "honest belief"

In re Acosta (5th Cir. 2005)

An honest belief, even if unreasonable, that a representation is true and that the speaker has information to justify it does not amount to the "intent to deceive" element required for nondischargeability under 523(a)(2)(A).

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Pre-Petition fees of the Debtor's Attorney are dischargeable

Rittenhouse v. Eisen (6th Cir. 2005)

Pre-petition fees incurred in connection with preparation of a bankruptcy case are dischargeable.

NB: part of a growing trend holding that balance of fees owed to the attorney as of date of filing is discharged, and any attempt by the Attorney to collect post-petition is a violation of the automatic stay. Thus, attorneys who advertise "no up-front fee" to file, and those who ask for only a portion of the fee up-front, will be at risk of attempting to collect fees after the case is filed.

President to sign Reform Bill (and other incredibly obivous items ...)

S256 passed the House without amendments by a vote of 302-126 before making its way to the President, who is expected to sign it on Wednesday April 20, 2005.

Democrats (surprise!) said the bill would hurt low-income workers, single mothers, minorities, senior citizens, immigrants, space aliens, ACLU anti-gun-pro-abortion activists, the Mole People, those with sensitivity to Kryptonite, and other traditional Democratic constituencies, and eliminate a safety net for laid-off workers, the criminally insane, and those facing overwhelming medical bills.

Evil Republican memberes of the Glactic Empire like House Speaker Dennis "Denny" Hastert (R-Ill.) called the bill the first step in their design to take over the Universe, and also a "path towards greater responsibility."

Vendor Profile: Collier TopForm Bankruptcy Software

The second in our series of vendor profiles highlights Collier TopForm from LexisNexis. TopForm includes Illinois jurisdictional forms at no extra charge, including:

Northern District Affidavit Evidencing Compliance with General Rule 39 Chapter 13 Plan Declaration Regarding Electronic Filing (ILN) Order Confirming Plan Rights and Responsibilities Agreement Between Chapter 13 Debtors and Attorneys (ILN) Southern District Order Confirming Plan Rights and Responsibilities of Chapter 13 Debtors and Their Attorneys Verification of Creditor Matrix Contact: Paul Thomas Remmes with LexisNexis at +1 (312) 593-2533 to find out more.

Vendor Profile: US Court Forms

As a follow up to our Seminar, and in an ongoing effort to keep the membership informed about useful products, below we present the first in a series of vendor profiles. US Court Forms is an internet based, comprehensive (Federal, State and Local), up to date collection of official Court and Agency forms, including Bankruptcy forms (i.e. forms that are general, procedural, in use nationwide and required by local Court rules). Forms are designed to be easily filled in Microsoft Word and quickly converted into PDF format for e-filing. More importantly, the software allows the user to input information once and, using XML, insert that information into the required spaces on the form. No other product on the market that can accomplish this multi-jurisdictional coverage with all practice areas covered.

For more information contact Cindy Guinn.

Respond to this post by using the comment button below or e-mail me by clicking here.

2005 Seminar -- Success!

Our annual seminar was held yesterday from 3:00 P.M. - 5:00 P.M. Present were the Honorable Eugene Wedoff, the Honorable Kenneth Gardner, and representatives from 5 software companies: U.S. Court Forms, EZ Filing, Best Case Bankruptcy Solutions, Westlaw and Lexis/Nexis. The event was attended by 30 Attorneys from Cook, DuPage and Will Counties and catered (very nicely, we might add) by Westlaw, whose generous support has been evident all year and has been a boon for the committee. Everyone agreed that the seminar was a tremendous success and presented important information. Just as important, everyone had a good time.

Many thanks to all who spoke, attended, or meant to attend but couldn't (you know who you are), and of course a special thanks as always to the DCBA staff, especially Gloria Norton, who helped bring it all together. Remember, you can't spell "Dupage County Bankruptcy Committee" without d-c-b-a. Am I right?

Also, while we received feedback yesterday, we are always interested to hear more from attendees or the general membership. Use the Comment/Talk-Back button below to post your thoughts on this web log or reply confidentially by clicking here.

Finally, we will most likely hold another meeting or two as we round out the 2004-2005 committee year and boldly move into an even livelier 2005-2006 as the new law makes us all kick it up a notch. Bam!

P.S. Photos of the event coming soon.

More flavor to savor (cases, that is)

Coroprate veil may be pierced to reach Debtors

In re Aoki (1st Cir. BAP 2005)

Bankruptcy court did not err in piercing corporate veil to hold debtors personally liable for a corporation's debts, nor in determining that a debt was nondischargeable in the individual debtors' bankruptcy case.

Partial discharge of student loans permissible In re Fields (6th Cir. BAP 2005)

Bankruptcy court may grant partial discharge of student loan debt upon a finding that repayment of the entire debt would impose an undue hardship pursuant to § 523(a)(8), although repayment of a portion of the whole would not.

Tax Court properly declined jurisdiction

Meadows v. Commissioner of Internal Revenue (11th Cir. 2005)

Tax Court did. not abuse its discretion by declining to exercise jurisdiction over complex dischargeability question.

No interest on administrative expenses

In re Reed (5th Cir. 2005)

Code indicates that only creditors are entitled to payment of interest in a solvent Estate. Because administrative claimants are not creditors, interest cannot be paid on administrative claims when an Estate is solvent.

Chapter 13 fees by Debtor's Attorney were excessive In re Desai (Bankr. N.D. Cal 2005)

Rather than a competent attorney or paralegal sitting down and doing the work, 2 attorneys and 2 paralegals attacked the project in bits and pieces.

