First Equity Card Corp. v. Kleit, 05 A 1982

Issued: September 28, 2006 Judge: A. Benjamin Goldgar

Court: Northern District of Illinois

Division: Eastern

Estate v. Marcet, 05 A 00488

Issued: September 26, 2006 Judge: John H. Squires Court: Northern District (Illinois)

anti-cramdown provision under BAPCPA §1325(a)

entire sum loanedt for purchase of car + extended service contract is s protected by anti-cramdown provision of the code -- not just amount used to purchase vehicle itself

"TILL" formula formula governs interest paid to secured creditor (prime rate+risk factor)

In re Murray, 346 B.R. 237 (Bkrtcy.M.D.Ga. 2006) Creditor loaned money to debtors to purchase motor vehicle and pay for extended service contract. At time of filing the vehicle was valued at $8,612; balance owed to creditor was $10,498. Debtor's chapter 13 plan proposed cram-down, arguing that because the debt included the price of a service contract it was not a PMSI used for the purchase of a vehicle. Court held the hanging paragraph protects all of a loan secured only on a motor vehicle even if a portion was used for a service contract. Court also held that a PMSI falling within § 1325(a)(*) is a secured claim under § 506 and entitled to interest using the Till formula, notwithstanding language providing that sectiion 506 does not apply to a PMSI falling within 1325(a)(*).

BAPCPA: Court may not enlarge time limitations to meet new requirements

Bankruptcy Court lacks discretion to enlarge the time limits under BAPCPA § 521(a)(1)(B)(iv)

In re Ott, 343 B.R. 264 (Bkrtcy.D.Colo. 2006) Debtor filed chapter 7 two days after effective date of BAPCPA. Debtor failed to file required "payment advices" (paystubs or other evidence of income) as required under BAPCPA per § 521(a)(1)(B)(iv) within 45 days of filing the petition as required under § 521(i). Debtor's counsel informed court he may have inadvertently failed to inform debtors that pay stubs had to be filed by a certain date. Case was dismissed automatically on the 46th day. Debtors moved for relief from judgment based on counsel's confusion over the filing requirements of BAPCPA. The court, observing that by passing BAPCPA Congress viewed debtors "as the moral equivalent of shoplifters" reluctantly held that the court had no discretion to retroactively extend the 45-day deadline. Citing Judge Keith Lundin's treatise on Chapter 13, the court observed that the dismissal is automatic and requires no order by the court. "BAPCPA is a complex and extensive statute that is, at times, unforgiving to debtors and to their counsel. Snares and traps are present throughout BAPCPA for unwary debtors. By the design of Congress, the Court is not in a position to extricate counsel and debtors from these perils."

BAPCPA cap on homestead exemption

combined cap on homestead exemption + 'safe harbor' cannot exceed state homestead exemption

In re Summers, 344 B.R. 108 (Bkrtcy.D.Ariz. 2006) Where debtors acquired home within 1,215 days before filing petition but part of the purchase price came from sale of a previous homestead acquired earlier than 1,215 days before filing, debtors argued that the "safe harbor" provision of §522(p)(2)(B) provided that the $125,000 cap does not apply any of the equity in their home. The court disagreed, saying the Code puts a cap of $125,000 in equity on the home purchased within 1,215 days before the filing, including the equity that came from the sale of a home purchased beyond that period, but the combined exemption could not exceed the $150,000 homestead exemption provided under Arizona law. In doing so the Court distinguished the contrary outcome in the case of In re Wayrynen because the Florida homestead exemption is unlimited.

In re Bufford, 343 B.R. 827 (Bkrtcy.N.D.Tex. 2006)

Creditor holding PMSI in debtor's vehicle remains secured and entitled to "till" rate of interest under §506 SEE: BAPCPA §§ 1325(a)(5), 101(37), 502, 506) Debtor's proposed chapter 13 plan assumed that since car loan was a PMSI acquired for personal use within 910 days of filing petition, the debt could not be deemed a "secured claim" under § 506 and hence was entitled to interest of only 6.5%, while creditor argued that anti-cramdown provision also prevented modifying their secured status and prevented modification of the contractual interest rate of 17.9%. The court ruled that although the anti-cramdown language of § 1325(a) does not remove the claim from its secured status because secured status is determined by § 502, not § 506, and the anti-cramdown language protects the PMSI from cramdown, it does not prevent modification of the interest rate. Court ruled with the weight of authority that the interest rate is the "formula rate" provided by Supreme Court in Till v. SCS Credit Corp., 124 S.Ct. 1951 (2004); "The formula rate begins with the national prime rate and adjusts upward based on several factors, including the 'circumstances of the estate, the nature of the security, and the duration and feasibility of the plan.'" The court cited cases holding that the Till rate applies to "910" claims, including: In re Pryor 341 B.R. 648 (Bkrtcy.C.D.Il. 2006); In re DeSardi, 340 B.R. 790 (Bkrtcy.D.D.Tex. 2006); In re Brown, 339 B.R. 822 (Bkrtcy.S.D.Ga. 2006); In re Fleming, 339 B.R. 716 (Bkrtcy.E.D.Mo. 2006); In re Wright, 338 B.R. 917 (Bkrtcy.M.D.Ala. 2006); In re Robinson, 338 B.R. 70 (Bkrtcy.W.D.Mo. 2006); In re Johnson, 337 B.R. 269 (Bkrtcy.M.D.N.C. 2006).

