Thought for the Day Archive – 2015:
Bankruptcy related insights and information
Response and Memorandum of Law on Trustee’s Unfavorable Recommendation and Objection to Confirmation regarding Trustee’s double dipping as to tax refunds. All are welcome to copy, modify, and file in their cases.
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
John Doe, Case No. 8:15-bk-00000-KRM
Debtor. Chapter 13
RESPONSE AND MEMORANDUM OF LAW REGARDING
TRUSTEE’S UNFAVORABLE RECOMMENDATION AND
OBJECTION CONCERNING CONFIRMATION OF PLAN (D#17)
I. Statement of Material Facts
The trustee is now making a standard objection in most cases asserting that the debtor is under deducting taxes on line 16 of form B22C-2. This appears to be based on the trustee’s belief that the debtor should reduce the withholding deduction shown on the means test by the amount of any refund. This despite the current Amended Administrative Order Prescribing Procedures for Chapter 13 Cases, Administrative Order FLOMB-2015-8 providing in paragraph 18 that the Debtors shall turn over all tax refunds received during the case. Acceptance of the trustee’s position would result in the trustee double-dipping, in receiving twice the amount of any refund that the debtor’s are due in any given year, and unjustly increase the dividend to unsecured creditors over that they are entitled to by statute.
Whether the deduction for actual expenses on the means test for taxes must be reduced by the amount of any tax refund when the plan otherwise provides for turnover of refunds to the chapter 13 trustee.
11 U.S.C. 1322(d) provides that the chapter 13 debtor’s disposable income shall be determined in accordance with the chapter 7 means test as defined in §707(b)(2). Current monthly income for purposes of the means test is computed based on average gross income for the six calendar months ending the month before the filing of the bankruptcy. 11 U.S.C. 101(10A). The chapter 13 debtor then deducts reasonably necessary expenses from the current monthly income to arrive at projected disposable income. 11 U.S.C. 1322(b)(2). Pursuant to §1325(b)(1) if the trustee or an unsecured creditor objects, the bankruptcy court may not approve a chapter 13 plan unless the plan provides for the full repayment of unsecured creditors or that all of the debtor’s ‘projected disposable income’ received during the plan will be applied to plan payments.
The burden of proof is on the trustee to demonstrate that the debtor is not applying all his disposable income the plan payments. In re Ramos, 494 B.R. 181, 186 (Bankr. P.R. 2013). Given that the debtor is already turning over the tax refunds pursuant to the administrative order, there is no basis to reduce the actual withholding by the amount of such refunds.
A debtor who customarily uses tax refunds as a ‘forced savings account’ may not have room in his budget to make the higher plan payments required by using the ‘right’ tax number. “right” tax number. In re Hilgendorf, No. 10-37111-SVK, 2011 WL 353240, at *2 (Bankr. E.D. Wis. Feb. 2, 2011). Thus, debtor’s should be given an option to either turnover tax refunds, or decrease the tax deduction in the means test to account for such refunds. In re Stimac, 366 B.R. 889, 893 (Bankr. E.D. Wis. 2007) (allowing debtor’s to dedicate 50% of the tax refunds to the plan). By requiring the turnover of future tax refunds to the Chapter 13 Trustee, a court is simply correcting the debtor’s error of over-estimating his or her tax liability made when completing the means test. In re LaPlana, 363 B.R. 259, 267 (Bankr. M.D. Fla. 2007) (J. Jennemann).
Given the low success rate of chapter 13 cases, there can be no basis to allow the trustee to double-dip on tax refunds and receive the amount of such refunds twice, once by increasing the monthly plan payment as computed under the means test, and again upon receipt of the refund itself. Rather, by turning over the refund, the deduction on the means test must be the amount actually withheld from the debtor’s paycheck.
