Thought for the Day Archive – 2011:

Bankruptcy related insights and information

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Judge Williamson applies Florida statutory limits on punitive damages to trustee’s adversary proceeding against debt collector. In re Johnson, 452 B.R. 433 (Bankr. M.D. Fla. 2011).


Soon to be timely case: Prepetition refund received after filing after conversion from chapter 13 to 7 was not property of the chapter 7 estate when spent on ordinary living expenses. In re Schick, 452 B.R. 884 (Bankr. W.D.N.Y. 2011).


Does it really make a difference which attorney you hire? Can you afford the one of the best bankruptcy attorneys? I continue to get cases filed by other attorneys who abandon clients after problems arise, then I have to charge much more to fix the problems than I would if I had been hired first, and done the case right. Yes, it makes a difference. Thinks to look for: 1) is the attorney board certified? 2) How much time does the attorney take with you at the initial appointment (do you even meet with the attorney or a paralegal)? 3) Does the attorney explain the process to you and make sure you understand what the choices are and what is happening? 4) is the attorney rated with the BBB or other similar organization? 5) does the attorney have a legal analysis site of current cases?


Be careful determining owner of 2nd mortgage. We sent qualified written request to determine owner of 2nd mortgage after servicer repeated alleged orally was Residential Funding Corporation but would not put anything in writing, and no company was shown under that name. After getting a court order for $375 fees for failure to respond, we now have a formal response showing owner is actually US Bank, N.A. In re Deliford, case #8:11-bk-044557-KRM.


Fact that trustee does not object to exemption does not allow debtor to keep all of underlying property when exemption is based on statute with limited dollar amount allowed. In re Hall, 453 B.R. 22 (Bankr. D.Mass. 2011).


The provision of §526(c)(1) making a contract unenforceable against a debtor for noncompliance with §§526-528 only applies to requirements in those sections dealing with the terms of such contract, not with the timing of the execution of such contract. In re Humphries, 452 B.R. 261 (E.D. Mich. 2011).


Determining that Hamilton v. Lanning and Tennyson support temporal analysis for applicable commitment period. In re Filion, 452 B.R. 329 (Bankr. D.Mass. 2011).


Judge Briskman orders punitive damages against Fla. Dept. of Rev. for stay violation and discharge injunction for collection of child support arrearages in pre-BAPCPA case. In re Diaz, 452 B.R. 257 (Bankr. M.D. Fla. 2009).


Judge Glenn rules that debtor is still entitled to expanded persona property exemption even if retaining and reaffirming debt on homestead. In re Rodale, 452 B.R. 290 (Bankr. M.D. Fla. 2011).


Promissory note allowed as exempt proceeds of sale of homestead under Vermont law without limiting to funds intended for purchase of new home. In re Greene, 451 B.R. 331 (Bankr. D.Vt. 2011).


Military bonus recoupment nondischargeablity: 37 USC 303a(4) nondischargeable if discharge order entered less than 5 years after termination of agreement or if no agreement, after date of termination of service.


Thanks to Carol for warning that the filing fees are increasing November 1 to $306 for chapter 7 and $281 for chapter 13. Be sure to change contracts and Debt Relief Agency contracts.


The Filing fee for bankruptcies is increasing effective November 1, 2011. The new fees are $306 for a chapter 7, $281 for a chapter 13, $246 for a chapter 12, and $1,046 for a chapter 11 filing. These are the court fees, and do not include the attorneys fee, the credit report fee, or the credit counseling fee.


Court rules that both post-petition condo assessments, and fees incurred when debtor challenged dischargeability of such assessments, are nondischargeable despite agreed order lifting stay nearly 12 months prior, and confirmed chapter 11 plan. In re Burgueno, 451 BR 1 (Bankr. D. Ariz. 2011). Court noted possibility of transfer of property either through motion or through plan provision to mortgage holder or association.


Two new cases, one appellate, allowing stripping of 2nd mortgage even though debtor ineligible for chapter 13 discharge.


Debtor not allowed additional $200 operating expense for older vehicle after Ransom. In re VanDyke, 450 B.R. 836 (Bankr. C.D. Ill. 2011).


