In Re Capital Acquisitions & Management Corporation (05 B 12554)

Issued April 27, 2006 Judge Pamela S. Hollis

John Hancock v. Litas (05 A 2637)

Bankruptcy Case: In re Lee LitasBankruptcy, 05 B 34536

Issued: April 24, 2006

Judge: A. Benjamin Goldgar

Gregg Szilagyi, Ch 7 T(ee) v. JPMorgan Chase and Charter One (05 A 01717)

Bankruptcy Case: In re Gilbert V. Johnson, 04 B 33054

Issued: April 18, 2006

Judge: Eugene R. Wedoff

round up, round up, who's got the round up?

1st Circuit

Marrama v. Citizens Bank of Massachusetts (04/20/06 - No. 05-1858)

Summary judgment for defendant-creditor-bank and denial of chapter 7 discharge affirmed where plaintiff transferred assets within a year of filing with intent to defraud creditors.

4th Circuit

Hazelbaker v. Hope Gas, Inc. (04/18/06 - No. 04-2526)

Dismissal of appeal based on "statutory mootness" is confirmed with an eye towards the code's concern for finality of bk sales (sec. 363(m)). Appellant also failed to obtain a stay pending appeal (hence, mootness of the issue).

5th Circuit

Newby v. Enron Corp. (04/17/06 - No. 05-20219)

In a legal malpractice suit against a law firm involving statements made in a legal opinion regarding a transaction with later-bankrupt Enron Corporation, a remand order to state court is affirmed where the district court properly determined that the defendant-law firm's "apportionment complaint" failed, destroying the basis for federal jurisdiction. Ed. Note: Yes, the plaintiff's name is "Newby" - I can't make this stuff up.

6th Circuit

Meoli v. Citicorp Trust Bank (04/20/06 - No. 05-1075)

Summary judgment to a creditor in a bankruptcy action is affirmed over a bankruptcy trustee's claim that the creditor's security interest in an affixed mobile home was unperfected under state law where, pursuant to a statutory amendment which applied retroactively, the security interest was properly perfected.

7th Circuit

Hower v. Molding Sys. Eng'g Corp. (04/19/06 - No. 05-1889)

Appeal of an order approving sale of a business is moot since the sale already occurred and there was no abuse of discretion in the court's denial of a stay of the sale pending or clear error in the court's determination that the sale was in good faith.

11th Circuit

Colton v. Verola (04/20/06 - No. 04-14662)

Reversal of decision that restitution obligation arising from defendant's Florida conviction for fraudulent transactions was dischargeable under Chapter 7 of the Bankruptcy Code is affirmed over claims that: 1) the Supreme Court's decision in Davenport "abrogated" its decision in Kelly; 2) the 1994 amendments to the Bankruptcy Code effectively preempted the Supreme Court's ruling in Kelly; and 3) the district court erred in failing to follow the test for determining whether restitution is "payable to and for the benefit of a government unit" for the purposes of 11 U.S.C. section 523(a)(7).

In re Patrick and Kim Del Monico (04 B 38235)

Issued: April 19, 2006

Judge: A. Benjamin Goldgar

In re Neil Snowden (05 B 57906)

Issued: April 14, 2006

Judge: Jack B. Schmetterer

Lester and Judith Munson v. James Whitmer (03 A 4790)

Issued: April 27, 2005 Judge: Pamela S. Hollis

Bankruptcy Case: In re James P. Whitmer, 03 B 42061

O’Hare Midway Limousine Service v. Conroy (05 A 2058)

Bankruptcy Caption In re Kevin G. Conroy and Rhea Jan Conroy

Bankruptcy Number 05 B 26056

Issued April 17, 2006

Judge: A. Benjamin Goldgar

Suggested Ch. 13 Plan Language (Section "G")