CERTIFICATE OF SERVICE
I DO HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished by U.S Mail, first class postage prepaid, to or by electronic transmittal to ; Kelly Remick, Standing Chapter 13 trustee, at firstname.lastname@example.org*; this 6th day of December. * Served via Electronic Delivery by Court upon the filing of the motion
Michael Barnett, P.A.
by_/s/ Michael Barnett____________________________
Fla. Bar # 500150
506 N. Armenia Ave.
Tampa, FL 33609-1703
tel. (813) 870-3100
facs (813) 877-4039
Attorney for Debtor
* Tampa bankruptcy attorneys, FYI
What happens when you don’t list a cell phone contract on schedule G (executory contracts), owe a prepetition balance, and keep the phone and keep paying postpetition? According to one case, the prepetition is discharged and reporting to the contrary may give rise to a FCRA claim.
FDPCA case, magistrate Judge Thomas B. Smith in Orlando grants mortgage companie’s request for psychological examination of plaintiffs when plaintiff’s request $80,000 in emotional distress from chapter 7 discharge violation (continued billing on discharged mortgage). Barnello v. Bayview Loan Servicing, LLC, No. 614CV1383ORL41TBS, 2015 WL 6165277, at *1 (M.D. Fla. Oct. 20, 2015). Case #6:14–cv–1383–Orl–41TBS
Newest issue from Kelly Remick’s office: Line 23 on B22-C2: Optional telephone and telephone services. Some seminar they went to alleges that standard phone, internet, and cell phone service is not included. Language: Do not include payments for basic home telephone, internet and cell phone service. They interpret basic as referring solely to home telephone. I interpret basic to refer to home telephone, interent, and cell phone service. Basic internet is AOL dial up service. In either case, can include here cost for pagers (does anyone have these?), call waiting, caller id, special long distance, or business cell phone service to the extent necessary for your health and welfare or that of your dependents, or for pruduction of income if not reimbursed. If your bundle costs more than the standard for these services, presumably that should be allowed.
* Why is it they never learn anything pro-debtor at the seminars, but is always anti-debtor?
Interesting 8th Circuit decision, finding that bank’s collection efforts on loan extension post-discharge violates discharge injuction, and taking the position that to be valid, reaffirmations must comply both with 524(c) and with state contract law including requirements for consideration for the reaffirmation agreement. Venture Bank v. Lapides, No. 14-3085, 2015 WL 5011704 (8th Cir. Aug. 25, 2015).
Failure of debtor to reaffirm mortgage, when no reaffirmation was offerred by Bank of America, not basis to reopen case to compel surrender.
In re Rodriguez, No. 12-12043-BKC-AJC, 2015 WL 4872343 (Bankr. S.D. Fla. Aug. 13, 2015) (J. Cristol).
* Another important case to keep on file.
Commingling of retirement funds with savings before depositing into IRA not prevent debtor from exempting funds. In re Rivera-Cintron, 2015 WL 4749217, case #6:14-bk-12581 (Bankr. M.D. Fla., 12 August 2015)(J. Jennemann).
New district wide administrative order on chapter 13’s, requires turnover of tax returns/refunds in all chapter 13s, required to be provided to all debtors (by counsel) within 14 days of filing. Issues with order: 1) if paying secured creditor directly, must pay by draft or debt from bank account and provide proof to trustee on request – so, if debtor’s don’t have bank account apparently can’t pay direct. 2) requires turnover of all postpetition tax returns and refunds absent court order to contrary; 3) not really problem but should be aware: must file motions to value, objection to claims, etc. within 28 days following bar date.
* Tampa bankruptcy attorneys – please read
Tampa Tribune bankruptcy editorial published today.
Good analysis of when property surrendered in chapter 13 plan does and does not require delivery to leinholder.
Blog response to Court’s decision to not permit payment of debtor’s attorney’s fees upon dismissal of case pre-confirmation.
The US Trustee has declined to file a §707(b)(2) motion in one of our cases where the primary special circumstance was communting miles to and from work.
* fyi to local bankruptcy attorneys
District Court, MD Florida, rules statute of limitation for FDPCA claim expires 1 year after claim filed.