Fees for intra-office conferences reduced by 50% In re Condor Systems, Inc. (Bankr. N.D. Ca. 2005)

Professional must be prepared to justify intra-office conferences -- and that justification may not merely be generic. To say that the subject activities were related to each professional’s engagement and were more efficient in the long run is insufficient. Extensive use of .5 and 1.0 billing increments warrants a reduction in fees sought. A professional's failure to submit its time records in electronic form to a fee auditor resulted in a higher audit cost which should not be borne by the Estate. Mileage for professionals from the same office to travel separately to the same location is not reasonable and is disallowed.

54-Page Critique of Reform Act

Dissenters in the House of Representatives argue that while making debtors repay what they can is a sound and uncontroversial notion on which everyone can agree, the Bankrtupcy Abuse and Fraud Prevention Act of 2005 (S. 256) fails to achieve that aim and, on the contrary, imposes additional costs on the parties to a bankruptcy including the government; undermines the rights of the debtor; forces businesses into unnecessary liquidation and favors select classes of creditors (i.e. by industry).

Get along little doggies ... the Round Up is back

7th Circuit Baker O'Neal Holdings, Inc. v. Massey (04/05/05 - No. 04-1525, 04-1526) Judgment for $2.5 million affirmed where recovery remedies unjust enrichment.

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6th Circuit In re Cohara (04/05/05 - No. 04-8051) Bankruptcy court abused its discretion by granting debtor's motion to dismiss chapter 7 petition despite fact that debtor failed to establish evidentiary basis for assertion that dismissal was necessary due to continuing medical needs. In re Fields (04/05/05 - No. 04-8031) Bankruptcy court may grant partial discharge of student loan debt based on finding that repayment of entire debt would impose an undue hardship pursuant to Sec. 523(a)(8). Rittenhouse v. Eisen (04/07/05 - No. 04-1281) Pre-petition Attorneys' Fees dischargeable under Sec. 523. Taunt v. Vining (04/08/05 - No. 03-2370) Defendant's appeal of denial of application to employ debtor's former attorney as special counseldismissed for lack of appellate jurisdiction.

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3rd Circuit

WRS, Inc. v. Plaza Entm't (04/04/05 - No. 03-4094)

Plaintiff's appeal from an order denying a Motion to Reopen a bankruptcy case is dismissed where the order was an administrative closure and not a final judgment.

Case Roundup

B.E.L.T., Inc. v. Wachovia Corp., No. 04-1812

7th Cir. April 05, 2005

In a suit to recoup loaned funds based on an allegation that defendant fraudulently borrowed money, dismissal of plaintiff's suit is affirmed where the claim lacks a viable legal theory. Baker O'Neal Holdings, Inc. v. Massey, No. 04-1525, 04-1526

7th Cir. April 05, 2005

In a bankruptcy proceeding, judgment against defendant for $2.5 million is affirmed where the amount is recoverable to avoid unjust enrichment.

Committee to Consider Rule for Bill Today: Full Debate Put Off Until Next Week

The House Rules Committee has scheduled a meeting for 5:00 pm today to consider a rule for S. 256. However, action by the full House will have to wait until next week, as a number of members will attend Pope John Paul II’s funeral.

25 Changes to Personal Bankruptcy

Take a look at the 25 most glaring changes in the Bankruptcy Reform Act, then kiss your practice good-bye ...

Synopsis of BK Reform Act

This is a useful 46-age PDF file on the Web.

Wage Deduction Orders (Thank You)

From our Member who posted the Wage Deduction question we get this feed-back: The response given by Committee Member Jan Watson regarding my wage deduction question was a great help. Since the "order" has not yet been entered, I will follow that suggestion, exempt the wage deduction as part of the Debtor's estate and then make a motion to avoid the lien. Kindly extend my gratitude to Jan Watson and all those who gave their valuable thoughts and insights.

Ed. Note: My thanks as well to all who participated. I look forward to many more exchanges like this one as our online community continues to evolve. As always, I welcome your feed-back to at mhedayat@mha-law.com.

Creditors Can't Seize I.R.A.'s, High Court Rules

WASHINGTON (AP) -- The Supreme Court gave bankrupt Americans another layer of financial protection Monday, ruling that creditors cannot seize their Individual Retirement Accounts. The unanimous decision shields a nest egg relied upon by millions of people. The justices said IRAs should join pensions, 401(k)s, Social Security and other benefits tied to age, illness or disability that are afforded protection under federal bankruptcy law. Justice Clarence Thomas, writing for the court, said a bankrupt Arkansas couple was entitled to keep more than $55,000 in retirement savings from creditors. He reasoned that IRAs are benefits tied to a person's age under the federal statute because a tax penalty is imposed if a person makes withdrawals before age 60.

Record Bankruptcy Filings (Again!)

With the pressure of both a shaky economy and the impulse to act before the new law kicks in, businesses and consumers filed a record 400,394 bankruptcies in the quarter ending June 30, the Federal Government reported.The quarterly total was 24.5% above the year-ago 321,729, the Administrative office of the U.S. Courts said. 6-month filings of 767,235 cases put bankruptcies on course to break the record of 1,442,549 cases set in 1999, said the American Banktruptcy Insitute.

Updates

Reform Bill Pending

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has been passed in the Senate and is now pending in the House. There may be action on the floor as early as this week.

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Executive Director of USTO Resigns

Informed sources tell us that Larry Friedman, executive director of the Office of the United States Trustee, resigned effective April 30.