In re Racette, 343 B.R. 200 (Bkrtcy.E.D.Wis. 2006)

Court denies motion to strike prior filing dismissed for failure to satisfy pre-filing counseling requirement SEE BAPCPA §§109(h), 362(e)(3) Debtors filed prior chapter13 that was dismissed for failure to do credit counseling. They then filed a subsequent chapter 13 and moved for an order "striking" the prior and not "dismissing" it, in order to avoid the effect of a prior on the automatic stay, and to avoid negative consequences in seeking refinance of a mortgage. The court gave a litany of reasons why a prior case should not be deemed a mere "nullity" to be "stricken," including, would the filing fee and trustee's fees have to be refunded? Was the automatic stay in prior case a nullity, thus causing confusion on part of creditors? "The debtors' concerns to not outweigh all the mischief that could be inflicted on creditors, trustees and courts by adopting a policy of striking the petitions of ineligible debtors." The court cited as authority cases holding the same, including In re Taylor, __ B.R. __ (Bkrtcy.N.D.Cal. 2006); In re Tomco, 339 B.R. 145 (Bkrtcy.W.D.Pa. 2006); In re Ross, 338 B.R. 134 (Bkrtcy.N.D.Ga. 2006).

Universal Serv. Admin. Co. v. Post-Confirmation Committee of Unsecured Creditors of Incomnet Communications Corp. (09/20/06 - No. 03-56736)

A decision by the bankruptcy appellate panel, holding that a non-profit corporation incorporated to collect, pool, and disburse the universal service support funds contributed by telecommunications carriers (USAC) was a transferee under 11 U.S.C. sections 547 and 550, is affirmed where USAC had "dominion" over a bankruptcy debtor's universal service support contributions and was therefore a transferee under section 550(a)(1).

In Re: Robert E. Harris (09/18/06 - No. 04-2164)

Dismissal of debtor's appeal from orders of the bankruptcy court is vacated where the district court abused its discretion under Federal Rule of Bankruptcy Procedure 8001 when it dismissed based on debtor's failure to include in the designation of record on appeal a transcript of a bankruptcy hearing without first giving the debtor notice and opportunity to respond and without determining whether a lesser sanction would have been appropriate.

In re James J. Kelly (04 B 46826)

Issued: September 20, 2006

Judge: John H. Squires

Bankruptcy Court: Northern District of Illinois

Division: Eastern

Unintended BAPCPA consequences

John CaherNew York Law JournalSeptember 20, 2006

A Northern District of New York bankruptcy judge has refused to bail out Congress for an apparent drafting glitch in the new bankruptcy law that frequently results in creditors getting less under the "reform" measure than they got under the old version -- even though the clear intent of lawmakers and the president was to aid creditors. Chief Bankruptcy Judge Stephen D. Gerling in In re Rotunda, 06-60054, broke with the majority of his colleagues who have considered the same issue and said that if Congress is determined to replace judicial discretion with formulaic mandates, it can deal with the seemingly absurd results. "To allow a debtor with income above the state median to provide for zero payments to unsecured creditors in a chapter 13 plan ... when ... there remains sufficient funds to pay even a minimal dividend to them is contrary to the approach taken by this Court for over 20 years in considering chapter 13 plans," wrote Gerling of Utica. "Yet ... it is not for the Court to second guess Congress despite the fact that the statute, as written, may result in a confirmed plan that is contrary to the view expressed by President Bush." Gerling's decision is rooted in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

In re Farrar-Johnson and Nelson, 06-3089

Issued September 15, 2006

Bankruptcy Court Northern District of Illinois

Division Eastern

Judge A. Benjamin Goldgar

5th Circuit

Margolies v. Deason (09/11/06 - No. 05-10928)

Dismissal, as time-barred, of all claims brought by certain shareholders of a company, relating to defendant's alleged self-dealing and fraud, which resulted in the collapse of the company, is reversed in part where the district court improperly concluded on summary judgment that a reasonable plaintiff should have known that transactions sufficiently raised the specter of fraud as to place him on inquiry notice.