Judge Adams rules that claims scheduled, rather than claims filed determine eligibility for chapter 13, and Court can look beyond the schedules to determine whether claims are actually contingent or unliquidated. In re De La Hoz, 451 B.R. 192 (Bankr. M.D. Fla. 2011). Court noted ability to look beyond schedules is limited to cases where the schedules are not filed in good faith, such as where debtors schedule virtually all their debt as contingent and unliquidated.


When divorce changes property from tenancy by entirety to tenancy in common, judgment lien fixing prior to divorce may become unavoidable in bankruptcy. In re White, 450 B.R. 866 (Bankr. E.D. Ark. 2011).


Florida spendthrift trust valid even though created to prevent assets from going to chapter 13 estate. In re Allan, 449 B.R. 628 (Bankr. S.D. Ga. 2009).


The United States Court of Appeals for the Third Circuit has delivered an important message about the management of mortgage claims in bankruptcy cases: blind reliance on inaccurate data supplied by a mortgage lender subjects the lender, its attorney and her law firm to sanctions under Bankruptcy Rule 9011. In re Taylor, No. 10-2154, 2011 WL 3692440 (3d Cir. Aug. 24, 2011) (Fuentes, Smith, Van Antwerpen). From


Appellate decision indicating that homestead exemption may apply to property outside state in bankruptcy even if state court decisions rule to the contrary; also discusses requirements for abandonment of homestead. In re Roberts, 450 B.R. 159 (N.D. Iowa, 2011).


The Tampa Bankruptcy Courts are now instituting a mortgage modification mediation program similar to one instituted previously in the Orlando Courts. The Orlando program has a success rate of 76% of clients being offered a modification (of completed mediations) compared with a success rate in foreclosure mediation of approximately 4%. While the mortgages will generally not reduce the principal balance owed, the interest rates may be reduced as low as 2%. Please set an appointment if you wish to discuss this option with us.


Judge McEwen takes under advisement debtor’s objection to turning over earned income credit portion of tax refund in case 10-21246, but refers to In re Royal case in determining inclusion of EIC in CMI.


Judge May grants motion to compel response to qualified written request.


Assignee of mortgage who could not show assignment of note, or possession of note, denied standing to seek relief from stay. In re Veal, 449 B.R. 542 (9th Cir. BAP, 2011) (reversing bankruptcy court). Very extensive analysis of standing, assignments, and the UCC.


Why you should never hire an attorney who is willing to give you a free telephone consultation:

Bar ethics rules requires attorneys to check whether they have a conflict of interest prior to giving any advice about your case, so a conflict check must be run prior to giving advice. Also, §547 requires written disclosures to all potential clients within 3 days of first offering to provide bankruptcy assistance, and a signed contract, even before the person hires the firm, within 5 days of first providing any assistance. Assistance includes advice about filing. So attorneys giving advice over the phone without a signed contract are either ignorant of the law, or intentionally violating it.


Expanding §1301? While co-debtor stay under §1301 only applies to consumer debts, there is no reason request for expansion of stay as is commonly filed in chapter 11 should not apply in chapter 13’s. Filed request against Florida when they suspended contractors license, J. Williamson set for hearing, and State withdrew stop work order prior to hearing.


Case allows counting four children that live part-time with the debtor as two full time members of the household, good analysis of different approaches to household size, and size may be different for different parts of means test. In re Robinson, 449 B.R. 473 (Bankr. E.D. Va. 2011).


Judge Delano on reformation of scriviners errors on mortgage assignments and avoidance of mortgages based on erroneous assignments; noting owner of mortgage does not have to be holder in due course. In re Aum Shree of Tampa, LLC., 449 B.R. 584 (Bankr. MD Fla. 2011).


No turnover order against Debtor for funds clearing bank account post-petition. In re Henson, 449 B.R. 109 (D.Nev. 2011).


Judge Williamson rules that immediate transferee of avoidable transfer does not lose good faith defense based solely on knowledge of the financial trouble of debtor. In re Key Developers Group, LLC, 449 B.R. 148 (Bankr. M.D. Fla. 2011).


The Court rejected the Trustee’s argument that the above median income debtor must pay more to unsecured creditors when schedules I & J showed higher income than the means test. In re O’Neill Miranda, Bankr. D. Puerto Rico 2011).


A Court in Louisiana has held that a mortgage company was bound by the amount of arrearages asserted in the confirmed chapter 13 plan, and could not assert a higher figure more than nine months after the case was filed. In re Franklin, 448 B.R. 744 (Bankr. M.D. La. 2011).


