In re Delta Phones, Inc.Bankruptcy No. 04-823/Peterson v Hoffcon, 05-1205

Issued December 23, 2005

Judge A. Benjamin Goldgar

Bankruptcy Reform What?

By Liz Pulliam Weston, MSN Money

Despite heavy (and expensive) lobbying by credit issuers, the unprecedented spike in filings prior to the advent of the Bankruptcy Reform Act is dragging down the bottom line for lenders, while the current lull in filings appears to be about to give way to still more escalation in the number of Americans seeking relief from their debts.

Bankruptcy attorneys say their caseloads are starting to pick up again, while credit counseling agencies are seeing significantly more people than they initially predicted.

All this is raising questions about whether lenders will profit as much from the new bill as they hoped and, ultimately, whether the top to bottom overhaul in the law will be worth the money spent trying to get it passed.

Ed. Note: I would like to hear any anectodes from committee members. Let me know at mmhedayat@hotmail.com.

IRS Announces 6-month extensions in 2006

For clients coming in three years from now, lawyers must be careful in identifying the start date for the 3-year period under §507(a)(8)(A) for purposes of dischargeabity of income taxes. The IRS recently announced that most taxpayers will be able to request an automatic, six-month tax-filing extension for most common individual and business returns. Beginning January 1, 2006 most individuals and businesses will be able to request a full six-month tax-filing extension, without a reason or even a signature. The new streamlined and simplified procedures are expected to save taxpayers between $73 million and $94 million annually, by eliminating or consolidating several existing IRS forms.

Ho, Ho, Holy Toledo -- Blogging on Christmas Eve!

4th Circuit Scott v. Nat. Century Fin. Enters., Inc. (12/20/05 - No. 05-1104) An injunction and contempt order resulting from an adversary action by creditors in bankruptcy court asserting the interests of the estate is vacated where plaintiffs lacked standing to request preliminary injunctive relief. 5th Circuit Tummel & Carroll v. Quinlivan (12/20/05 - No. 05-30137) Bankruptcy court discharge of defendant's debt to plaintiff, a law firm, is remanded for findings on the relevant state agency law, and whether, under applicable laws, a particular individual fraudulently secured plaintiff's services as an agent of defendant.

Ho, Ho, Ho (and then some)

1st Circuit US v. Torres (12/16/05 - No. 04-9006) Sovereign immunity bars awards for emotional distress damages against the federal government under Bankruptcy Code section 105(a) for any willful violation of Bankruptcy Code section 524, and sovereign immunity is not waived by Bankruptcy Code section 106. 2nd Circuit Whelton v. Educ. Credit Mgmt. Corp. (12/16/05 - No. 04-4844) Bankcruptcy court determination that the discharge of defendant's student loan debt under Chapter 13 should be vacated is affirmed where the debtor did not provide the student loan creditor adequate notice of his attempt to discharge his student loan debt. 4th Circuit In re: Charco, Inc. (12/13/05 - No. 04-2492) If a state requires that a judgment be recorded before it is effective against a class of third parties acquiring liens on real property, an unrecorded judgment in the state is not effective against a recorded federal tax lien under Treasury Regulation 301.6323(h)-1(g). 7th Circuit In re: Payne (12/14/05 - No. 05-1941) Debtor may not obtain discharge of tax debt if debtor failed to file a return until after the IRS assessed the tax; unless the debtor was making a reasonable effort to comply with his/her tax obligations. 9th Circuit Miles v. Okun (12/12/05 - No. 03-55963) 11 U.S.C. section 303(i) completely preempts state law tort actions for damages predicated upon the filing of an involuntary bankruptcy petition. Suncrest Healthcare Ctr. LLC v. Omega Healthcare Investors, Inc. (12/14/05 - No. 03-17195) Reversal of a bankruptcy court's entry of summary judgment in an adversary proceeding brought by appellant to recover Medicare overpayments for cost reimbursements is reversed where the district court erred as a matter of law in its interpretation of a written agreement between the principals.

In re Sekendur, 05-00739 (J. Schmetterer)

In re Laredo, 05-4620, Grochocinski v Laredo, 05-A-1785

Newly Bankrupt Raking In Piles of Credit Offers

Newly Bankrupt Raking In Piles of Credit Offers - New York Times Courtesy of Tony Mankus, Esq.

