Thought for the Day Archive – 2018:

Bankruptcy related insights and information

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Wishing everyone a great 2019!


Just a reminder: Court’s have funding through January 11, so unless you hear from me no hearings are cancelled. All payments to the trustees still must be paid on time regardless of any shutdown. Thank you, and have a great new year!


A Kansas bankruptcy court recently ruled on a case where a debtor purchased gift cards prior to filing, in part to avoid a garnishment of funds in his bank account. The debtor then attempted to exempt the cards under a Kansas exemption for household goods, asserting that the cards can only be used to purchase household goods. The court denied the request, finding that the cards are in the nature of cash, which, in Kansas, had a more limited exemption.

While Florida does not separate out exemptions for cash from household goods, there still could be a risk of running afoul of 11 U.S.C. 727(a)(2)(A) which can deny the bankruptcy discharge for transferring property in an attempt to hinder or delay creditors.

Attempting to ‘plan’ for a bankruptcy without experienced, professional help can be dangerous. It is almost always safer to hire competent counsel to assist in this important procedure.

In re Parks, 2018 Bankr. LEXIS 3946, Case #18-40736-7 (Bankr. D.Kan, Dec 12, 2018).


Hoping each of you can be with friends and family for the holidays. Cherish those still with us as we honor those who have passed on.


It is with a very heavy heart that I have to announce the passing of DJ at 8:45 this morning. She brought a light to all our clients in a time of need. She will be sorely missed.


Trustee’s are looking at getting back college tuition paid by parents before filing when parents file chapter 7 bankruptcy. Again, an issue where good counsel can make a difference. The trustees may sue the colleges and the children both on these suits. There are a couple recent cases on point. In Geltzer v Oberlin College, adv 18-1015 (Bankr. S.D.N.Y. 4 December 2018) the court ruled that the trustee could not recover any money paid while the child was a minor, under NY law until she was 21, but could recover funds after that. Another case discussed in an earlier post here: Pergament v. Brooklyn Law Sch., 2018 U.S. Dist. LEXIS 200559, Case #1:18-CV-2204, (E.D. N.Y., 27 November 2018) involved just a suit against the college, and ruled the trustee could not recover funds that were paid before the student’s registered for classes, as the student could still get a refund until then. If bankruptcy is considered, be sure to discuss any payments made toward children’s college tuition within a few years prior to filing.


Fraudulent transfer re payment of school tuition for children: initial transferee vs subsequent transferee for value discussion. Lowry v. Security Pacific Business Credit, Inc. (In re Columbia Data Products, Inc.), 892 F.2d 26 (4th Cir. 1989)


Discharge denied for former farmer who did not keep adequate records of loss of cattle, tobacco, and equipment liened to Farm Credit.


Earmarking doctrine as a defense to preference lawsuits.


Court warns against sloppy fee disclosures.


Court finds purported PACA claim in farm case to be a disguised security interest.


Good discussion of basis for retroactively annulling the automatic stay.


Disappointing appointment today. Client represented by local counsel, facing turnover request by chapter 7 trustee. Trustee made an offer months ago that client would have accepted, but says was never notified. Now counsel just pressuring to sign stipulation to withdraw, without any negotiations with trustee. Also didn’t file change of address for debtor.


Orlando bankruptcy petition preparer sanctioned well over $30,000 for violating prior injunctions. In re Harris, 2018 Bankr. LEXIS 3134 (Bankr. M.D. Fla., 11 October 2018) Case #6:17-bk-06716-CCJ


Maryland bankruptcy court allows limited ‘substantial contribution’ claim to creditor in chapter 7 case.


District court reverses bankruptcy court reopening case more than a year after it was closed to revoke trustee’s abandonment of home, after discovering erroneous satisfaction of mortgage; finding that since trustee sought relief under Rule 60(b)(6) rather than Rule 60(b)(3) extraordinary grounds must be shown which would not be a basis under 60(b)(1-5). Since misrepresentation would be a basis under (b)(3), it cannot be a basis under (b)(6); and (b)(3) cannot be used since it has a 1 year statute of limitations. Bank of America, N.A. v McCowan, 2018 US Dist Lexis 174497 (E.D. N.C., Oct 9 2018).


Indiana court gives good analysis why interest should not be required to unsecured creditors in 100% plans paying less than all disposable income, but see Judge Delano’s decision to the contrary in In re Cheatham, 2017 WL 5614910 (Bankr. M.D. Fla 2017).