Glen Stearns, Chapter 13 Trustee for the southwest suburbs recommends the use of the following language in Section G of plans filed with his office: late-filed claims Unsecured claims filed after the bar date are hereby disallowed and shall not be paid by the Trustee. direct payment by debtor of loans secured by personal property The debtor will make current monthly payments, as listed in debtor’s Schedule J directly to the following creditors holding claims secured by a perfected lien on debtor’s personal property: creditor:

collateral:

final payment due date:

fixed monthly payment: direct payment of student loans The debtor will make current monthly payments, as listed in debtor’s Schedule J directly to the following creditors for student loans that mature after 60 months from the date of filing: creditor: final payment due date:

fixed monthly payment: direct redemption of property taxes The debtor will redeem sold real estate taxes by reserving the amount listed in debtor’s Schedule J each month for the plans first ________ months. Debtor’s plan payment increases as shown in section D 1 upon redemption. redemption amount The debtor will pay past due real estate taxes directly by reserving the amount listed in debtor’s Schedule J each month for the plans first ________ months. Debtor’s plan payment increases as shown in section D 1 upon payment. past due amount increasing E 3 set payments after attorney fees have been paid Beginning with the ____________, 200___ disbursement, the set payment to [Creditor Name E3(a)] in Sec. E 3 (a) shall increase to $xxx per month and the set payment to [Creditor Name E3(b)] in Section E 3 (b) shall increase to $xxx per month. surrender of personal property that secures a debt Debtor hereby surrenders Description of Asset to Creditor Name. You may also include language regarding whether a deficiency claim shall be allowed or not.

NSC Creditor Trust v. BSI Alloys Inc.(04 A 01322)

Bankruptcy Caption: In re National Steel Corporation

Bankruptcy No.: 02 B 08699 Issued: March 28, 2006 Judge: Jacqueline P. Cox

Bankruptcy Blogs -- how many do you read?

BK Litigation Blog http://www.bankruptcylitigationblog.com/

Elizabeth Warren's Blog http://www.talkingpointsmemo.com/bankruptcy/

Milton and Mary Jones' Blog http://www.bpaperfree.com/index.php

BAPCPA Blog http://bapcpa.blogspot.com/

Kevin Chern's Blog http://blog.startfreshtoday.com/

Jonathan Ginsberg's Blog http://thebklawyer.com/thebkblog/?p=18

The Total BK Blog http://blog.totalbankruptcy.com/

Legal Helpers http://www.legalhelpers.com/blog/

BK and Restructuring http://www.bankruptcylawblog.com/

NY BK and Consumer Law http://www.drlcny.com/blog/

FL BK Law http://www.bankruptcyorlando.com/2006/02/index.html

Elizabeth Clark v. U.S. Dept. Of Education (05 A 01388)

Bankruptcy Caption: In re Elizabeth Clark Bankruptcy No.: 03 B 51878 Date of Issuance: April 11, 2006 Judge: John H. Squires

In re Kmart Corporation, et al., 02 B 02474 (jointly administered)

Adversary # 04 A 00126, 04 A 00094, 04 A 00087, 04 A 02898, 04 A 00158, 04 A 02775, 04 A 02865, 04 A 02785, 04 A 02874, 04 A 02102, 04 A 02436, 04 A 02005, 04 A 02479, 04 A 00145, 04 A 01970, 04 A 02072, 04 A 02118, and 04 A 02395 Issued April 11, 2006 Judge Susan Pierson Sonderby

What has happened to your fees since reform?

Okay, it's been about 6 months since BAPCPA. Some have suspended chapter 7 practice, some chapter 13 work, and still others have stopped handling conumers altogether, playing directly into the hands of the finance and credit card companies (who after all wanted to thin the herd and leave more money on the table for themselves). Those who were occasional bankruptcy practitioners never recovered from the one-two punch of electronic filing and reform (RIP).

In short, I'm not sure who's still out there practicing in the bk courts (especially here in DuPage County) to answer this question but here goes nothing: what are you charging these days? for a 7? for a 13? All responses will remain anonymous unless you indicate otherwise. Send responses to me by clicking here. And to prove that you're not alone, whatever your would-be response, here are some anectodal responses from another informal survey:

Fees are up for me, about 40-60% depending on the complexity.The differential is because it does take more time to do mechanics of the filing (means test carefully, disclosures, etc.) Also, there is greater risk.