Cases interpreting the Reform Act

In re Watson ___ B.R. ___ (Bankr.E.D.Va. 2005) Credit-counseling requirements imposed by Reform Act not unconstitutional; exigent circumstances alone do not waive requirement of pre-petition credit counseling; Certification of Exigent Circumstances must specify that debtor actually sought but was unable to obtain credit counseling prior to filing. _______________________

In re Charles ___ B.R. ___ (Bankr.S.D.Tex 2005) Under the Act, where debtor filed a case within 12 months of the current filing the automatic stay self-terminates in 30 days unless debtor also files and has the Court hear a motion to extend the stay within that same 30 days. Here, since the debtor had filed a case within 12 months of the current filing he also filed a motion to extend and for an expedited hearing. The Court held that: (a) debtor's burden is to establish good faith as to the creditors to be stayed (b) motion cannot seek a general extension of the stay: it must demonstrate that extension of the stay is appropriate as to each creditor; (c) the court should grant a motion to extend only if the debtor can establish “sufficient equitable factors” to justify doing so; (d) if there is no timely ojection to the motion, it may be granted without a hearing. ______________________

In re Maronde, ___ B.R. ___ (Bankr.D.Minn. 2005) Under Code § 522(b)(3)(A), the value of the debtor's homestead exemption shall be reduced to the extent the value is attributable to any property that the debtor disposed of in the 10-year period ending as of the petition date, with the intent to hinder, delay, or defraud a creditor. Code § 522(o). The court reduced the debtor's homestead exemption by the amount of equity created when the debtor reduced the balance owed on a line of credit secured by the home by selling a truck and trailer and using the proceeds to pay down the balance. Under the circumstances of this case, the court held that turning non-exempt assets into exempt assets was fraud against the creditors. ___________________

In re Gee, 332 B.R. 602 (Bankr.W.D.Mo. 2005) Held, BAPCPA requires that in seeking to be excused from the pre-petition credit counseling requirement the debtor must certify that he/she sought credit counseling and was unable to get it. _______________________

In re LaPorta, ___ B.R. ___ 2005) An unrepresented debtor filing her own petition also filed a certification asserting that all of the approved credit counseling agencies were too far for her to travel, but she was willing to take an online credit briefing should one be made available. Held, debtor's unsigned statement was not a “certificate” within the meaning of Code § 109(h)(3)(A) and failed to certify that she had requested counseling and was unable to get it. [ed. note: From whom, exactly, is a debtor supposed to "request" credit counseling, if there is none in the area?] ______________________

In re Hubbard, 332 B.R. 285 (Bankr.S.D.Tex. 2005) Held, case dismissed for failure to file the certificate of exigent circumstances excusing requirement for pre-petition credit counseling. On reconsideration, the court held that the pre-petition credit counseling requirements do not apply if the U.S. Trustee determines that adequate counseling services are not reasonably available within the district. ________________________

In re Blair, ___ B.R. ___ (Bankr.N.D.Tex. 2005) Held, the amount of equity accrued during the 1,215 day look-back period prescribed by Code § 522(o) due to the debtor's regular mortgage payments did not result in imposition of an exemption cap of $125,000. The court also cited approvingly section 522(p)(2)(B) which permits a debtor to use the proceeds from the sale of his home and reinvest them in a second residence within the time period without triggering the homestead cap. The court observed that the main legislative purpose of this section was to stop debtors from selling a home in a state with a low homestead exemption and purchasing one in a state with a high or unlimited exemption within the time period leading up to filing the bankruptcy. _______________________

In re Lucre, Inc., ___ B.R. __ (Bkrtcy.W.D.Mich. 2005) This convoluted opinion in a chapter 11 case deals swith the convoluted provisions of Code § 366(c) which establishes when a utility may or may not shut off service to a debtor in bankruptcy.

Fischer Investment Capital, Inc. v. Cohen, 04 A 4016

Bankruptcy Caption: In re Avie Cohen Bankruptcy No.: 04 B 11482 Date of Issuance: December 2, 2005 Judge: A. Benjamin Goldgar Subject: Partial summary judgment in debtor's favor with respect to creditor's claims under 523(a) (e.g. no finding of "non-dischargeability" under the provisions of 523(a) will be made unless the creditor can meet its burden of proof).

In re Semrau, 01 B 08648

Judge: John H. Squires Trustee: David Brown Subject: Objection by one debtor to claim of credit card creditor as to assets of another debtor is denied.

Super Robot Bankruptcy Case Hyperforce, Go!

U.S. 1st Circuit Court of Appeals

Mass. Asset Fin. Corp. v. Harter, Secrest & Emery, LLP (12/01/05 - No. 04-2541)

Summary judgment for defendant in a claim arising from inaccurate valuation of assets used by plaintiff as security for a loan is reversed where District Court erred in concluding that defendant's asset valuation was gratuitous.

U.S. 5th Circuit Court of Appeals

In the Matter of: West Delta Oil Co., Inc. (12/01/05 - No. 04-30848)

Where the Bankruptcy Court found no conflict of interest in the appointment of Special Counsel, and where that same Special Counsel was later alleged to have acquired assets of the debtor to the debtor’s detriment, the Bankruptcy Court's grant of Attorneys' Fees against that Special Counsel is reversed; the Bankrupcty Court abused its discretion by finding no conflict of interest to begin with.

Background searches under the new law

This service, found at http://www.reasonable-inquiry.com, conducts a background search of prospective debtors and generates a report with an eye towards Attorney liability under §707(b)(4) of the new law. While the sample report looks thorough, I don't have any info on costs. If anyone has used this service, or uses it in the future, or knows of another service, please let the rest of us know. As always, you can reply directly to me if you prefer.