Creditor counsel beware: creditor attorney sanctioned for filing motion to lift stay to foreclose on property about 30 days after creditor had sold it’s claim to a 3rd party. $5,000 sanction affirmed on appeal

IN RE DOROTHY MONIELLO, Debtor. MICHAEL ROZEA, Appellant., No. 3:17-CV-01801 (SRU), 2018 WL 4405611 (D. Conn. Sept. 17, 2018)


8th Circuit panel finds bad faith or prejudice to creditors is not basis to deny exemption of assets discovered by the trustee and exempted after the meeting of creditors.


Colorado district court finds that attorneys fees awarded in state court fraud judgment are dischargeable under §523(a)(2)(A).


Interesting factoid from recent decision: Following the financial collapse of the Studebaker Company in 1963, more than 11,000 autoworkers lost 85 percent of their vested pension interest when the company’s retirement plan was terminated. The resulting political pressure culminated in passage of the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001–1461 (ERISA), which regulates private-sector pension and health funds.

Pension Benefit Guar. Corp. v. Findlay Indus., Inc., et al., No. 17-3520, 2018 WL 4201636, at *1 (6th Cir. Sept. 4, 2018)


Failure to disclose defects in sale of real property as basis to deny discharge under §523(a)(2)(A). Even if seller failed to read disclosure document.

In re Melendez, No. AP 17-00068-AMC, 2018 WL 4063378 (Bankr. E.D. Pa. Aug. 27, 2018)


And on a lighter note, California district court finds that bankruptcy court did not violate debtor’s 8th Amendment right against cruel and unusual punishment for discharging chapter 13 trustee after case was dismissed for lack of prosecution.

FAREED-SEPEHRY-FARD©, Appellant, v. U.S. TRUSTEE, et. al., Appellees. Additional Party Names: Capital One, N.A., Clear Recon Corp, Countrywide Home Loans, Inc., Devin Derham-Burk, Greenpoint Mortg. Funding, Inc., Nationstar Mortg. LLC, U.S. Bank Nat’l Ass’n, No. 17-CV-06577-BLF, 2018 WL 4076283 (N.D. Cal. Aug. 27, 2018)


Maine court allows exemption, ruling that ‘vanishing exemptions’ limiting exemption where proceeds are not reinvested timely are fixed as of filing chapter 13 not when converted to chapter 7.


Court finds §523(a)(6) willful and malicious injury type debt nondischargeable under §1328(a)(4) when complaint filed after Rule 4007 deadlines.


Venezuela currently about 82,766% interest. Putting that in perspective, if you pay $1,250 property taxes in chapter 13 plan over 60 months at 18% interest, you would pay $626 interest over the five years. At 82,766% interest you would pay $75,178 in interest over the five years on the $1,250 in taxes.


5th Circuit interprets ‘costs of sales and marketing’ in §506(a)(2) to exclude delivery and setup costs on mobile home from such valuation.


Rejecting the majority view, Judge Mark finds a PACA trust is not a §523(a)(4) type trust absent a separate court order requiring segregation of trust assets.


Our office is now able to accept debit cards for payment, and have some appointments (including an initial appointment) via Skype for clients that have difficulty getting to the office.


5th Circuit requires chapter 13 trustee to turnover non-exempt proceeds from sale of home to debtors upon dismissal of case.


NY case indicating that a forced sale such as a property tax sale of property may be subject to avoidance as a fraudulent transfer, indicating that BFP v Resolution Trust does not apply to forced sales such as tax sales.
Hampton v. Ontario County, 17-6810 (W.D.N.Y. July 18, 2018)


Interesting case from 6th Circuit Court of appeals: Allowing debtor to challenge mortgage foreclosure judgment based on fact mortgage had language indicating it became a lien only upon recordation, and was recorded during pendency of prior case, while Rooker Feldman precluded review of perfection of mortgage it did not preclude determination that debtor could use strong arm powers to avoid mortgage as being unperfected. Case allowed debtor to seek right to derivative standing to bring action after suit was filed.

In re Isaacs, No. 17-5815, 2018 WL 3453360 (6th Cir. July 18, 2018)


NC court finds Chapter 13 debtor may utilize section 363(h) because pursuant to section 1303 a Chapter 13 debtor has the power of the Chapter 13 trustee under section 363(b) and section 363(h) specifically incorporates section 363(b) by reference.
IN RE: BRIAN JOSEPH GUY DEBTOR, No. 18-00272-5-DMW, 2018 WL 3388031, at *3 (Bankr. E.D.N.C. July 10, 2018)


9th Circuit finds post-petition condo assessments are dischargeable in chapter 13, rejecting covenant running with the land argument.


Spouse who believed husband’s assertions that taxes were being paid, and did not read tax notices from IRS held not to have willfully evaded tax liability.