Plan may limit governmental right to setoff tax refunds against domestic support obligations despite 11 USC 362(b)(2)(F). In re McGrahan, 448 B.R. 611 (Bankr. D.N.H. 2011).


Case on fraudulent transfers, transfer of truck subject to levy is not fraudulent where debtor was unaware of levy, transfer of proceeds to spouse from whom debtor is separated is neither fraudulent nor a gift, and finding that 341 question ‘are there any errors or omissions that require the court’s attention’ is overbroad and subject to objection. In re Ciotti, 448 BR 694 (Bankr. WD Pa. 2011).


Our thoughts and prayers for the families and friends of the victims in Norway.


Lengthy analysis just to conclude that Florida opt-out statute only applies to residents of Florida. Hinting that generally opt out statutes may be preempted by BAPCPA’s choice of law provisions. In re Beckwith, 448 BR 757 (Bankr. S.D. Ohio 2011).


Family farmer with regular income, test designed to allow chapter 12 if he can demonstrate that he has an active farming history; and that his conduct reveals an intent to salvage his farm for future use. In re Sandifer, 448 B.R. 382 (Bankr. D.S.C. 2011).


Oversecured creditor with 4 attorneys working on case, where representation did not change outcome of case, fees determined to be unreasonable. Montana DOR v. Duncan, 409 F.Appx. 122 (9th Cir. 2010). It is inherently unreasonable to ask a debtor to reimburse attorneys’ fees incurred by a creditor that are not cost-justified. Quoting In re Nicfur-Cruz Realty Corp., 50 B.R. 162, 169 (Bankr. S.D.N.Y. 1985).


Judge Olsen bars firm from taking new cases, extensive discussion of procedural problems, proposed solutions. Also notes counsel barred from representing corporation in chapter 11 and officer owed wages in chapter 13, and chapter 11 fees should be placed in trust until earned, generally earned when paid retainers voidable or void. In re Moon Thai 448 BR 576 (Bankr. SD Fla 2011)


Georgia case on 707(b) finding numerous misstatements insufficient to warrant dismissal, citing MD Florida cases as examples. In re Hibbard, 448 B.R. 296 (Bankr. S.D. Ga. 2009). 2009 case but recently published.


Denial of request by US Trustee to extend time to file 707(b) or 727(a) complaint (totality of the circumstances) where they did not appear at 341, and filed request for extension on last day. UST Failed to show cause for extension, ie that it promptly investigated debtor’s circumstances. In re Bomarito, 448 B.R. 242 (Bankr. E.D.Cal 2011).


Continued conflict in cases over allowing stripping of junior mortgage after chapter 7 discharge. Minority view allowing stripping, citing 11th Cir. case as precedent. In re Davis, 447 B.R. 738 (Bankr. D.Md. 2011).


Nondischargeability of postpetition condo fees in chapter 7, 11 but dischargeable in chapter 12, 13. In re Ames, 447 B.R. 680 (Bankr. D.Mass. 2011).


Judge Glenn rules on domicile for exemptions and right to amend exemptions. In re Welton, 448 B.R. 76 (Bankr. MD Fla. 2011).


5th Circuit rules that §525 antidiscimination clause prohibition against discrimination in hiring is limited to public employers. In re Burnett, 635 F.3d 160 (5th Cir. 2011).


Debtor may not strip 2nd mortgage after receiving prior chapter 7 discharge. In re Gerardin, 447 B.R. 342 (Bankr. S.D. Fla. 2011). J. Mark, J. Isicoff, J. Cristol sitting in consolidated hearing.


Analysis of law on 523(a)(6) complaint for damages to rental house. High burden of proof. In re West, 448 B.R. 813 (Bankr. N.D.Ohio 2010).


Another student loan case. While facts did not allow for including student loan debt as special circumstance expense in means test, plan may separately classify long term student loan debt. In re Johnson, 446 B.R. 921 (Bankr. E.D. Wis 2011).


Extensive analysis of when student loan may qualify as special circumstance for means test. In re Harmon, 446 B.R. 721 (Bankr. E.D. Pa. 2011).