Hansend v. Resurgent Capital Servs., L.P., No. 8:15-CV-00426-27TBM, 2015 WL 3652838, at *1 (M.D. Fla. June 11, 2015).
11th Circuit rejects argument that claims should be disallowed based on fact that documentation supporting the claim would be inadmissible under state law hearsay rules, even though claim attaches all information required by Rule 3001. In re Walston, 2015 WL 3462325 (11th Cir., June 2, 2015).
8th Circuit decision allows exemption of additional child tax credit where state law exempts public assistance benefits,not limiting to local public assistgance benefits. Unfortunately 522(d)(10) only provides for local.
* Must read case. Also indicates social securiity income cannot be considered in determining chapter 13 payment.
Judge Williamson rules that tax penalties filed as general unsecured claims in chapter 13, related to priority taxes, are nondischargeable under hardship discharge. In re Brown, 2015 WL 2437913, 8:09-bk-27844-CED (May 20, 2015).
Supreme Court finds bankruptcy court’s can rule on Stern matters with consent of the parties.
At a continued hearing yesterday, Judge McEwen indicated that she agreed with my position that below median-income debtors only need to turnoever tax refunds for the first three years of the plan, but expressed concern as the res judicata effect of the order confirming plan requiring turnover for five years. If this is raised at a confirmation hearing, I believe it is very likely the Court will require turnover only for three years. No formal ruling was made yet having taken the matter under advisement for the res judicata issue.
Judge Williamson rules that chapter 7 and chapter 13 debtor’s surrenderring property must relinquish secured property and make it available to the secured creditor by refraining from taking any overt act that impedes a secured creditor’s ability to foreclose its interest in secured property.
In re Metzler, No. 8:12-BK-16792-MGW, 2015 WL 2330131, at *5 (Bankr. M.D. Fla. May 13, 2015).
Court revoked confirmation order based on intentionally contesting the foreclosure after providing for surrenderring the property in the plan.
Indiana District Court rules no FCRA violation for Greentree not reporting post-petition mortgage payments when mortgage was not reaffirmed, finding FTC Regulation supports Greentree’s position, and that to report might be construed as violation of stay/discharge injunction. Dixon v. Green Tree Servicing, LLC, 2015 WL 2227741 (N.D. Ill., May 11, 2015).
Jacksonville District Court grants in part motion to dismiss FDPCA suit against Law Office of Dan Consuegra in bankruptcy case, finding 1) Notice of assignment of debt was not attempt to collect a debt; 2) collection of a deficiency judgment on a foreclosure is subject to FDPCA and FCCPA; 3) FCCPA claim not preempted by bankruptcy law; 4) Case not dismissed based on bankruptcy trustee rather than debtor being real party in interest; 5) Post-petition letter may be violation of FDPCA despite bankruptcy debt collection disclaimer on it. Hernandez v. Dyck-O’Neal, Inc., 2015 WL 2094263 (M.D. Fla., May 5, 2015).
I was unaware of this, until recently.
608.4237 Membership termination upon events of bankruptcy.—A person ceases to be a member of a limited liability company upon the occurrence of any of the following:
(1) Unless otherwise provided in the articles of organization or operating agreement, or with the written consent of all members, a member:
(a) Makes an assignment for the benefit of creditors;
(b) Files a voluntary petition in bankruptcy;
History.—s. 1, ch. 99-315; s. 12, ch. 2000-159; s. 5, ch. 2013-180.
1Note.—Repealed January 1, 2015, by s. 5, ch. 2013-180.
* Looks like §608 was repealed effective 1/1/15 but replaced with §605, and §605.0602(8)(a) has a similar provision, as to member managed llcs.
* About time, though case implies may require actual damages for standing (ie $25 nsf fee from Kohl’s) enabling debtor to get attorneys fees (evidentiary hearing held, guessing fees $5-10K).
Judge Jenneman rules that no reaffirmation is needed to assume a car lease (or any lease of personal property). In re Bailly, 2014 WL 7148716 (Bankr. M.D. Fla. Dec. 11, 2014).