Partial discharge of student loan for debtor who did not qualify for ‘exceptional circumstances’ discharge under §523(a)(8) where facts and circumstances require intervention in the financial burden of the student loan on the debtor.
In re Modeen, No. 17-11954-7, 2018 WL 2970990 (Bankr. W.D. Wis. June 8, 2018)


1st Circuit panel (with retired Justice Souter) finds IRS liable for damages for actions taken to collect debt subsequently determined to be discharged in chapter 7. Reasonable belief as to dischargeability is irrelevant to determining whether conduct is a willful violation.


Met today with another dissatisfied customer of Freedom Debt Relief.


Analysis of when a government overpayment may qualify as a nondischargeable domestic support obligation.


W.D. Louisiana district court reverses ruling denying confirmation finding that debtor’s can contribute up the legal limit for 401(k)’s without being denied confirmation solely on that basis. Note 5th Circuit uses totality of circumstances test vs. 11th Circuit Kitchen’s standards. Miner v Johns, 2018 WL 2347095 (W.D. La., May 23 2018).


Supreme Court rules that a statement respecting a single asset is a statement respecting a debtor’s financial condition, thereby excluding the cause of action from §523(a)(2)(A). Broad reading of respecting, which they indicate has the same meaning as ‘about’, ‘concerning’, ‘with reference to,’ and ‘as regards.’ possibly leading to broader interpretations of other provisions of the code. 


9th Cir BAP case on property of the estate on conversion from 13 to 7. Possibly overbroad language.


Ocwen caught requesting improper $400 fees for ‘plan review’ in Notice of Post-petition Fees.


Where document creating master condo association and assessments was separate from document creating condominium, claim of lien does not relate back to recording of document allowing stripping of association lien even as against a 2nd mortgage.


Punitive damages, as well as return of payment made by debtor after request by creditor awarded against law firm collecting prepetition debt after promise by debtor to repay such debt.


Michigan Debtor’s attempt at pro-se pre-bankruptcy planning backfires when trustee is allowed to sell her home.


Hope this becomes a trend.


Ohio courts denies discharge for failing to produce documents at 2004 examination. Note standard may be different in Florida.


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Interesting case requiring City of Chicago to return car impounded for traffic tickets in chapter 13. Might have been different result if timely objection to plan was filed.


We had recently had a chapter 12 case discharged that stripped down the farm/home property with a long term amortization at a reduced interest rate. When the client first met with us, he was under a bar order requiring permission to even file a new case, given prior unsuccessful cases both with and without attorneys. We were able to get permission to refile and successfully negotiate a reduction in the mortgage to the value of the farm and land, a reduction in the interest rate, as well as agree to payment terms over 15 years.


Illinois court finds fiduciary duty to clients before retainer contract, requiring disclosure of effect of early payment of fees through plan on ability to retain vehicles if case is dismissed early.


Sanctions awarded against attorney who markets to clients in foreclosures, then fails to provide for mortgages in chapter 13 plans (requiring debtors to attempt pro-se modifications) and provides for surrender after objections to such plans.
In re Tabor, No. 15BK26544, 2018 WL 1768549, (Bankr. N.D. Ill. Apr. 11, 2018)


If state law requires post-petition interest on domestic support obligations, then such interest must be paid through chapter 13 plans


11th Circuit affirms bankruptcy court reopening case to compel surrender of homestead where chapter 13 plan indicated surrender and no statement of intent filed in converted chapter 7 case. In re Woide, No. 17-10776, 2018 WL 1633550 (11th Cir. Apr. 5, 2018)


11th Circuit on KEL case that advising clients to charge attorneys fees violates debt relief agency provisions.


11th Circuit: dismissal for improper service is res judicata in any future action that was or could have been raised in dismissed action.
ERIC FERRIER, Plaintiff – Appellant, v. JAMES V. ATRIA, Defendant – Appellee., No. 17-11261, 2018 WL 1433742, (11th Cir. Mar. 22, 2018)


Good analysis by 7th Circuit why judges should not require automatic turnover of tax credits/refunds, especially for below median income debtors.


Deadline for early bird discount at NACTT Seminar at Fontainebleau Miami Beach 4/1/18. Note their website, including ordering area, is not secure so fax or mail payment.


$13,050 default judgment under Telephone Consumer Protection Act and FDPCA.


Debtor and counsel beware: incarceration of Debtor and disbarment of counsel for thwarting discovery. And no interlocutory appeal. 


Chapter 13 trustee’s successfully sued mortgage to determine mortgage debt to be unsecured where chapter 13 filed between date new mortgage paid off old mortgages and date new mortgage recorded deed of trust.