Debtor who sold non-exempt securities while not paying her bills, and used proceeds to purchase and make improvements on homestead, lost homestead exemption notwithstanding Florida constitutional exemption for homestead. In re Osejo, 447 B.R. 352 (Bankr. S.D. Fla 2011).


Social security income from debtor and non-filing spouse excluded from CMI and not required to submit toward chapter 13 plan. In re Miller, 445 B.R. 509 (D.S.C. 2011).


Practice pointer – With the newest Acrobat Version X you can save pdf forms in word format and edit them, or pull out legal descriptions from pdf documents and save them in word documents (ie motions to strip mortgages).


Fact that debtor is 67 years old and wishes to retire in near future insufficient to rebut means test. In re Anderson, 444 B.R. 505 (Bankr. W.D.N.Y. 2011). Debtor earned $7,219/month gross, and did not disclose girlfriend’s income of approximately $100,000/year.


New bill to make student loans dischargeable.


When order confirming plan is reversed on appeal, money received by mortgage under plan must be refunded. Now that mortgages are being paid regularly through the plan when there are arrearages, could come up more often.

* Note chapter 13 trustee attorneys – court rules it is duty of trustee to obtain this refund.


Judge Olsen rules that joint ownership of home with ex-spouse does not constitute benefit of homestead, preventing use of 222.25(4) expanded exemption. Also ruled on broad interpretation of allowance of amendment of exemptions.


Judge Glenn allows exemption in assets not initially disclosed, finding that they did not intentionally omit the assets, did not attempt to remove assets from the reach of the creditor, and did not hinder the trustee’s investigation of the estate assets. In re Welton, 2011 WL 1379801 (Bankr. M.D. Fl. 2011).


Interesting case where court rules on an attempt by Debtor to deem a mortgage to be unsecured based on the assignment of the mortgage to MERS without an assignment of the note. In re Martinez, 444 B.R. 192 (Bankr. D.Kans. 2011). While Debtor lost in that case, in an appropriate case where note and mortgage were not assigned correctly, mortgage may be deemed unsecured.


So you forgot to tell your client to close their Wells Fargo/Wachovia bank account prior to filing, or they forgot to follow your instructions and the account was frozen when the case was filed.. what now? Get the trustee to abandon the account. In re Zavala, 444 B.R. 181 (Bankr. E.D. Cal 2011).


Judge Kimball discusses spendthrift trusts exclusion from property of the estate. In re Rogrove, 443 B.R. 182 (Bankr. S.D. Fla 2010).


There is now more total debt on student loans in the US than on credit cards. While it is difficult to eliminate student loan debt in bankruptcy, there are non-bankruptcy alternatives which we can help with. Set an appointment to discuss these with us.


Alabama bankruptcy court explains that allowing cure and continued payment on student loan debts is not unfair discrimination if properly designed. In re Boscaccy, 442 B.R. 01 (Bankr. N.D.Miss. 2010). Interesting sidenote in decision: total student loan debt now exceeds total revolving credit including credit cards in America.


To be included in CMI income must both be derived from and received during the applicable six month period prior to filing. In re Arnoux, 442 B.R. 769 (Bankr. E.D. Wash 2010).


Judge Jennemann allows chapter 7 attorneys fees of $3,450 in no asset typical chapter 7 case where attorney spent much more time than most attorneys on the case and had time records supporting the fees. In re Lantz, 2011 WL 843963 (Bankr. MD Fla. 2011).


Citing In re Pavco Enterprises, Inc., 172 B.R. 114 (Bankr. MD Fla 1994) (J. Paskay) Judge Delano orally ruled that providing a 3 day notice and filing an eviction did not necessarily terminate a lease, that one option was that the landlord takes possession of the property on account of the tenant without terminating the lease, absent express language terminating. oral ruling today.


Judge Williamson finds that amendment of exemptions after order granting turnover is entered on objection to exemptions is barred by res judicata and laches. In re Wilson, 2011 WL 666514 (Bankr. M.D. Fla. 2011).


Judge Williamson rules that detailed fee applications are required in chapter 11 cases even where counsel requests no additional fees through plan. In re Ford.


§525 does not prevent private employers from discriminating against against prospective employees on the basis of a prior bankruptcy filing. Rea v. Federated Investors, 627 F.2d 937 (3rd Cir. 2010).