_____________________

Fees have increased about $500 a case for me to cover time of my doing property profiles and title issues. ____________________

Before The reform act I made an average after payment of filing fees of 1500.00 per chapter 7. Now I am getting about 2100 per personal chapter 7 case but out of that now 299.00 is filing fees and then there is the fee for credit reports and appraisals.

____________________

I have increased my Ch 7 fees to $1,500 from $800.00. I understand that closer to the big city, they’ve gone up to $2,000 for a seven.

____________________

I have raised my fees for a basic Chapter 7 from $775 to $1500, not including the filing fee. My secretary tells the potential clients upfront about the fee. I take a basic $250 retainer and they can take up to 90 days to pay the remainder. Most Attorneys that are still taking cases are around the same level.

______________________

I have raised fees. On average 40%. The chapter 13 fee is by local rule and it went from $1,800 to $3,000 but the judges are now stating that $3K is too much for some cases when they look at them. The point originally of a local rate was to stop the review.

_____________________

7 went up $500 from $1000 to $1500

_____________________

I am quoting at least $200.00 higher.

______________________

Almost doubled the fee, how ever my fee includes both counseling classes

______________________

Local rules are going to raise the fixed fee agreement in the southern division to probably somewhere around a bit over $3k. Presently at $2460 [13’s]. As for Chapter 7…I am asking for $1650.00 [costs included]---up about $300-500.00 from previous.

_____________________

$1,500 if they have money or less if desperate that week.The time and risk obviously are significantly higher but the people still are broke so who can afford to pay the fees. Remember the cc are telling clients what they should be paying,etc. It is not a free market and never has been except now we have more work,riskis greater,etc. We are still lucky and must adjust practices to stay in the game or go work for the government.

____________________

I raised fees about 50%

Case Roundup 2.0

3rd Circuit

In re: Fruehauf Trailer Corp. (04/12/06 - No. 05-1374)

A decision in a bankruptcy case finding that payouts under an amendment to a pension plan would be a fraudulent transfer under 11 U.S.C. section 548 which the plan administrator could avoid is affirmed over claims of error regarding: 1) a determination that the administrator had a cognizable property interest in a pension plan surplus; 2) the proper test for fraudulent transfers; and 3) assignment of the burden of proof.

9th Circuit

Norfolk S. Ry. Co. v. Consol. Freightways Corp. (04/10/06 - No. 04-55717)

Dismissal of a complaint claiming that bankruptcy debtor, an interstate motor carrier, held certain funds in trust for plaintiff, an interline freight railroad, under the "interline trust doctrine" is affirmed since the creation of a new federal common law rule imposing a constructive trust for the payment of interline balances in bankruptcy was not justified.

Estate of Spirtos v. Estate of Spirtos (04/12/06 - No. 03-56405)

Section 323 vests the bankruptcy trustee with the exclusive right to sue on behalf of the estate.

Harrison v. Emerald Outdoor Adver., LLC (04/13/06 - No. 04-35647)

Bankruptcy Court held that a lease in tribal land had priority over deed of trust becaise it had been recorded in the BIA Title Plant first. Determination was reversed becaise state law must control to determine priority and under state's standard race-notice statute priority went to the recording in the county in which the land was located.

District of Columbia

Worldwide Moving & Storage, Inc. v. Dist. of Columbia (04/14/06 - No. 04-7184)

Dismissal (for lack of standing) of an action seeking to enjoin the District of Columbia from imposing a surety bond requirement on a federally licensed motor carrier or its employees is affirmed on grounds of Younger abstention where the dispute was being litigated in the local courts of the District of Columbia.