In re: RAY WHITE & JAMIE M. WHITE, Debtors. HELEN M. MORRIS, as Chapter 13 Tr., Plaintiff, v. MORTGAGE SOLUTIONS OF COLORADO, LLC, Defendant., No. 16-BK-1240, 2018 WL 1352680, (Bankr. N.D.W. Va. Mar. 14, 2018)


Debtor sentenced to 18 months in prison, 3 years supervised release, and $21,990 restitution to the US Trustee for failing to disclose gifts to family from $55,000 personal injury settlement received 8 months prior to filing chapter 7.

UNITED STATES OF AMERICA v. SHELLEY R. CALLAHAN (01), No. 5:13-CR-00119-01, 2018 WL 1322046, (W.D. La. Mar. 14, 2018)


Extensive analysis of chapter 12: aggregate debt eligibility, income analysis, feasibility and liquidation by 6th Cir. B.A.P. 


MD Fla District Court rules that Service of Rule 11 motion must be by US Mail unless opposing attorney has consented in writing to electronic service.



Undue hardship complaint filed 6 1/2 years after chapter 7 discharge survives motion to dismiss; court may consider new hardships after discharge in meeting Brunner test.


Illinois case details confirmation requirements in farm chapter 12 case.


Never try to hide assets or income in bankruptcy.


4th Circuit on good faith chapter 7, including $1,000/mo entertainment expenses and exempt assets sufficient to pay creditors.


Court allows setoff against CD in jointly owned with Debtor’s children 


Credit union slapped with debtor’s fees for filing unjustified complaint on refinancing 62 days prior to chapter 7 filing.


Interest not required on 100% plans even when debtor not paying all disposable income in plan.


Having a debtor arrested in a courthouse during a mediation resulted in unclean hands finding against creditor resulting in dismissal of some causes of action by creditor against debtor.

Halvorson v. Halvorson, No. 8:15-AP-01391, 2018 WL 915043 (Bankr. C.D. Cal. Feb. 14, 2018)


Beware ‘boiler room’ bankruptcy firms.


11th Circuit on relation back of complaints to motions, and summary judgment under 11 U.S.C 523(a)(6).


Important ruling for chapter 12’s: PACA trust interest are liens.


2nd Circuit finds that mere factual inquiry to clerk’s office does not violate automatic stay, even if result of inquiry is an action in violation of the stay.


11th Circuit affirms dismissal of case based on pro se debtor not satisfying trustee’s statements of deficiencies prior to confirmation, without any formal objection by trustee and without separate hearing or motion to dismiss.

In re: MARTHA E. ECHEVERRY, Debtor. MARTHA E. ECHEVERRY, Plaintiff-Appellant, v. ROBIN R. WEINER, Defendant-Appellee., No. 17-12722, 2018 WL 509307, (11th Cir. Jan. 23, 2018). Possibly evidentiary issues: ie no transcript of confirmation hearing designated on appeal and did not reply to Trustee’s brief.


How to choose an attorney to represent you?

1. Find an attorney who is experienced in the field of law. I have been practicing consumer bankruptcy law since 1988. Bankruptcy, and bankruptcy appeals is the only area of law I work in. I was a partner at Isaak and Barnett until 1992 when I opened my own firm.

2. Find an attorney recognized for his work in the field. I have been board certified in consumer bankruptcy law ince 1993, by the American Board of Certification. I have written an extensive analysis of the current version of the law which was linked on a national bankruptcy website, and have co-authored a book on bankruptcy appeals.

3. Find an attorney who personally handles the case. At some firms you may see one attorney for the initial meeting then have one or more other attorneys, often with less experience, handling your case. I am the only attorney at the firm, and personally handle every case.

4. Find an attorney who will take the time both to fully understand your situation, and explain your options in language you understand. I schedule each new client appointment for at least an hour, and go over your financial situation in detail. I have a free consultation, so you can meet with me without incurring additional costs.

Bankruptcy is an important decision, as is which attorney you hire to represent you. It may be a good idea to meet with 2 or 3 different attorneys, see which one takes the time to understand you situation and explain your options.

Call today to set a free consultation to discuss your options with us. Main office Tampa 506 N Armenia Ave., Tampa 813 870-3100. Appointments also available 38100 Meridian Ave., Dade City 352 521-0190


Check those UCC’s


New bankruptcy scheme called ‘hijacking’ where 3rd party transfers deed to debtor in bankruptcy to stop foreclosure sale, debtor may not even know about it.

In re: Elizabeth Vazquez, Debtor(s)., No. 2:16-BK-10699-NB, 2017 WL 6759067 (Bankr. C.D. Cal. Dec. 29, 2017)


Debt limits may not be absolute ground for dismissal/conversion of chapter 13. Court denied trustee’s request to dismiss when primary debt was student loans.