‘Ware the X…523(a)(2) suit by x-girlfriend for debtor/boyfriend not living up to promise to pay joint mortgage on her home. In re Borreggine (Bankr. W.D.Pa. 2011).


Attorney’s notes and research memorandum prepared by special counsel for involuntary chapter 11 debtor were property of the estate once case was converted, and had to be turned over to chapter 7 trustee despite claim of attorney client privilege. In re CW Mining Company, 442 B.R. 44 (Bankr. D. Utah, 2010).


While §1322(f) requires allowance in means test for 401k loan repayments, a voluntary deduction toward the 401k is not an allowed expense in the means test in chapter 13. In re Prigge, 441 B.R. 667 (Bankr. D.Mont 2010). See


Consolidation of student loan debts subsequent to filing of appeal rendered appeal moot as original debt no longer existed. In re Jones, 392 Fed. Appx. 5 (3rd Cir. 2010). Loans consolidated under William D. Ford program, no response by debtor to motion to dismiss.


Property received as a result of a pay on death clause are received pursuant to contract rather than device, bequest or inheritance, therefore are not property of the estate even if the death occurred within 180 days of filing. In re Hall, 441 B.R. 680 (10th Cir BAP, 2009).

* query should the trustee have taken the tactic that the contractual rights were not disclosed as an asset therefore not claimed exempt?


Mortgage avoided, prepetition mortgages not reinstated where debtor refinanced shortly after filing chapter 7 and did not advise court or trustee. In re Ellis, 441 B.R. 656 (Bankr. D. Idaho, 2010). See


The applicable commitment period sets a temporal requirement, and plans must extend the full 60 months upon objection by the trustee or a creditor in interest; it is not sufficient to simply pay the dollar amount computed by multiplying the projected disposable income by sixty. Baud v Carroll, 2011 WL 338001 (6th Cir., 2011).


Can’t change my plan anymore after every seminar, so adding to cya sheet on quesetionnaire 1) close all Wells Fargo or Wachovia bank accounts prior to filing (or they may freeze); 2) pay all bills with money orders within 10 days of returning questionnaire.


How to find owner of mortgage in MERS System? Once MERS is recorded in county property records all future changes is in MERS itself. MERS ID (MIN) is recorded on mortgage in county records, look up ID at will show both servicer and owner.

* Note this shows name of trustee, but not of trust holding collateralized security. Query (Carol?) should order avoiding be recorded in MERS?


With so many cases filed by the bankruptcy mills, whose advertisements you see everywhere, I get more and more complaints by clients that hired them, only to have problems. The most recent case the firm simply failed to file the case when they were supposed to, indicating that his case was less important, resulting in a delay which may have been part of the cause of later problems in the case. Beware of filing with bankruptcy mills or attorneys inexperienced with bankruptcy.


Judge Olsen allows strip down of first mortgage on debtor’s duplex home.


Debtor’s counsel could not exclude reaffirmation agreement from representation of debtor, and failure of counsel to endorse agreement renders the court without jurisdiction to approve it and renders the agreement unenforceable, but stay was not lifted and permanent injunction still applies to debt. In re Barron, 441 B.R. 131 (Bankr. D.Ariz. 2010).


5th Circuit interprets Florida opt-out statute to be inapplicable to non-residents, allowing debtor who had moved from Florida to Texas to use Federal exemption. Camp v. Ingalls, 2011 WL 184551 (5th Cir. 2011).


Interesting case from Carol Lawson on affidavits based on ‘information and belief’.


Quote of the day: This adversary proceeding presents the very worst in bankruptcy cases – profligate debtors with absolutely no intention of changing their ways, with just enough cunning to slide like eels through the bankruptcy system without tripping the trap on non-dischargeability. In re Oxford, 440 B.R. 774 (Bankr. W.D.Ky, 2010).


Updated ¶6.2 of analysis of BAPCPA regarding income excluded from CMI, may include more than just social security based on antialienation language in other federal laws.


Judge Kovachavich agrees with John Waage that payments to secured creditors on property being surrendered cannot be included in plan, plan dismissed for bad faith when not amended.


Supreme Court decides Ransom v. FIA Card Servc. N.A., limiting car ownership allowance to debtors with loan or lease payments. See analysis at Tampabankruptcy blog.


In this new year I resolve to treat each of my clients just as I would want to be treated, and try to insure every client gets a fresh start for their finances.