9th Circuit

Hebbring v. U.S. Trustee (09/11/06 - No. 04-16539)

The Bankruptcy Code does not, per se, disallow voluntary contributions to a retirement plan as a reasonably necessary expense in calculating a debtor's disposable income, but rather requires courts to examine the totality of the debtor’s circumstances on a case-by-case basis to determine whether retirement contributions are a reasonably necessary expense for that debtor.

Federal Circuit (09/11/06 - No. 806)

In a case involving a suit, purportedly under the Tucker Act, by a former bankruptcy judge alleging that the denial of his reappointment as a bankruptcy judge was in violation of his due process rights and certain regulations, the government's petition for a writ of mandamus from certain rulings of the Court of Federal Claims is granted where the court should not have exercised jurisdiction over the suit and the requirements for the writ of mandamus were met.

Cases ahoy

2nd Circuit Liberte Capital Group, LLC v. Capwill (09/05/06 - No. 05-3510) An order finding insurers in contempt of court for violations of previously issued injunctions in a receivership case over the assets of former viatical settlement companies and their trustees is affirmed where there was no abuse of discretion in the order since a Delaware suit violated prior district court orders, and the inclusion of a party was solely for the improper purpose of defeating diversity. 7th Circuit In Re: Globe Building Materials (09/08/06 - No. 05-3738) Summary judgment for bankruptcy trustee in a suit by the State of Wisconsin to enforce a wage lien on the bankrupt company's assets after a liquidation sale had occurred is affirmed where the lien was avoidable since the state statute did not create a right of enforcement against a bona fide purchase"

Judge Black' s New Standing Orders

New Standing Order 17 New Standing Order 18

In re Fink, 05 B 42371/Baccala Realty v. Fink, 06 A 00903

Issued: September 5, 2006
Judge: John H. Squires

1st Circuit

Pratt v. General Motors Acceptance Corp. (09/01/06 - No. 05-2453)
Judgment that car financing company did not violate a chapter 7 discharge injunction by declining to discharge its lien on the debtors' automobile until they paid the remaining balance due on their pre-petition car loan is reversed where the facts of the case rendered the company's refusal to release its lien objectively coercive in violation of federal bankruptcy law.

3rd Circuit
In re: Scarborough (08/28/06 - No. 04-4298)
In the context of the anti-modification protection afforded in Chapter 13 bankruptcy proceedings by 11 U.S.C. section 1322(b)(2), a mortgage secured by property that includes, in addition to a debtor’s principal residence, other income-producing rental property is secured by real property other than the debtor’s principal residence, and, thus, modification of the mortgage is permitted.

8th Circuit
Neal v. Kansas City Star (08/29/06 - No. 06-1878)
A bankruptcy court judgment sealing a former municipal judge's creditor list is reversed where: 1) the list was not "scandalous" pursuant to section 107(b)(2); and 2) the list was not a "governmental matter made confidential by statute or regulation" and thus, the bankruptcy court abused its discretion in relying on Fed. R. Bank. P. 9018 to seal the list of creditors.

In re Aura, Inc., 06-01853

Issued: 9/1/2006 Judge: Eugene R. Wedoff

1st Circuit

Dahar v. Jackson (08/18/06 - No. 05-2702)

Judgment setting aside certain property transfers made to defendant in a bankruptcy action is affirmed where the transfers were constructively fraudulent.

2nd Circuit In re: Layo v. First Nat'l Bank of N. NY (08/15/06 - No. 04-0369) Reversal of bankruptcy court decision and finding that a confirmed Chapter 13 bankruptcy plan is res judicata preventing a debtor from avoiding a mortgage on his property where the mortgage lien, which had been recorded in the land records, was identified in the Chapter 13 plan, is affirmed where the Trustee had both a motive and opportunity to confirm the status of real estate liens affecting the debtor's estate at or before the time that the plan was confirmed. 7th Circuit Black v. Educ. Credit Mgmt. Corp. (08/16/06 - No. 05-1102) Claim for collection costs associated with student loans and computed according to Department of Education regulation 34 C.F.R. section 682.410(b)(2) is allowed to continue where the regulation was neither arbitrary nor capricious. 9th Circuit Unified W. Grocers, Inc. v. Twin City Fire Ins. Co. (08/14/06 - No. 05-15986) Summary judgment for an insurance company in a coverage dispute is reversed where: 1) the district court erred in finding no genuine issue as to whether there was a covered claim that was not inseparable from allegations of willful conduct; 2) a genuine issue of material fact remained as to the extent that an underlying complaint sought restitution of money wrongfully acquired by the insured; and 3) the district court erred in holding that an exclusion precluded coverage for an officer.