"Disposable Income" Means Post-Petition Income

In re Hardacre, __ B.R. __, 2006 WL 541028 (Bankr. N.D. Tex. 3/6/06) The Code calculates disposable income based on a prepetition income history. By definition however, chapter 13 plans are funded with post-petition income. After taking a close look at the statute, Judge Nelms concluded that "projected disposable income" for purposes of 1325(b) is based on the debtor's post-petition income rather than their income during the prior 6 months. First, use of "projected" suggests Congress intended something other than the traditional notion of "disposable income" (since Congress acts intentionally when it uses different language in different sections of a statute). Second, the statute refers to projected disposable income "to be received;" that is, the opposite of pre-petition income. Finally, 1325(b)(1) requires the court to determine whether the debtor is committing all of their projected disposable income "as of the effective date of the plan." Again, the language indicates that the court should consider current income, rather than historical income. Upshot: monthly plan payment is based on actual income and expenses appearing in schedules "I" and "J" rather than the hypothetical disposable income calculated pursuant to §§1325(b)(2), (b)(3) and (b)(4).

Post BAPCPA filing statistics, plus a handy review

Compared to the same periods in 2005:

This quarter 102,949 cases filed, down from 381,743

Overall filings down 73%

Chapter 7 filings down 80%

Chapter 13 filings down 53.6%

But ... filings are trending back up towards pre-BAPCPA levels

Quick Review

§109(h)(1) requires all individuals (regardless of chapter) to complete credit counseling within 180 days before filing. In some districts trustees are interpreting this section to mean that an individual cannot file the same day they complete the counseling

§109(h)(3) allows for a 30 day exemption from the credit counseling requirement for "exigent circumstances." In practice, it is extremely difficult to obtain this exemption. The issue is being litigated in some places, especially with respect to non-English speaking debtors

§109(h)(4) releases individuals from counseling requirement after they have been determined by a court (after notice and hearing) to be "incapacitated, disabled, or on active duty military in a military combat zone." Courts initially appear to be more receptive to motions seeking this exception than the §109(h)(3) exception, but even this exception is hard to establish.

§727(a)(11) requires chapter 7 debtprs to obtain “debtor education” prior to discharge.

§1328(g)(1) requires chapter 13 debtors to obtain "debtor education" prior to discharge.

§111 governs how agencies may be approved by the United States Trustees and Bankruptcy Administrators to provide the counseling and education services.

Interim Rule 1007(b)(7) and 1007(c) require the filing of Official Form 23 and the debtor education certificate within 45 days after the first date set for the §341 hearing under chapter 7 and by the last plan payment or date of motion for discharge under chapter 13

Updated Filing Fees

Click the above link to see the entire list of new fees.

For consumer practitioners the skinny is:

Chapter 7 filing fee now $299

Chapter 13 filing fee now $274

Adversary Proceeding now $250

Ed. Note: Notice a pattern? That's right -- the most pressure continues to be placed on Chapter 7 cases. Apparently consumer liquidation was the thorn in the side of the financing companies; and it only took millions of dollars worth of lobbying and a complete gutting of the law to bring them closure. I've said it before and I'll say it again: Democracy works.

Man bites dog! and other cases in the Roundup

In re Pepper (10th Cir. BAP 2006) Non-contemporaneous lien avoidable Bankruptcy court did not err in finding that a lien perfected 7 months after execution due to recording agency's error constituted an avoidable preference despite the fact that the parties stipulated that they intended the transaction to be a "substantially contemporaneous exchange." Whoops. Ross H. Briggs v. John V. LaBarge, Jr. (8th Cir. BAP 2006) Conflict of Interest Bankruptcy attorney's dual representation of a debtor and a bank was an impermissible conflict of interest In re Sherman (9th Cir. 2006) Circumstances did not amount to "cause" for dismissal Circumstances contemplated by another statutory section applicable to Chapter 7 debtors cannot amount to "cause for dismissal" under 707(a). Howard Delivery Services, Inc. v. Zurich American Insurance, ___ F.3d ___ (4th Cir. 2005) Unsecured claim for unpaid workers' comp. insurance premia was priority Issues: Whether unsecured claim for unpaid insurance premia has priority. Whether the company providing worker's compensation insurance to debtor has priority claim to unpaid premia. Held: Yes. Claim is entitled to priority under § 507(a)(4). Since worker's compensation insurance constitutes an 'employee benefit' under ERISA it qualifies as such under 507(a)(4) and therefore premium payments have priority.

13 Reasons to file Chapter 13

1) Debtor Educational Course can be completed before final plan payment versus 45 after 341 meeting in chapter 7

2) 0% pay-back to unsecured creditors (debtor's payments go to secureds and the Attorney -- as they should!)

3) No means test if case is converted to chapter 7. In the first place, 707(b)(3) says means test applies only to case filed "under Chapter 7 by an individual debtor whose debts are primarily consumer debts." Moreover, 348(b) does not invoke 707 in connection with conversions from 13 to 7.

4) Per 707(b)(3)(C) and (D), the Attorney's duty to perform "reasonable investigation" and "certify" that schedules are "not incorrect" applies only to cases filed "under Chapter 7." In fact, none of the new Attorney liability rules applies to Chapter 13 at all.

5) Minimize UST scrutiny, which will henceforth be focused on catching improper Chapter 7 cases.

6) Higher fees, including likelihood of post-filing fees collectible via fee petition.

7) Debtor can repay non-dischargeable taxes.

8) Per 524(i), if mortgage arrears are cured in a Chapter 13 plan, then upon discharge the debtor will have a cause of action against their mortgage company for misapplication of payments or improper fees and charges. Since there is no way for mortgage servicers to comply with this new statutory mandate, every Chapter 13 case involving a residential mortgage will give rise to such a cause of action.

9) Debts incurred to pay taxes are not discharged in 7 but are discharged in 13.

10) Obligations under a mairtal property settlement agreement that do not qualify as alimony are dischargeable.

11) Debtor can enjoy protection longer -- bar on refilling is from filing date to filing date, so as long as each case is carried for at least 2 years debtor can refile as needed.

12) Child support income not included in a 13, but is included in a 7

13) Filing fee is $274.00 versus $299.99.

Statement regarding completion of counseling

If the debtor fails to submit the required certification, the Court shall close the case without granting a discharge. Notice will be sent to the debtor, trustee and all creditors on the case. The debtor can subsequently move to reopen the case to request that the discharge be granted. The fee to reopen the case must be charged. Since there has been some confusion regarding which document should be filed with the Court, if either the Official Form or a certificate furnished by a provider is filed, either will suffice for purposes of meeting this requirement through April 2, 2006. Effective Monday, April 3, 2006, the Official Form must be filed. Attach any certificates to the Official form. Use the event, Financial Management Course, to file the form. Call the ECF Help Desk at 312-408-7765 with questions.

In re Pearson v. Howard (03 A 02330)

Bankruptcy Caption: In re George C. Howard, Jr., 03 B 16153 Date of Issuance: March 22, 2006 Judge: Schwartz

In re: United Airlines, Inc., et al. (03/31/06 - No. 05-3121)

Decision allowing DIP to eliminate contractual pension rights of retired pilots is affirmed where pilots' ability to challenge future proceedings did not disturb creditor's rights or harm debtor's estate.

Ed. Note: Bankruptcy equivalent of "no harm no foul"

ABI Highlights

The following are some highlights from this past week gathered by the American Bankruptcy Institute: Ed. Note: It all seems like pretty good news. Sorry Democrats. But hey, there's always '08! Go Hilary! Prepackaged Bankruptcies Companies are seeking an alternative to the increasingly expensive bankruptcy process by embracing pre-packaged deals that ensure a smooth process. Witness the Chapter 11 filing of bus manufacturer Blue Bird Corp.; after filing its pre-packaged bankruptcy in January the company was out a record 32 hours later and less $115 million in debt. Others are taking note. Initial jobless claims down to 302,000 First-time claims for jobless benefits unexpectedly fell last week as a buoyant labor market gave consumers the income to keep spending. Initial claims dropped by 10,000 to 302,000 for the week ended March 25. The four-week moving average fell to 310,750 from 312,250 a week earlier. This quarter the economy will expand at the fastest pace in more than 2 years and consumer confidence jumped to the highest level in almost 4.