Posted by NCBRC - July 9th, 2019
Debts based on overpayments to debtors
for government welfare benefits are not non-dischargeable domestic support obligations.
Dennis v. Illinois Dept. of Human Serv., Nos. 18-2899, 18-2952 (7th Cir.
June 27, 2019).
Chapter 13 debtor, Devan Dennis entered
bankruptcy owing the Illinois Department of Human Services for overpayments
under the state Child Care Assistance Program. Chapter 7 debtor, Tyeane
Halbert, owed the DHS for overpayments of her SNAP benefits. The bankruptcy court
rejected the DHS’s argument that the overpayments were non-dischargeable domestic
support obligations under section 507(a)(1)(B) and DHS appealed.
NACBA filed an amicus brief on
behalf of the debtors.
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Posted by NCBRC - July 8th, 2019
Type: Amicus
Date: March 28, 2019
Description: Whether debt based on overpayment of SNAP benefits is non-dischargeable domestic support obligation
Result: Affirmed, June 27, 2019.
Posted by NACBA - June 26th, 2019
It’s going to
be a bad opinion when the judge brings up Pandora’s Box in the beginning of the
opinion and titles the last section of the opinion “This Is The End.”
On
June 25, 2019 the Bankruptcy Court for the Southern District of Florida, in a
172 page opinion (including attachments), suspended an attorney from practice for
two years before the Bankruptcy Court, terminated her CM/ECF privileges, referred
the attorney to District Court’s attorney review committee and the Florida Bar
with recommendations to disbar, and referred the attorney to the United States
attorney for investigation.
The
Debtor filed a chapter 7 bankruptcy. He
was represented by the Attorney. Neither
Debtor nor Attorney attended the 341 meeting.
Subsequently the trustee filed an
adversary objecting to the Debtor’s discharge pursuant to 11 U.S.C. §
727(a)(2), (3), and (4). The bases of
the Trustee’s complaint were that Debtor’s schedules indicated virtually no
detail, were not consistent with other documents the trustee received (tax
returns), and that required information was apparently missing (missing
lawsuit). In addition, the Trustee cited
Debtor’s and Attorney’s failure to attend the 341 meeting. When asked by the Trustee, the Attorney said
they didn’t plan on proceeding and wanted the case dismissed.
Two days after the adversary was filed, Attorney moved to withdraw as counsel for Debtor. The Debtor, now pro se, stated to the Trustee that the schedules were not provided to him prior to filing and that he did not sign the schedules that were actually filed.
To read more click here.
Posted by NCBRC - June 25th, 2019
Rule 8006(g) states a mandatory
requirement that a party seeking direct appeal file a petition in support. Failure
to do so, if properly invoked by the opposing party, is cause for dismissal. In
re Wade, No. 18-2564 (7th Cir. June 14, 2019).
This case came to the Seventh Circuit
on certification of direct appeal by the bankruptcy court to address the scope
of section 362(c)(3)(A), which, in the case of successive petitions, lifts the
automatic stay after 30 days with respect to property of the debtor. The Wades’
previous attorney, Kreisler Law, P.C., filed a lien against Ms. Wade’s
residence while the Wades’ second bankruptcy was pending and the Wades sought
sanctions for violation of the automatic stay. The bankruptcy court determined
that the stay was no longer in effect when the lien was filed and denied the motion
for sanctions. Recognizing, however, that courts have disagreed as to the meaning
of the phrase “with respect to the debtor,” in section 362(c)(3)(A), the bankruptcy
court certified the Wades’ appeal to the Seventh Circuit.
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Posted by NACBA - June 21st, 2019
Case Bites issues:
- If service of an adversary complaint is not completed until 21 days after the Clerk issues the summons, and no response is filed, can a Court sua sponte deny a request for entry of default judgment for improper service?
- Can a chapter 13 Trustee avoid the claim of a creditor who did not perfect its security interest until after a chapter 13 is filed?
- Are negative procedural rulings against a party grounds to recuse the bankruptcy judge for bias?
- What is the standard to challenge a trustee’s decision to settle litigation?
- Can a motion for sanctions under Rule 11 be dismissed as untimely if filed after final adjudication of the offending pleading or motion?
To read more click here.
Posted by NACBA - June 20th, 2019
On June 19, 2019 the 7th Circuit Court of Appeals affirmed the decisions of the lower bankruptcy courts.
In four chapter 13 bankruptcies, the City of Chicago impounded vehicles owned by the Debtors for failure to pay multiple traffic fines. After the Debtors filed chapter 13, the City refused to return the vehicles claiming they needed to maintain possession to continue their perfection on them and wouldn’t return the vehicles until the fines were paid.
The bankruptcy courts held that the City violated the automatic stay by exercising control over the vehicles, that no exceptions applied, and ordered the return of the vehicles and sanctions. The City appealed and the 7th Circuit consolidated the appeals in this case.
The Debtors were represented in part by NACBA members John Wonais of the Semrad Law Firm, and Eugene Wedoff. NACBA member Tara Twomey supported the Debtors by filing an amici curiae brief for NACBA and the National Consumer Bankruptcy Rights Center. NACBA member David Yen filed an amicus curiae brief for the Legal Assistance Foundation.
To read more click here.
Posted by NCBRC - June 19th, 2019
In a bad-facts-make-bad-law
situation, the Southern District of New York affirmed the denial of student
loan discharge where the chapter 7 debtor sought to have his religious contributions
deducted from his income, and, unfortunately, in so holding, the district court
went beyond the bankruptcy court holding to add some unpleasant dicta of its
own. In re Lozada, No. 18-11643 (S.D.N.Y. June 12, 2019).
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Posted by NCBRC - June 11th, 2019
Where the debtor was not deprived
of the opportunity to fully participate in the state court proceedings, there
was no “extrinsic fraud” and his bankruptcy court challenge to the state court judgment
was barred by the Rooker-Feldman doctrine. Reyes v. Kutnerian (In re Reyes),
No. 18-1229 (B.A.P. 9th Cir. April 19, 2019) (unpublished).
Posted by NCBRC - June 7th, 2019
Debtors were precluded from modifying their plan to surrender their residence where the surrender was a “payment” under the plan and was beyond the sixty-month plan period. Derham-Burk v. Mrdutt (In re Mrdutt), No. 17-1256 (B.A.P. 9th Cir. May 6, 2019).
When chapter 13 debtors, Christina and David Mrdutt, filed their bankruptcy petition, Wells Fargo held two liens on their residence. The first lien was under-secured and the second wholly unsecured. The Mrdutts were also almost $65,000 in arrears on their mortgage. They proposed a plan providing for curing their mortgage arrearage either after loan modification or as proposed in a later plan modification. In the meantime, the Mrdutts agreed to maintain direct mortgage payments to Wells Fargo outside the plan.
The bankruptcy court confirmed their plan while their request to modify the primary mortgage was still pending with Wells Fargo. The Mrdutts made all 60 of their plan payments, but failed to maintain necessary direct payments to Wells Fargo. Ms. Mrdutt died of cancer during the bankruptcy, and Wells Fargo, being Wells Fargo, refused to discuss loan modification with Mr. Mrdutt because only Ms Mrdutt’s name was on the loan. Wells Fargo never approved a loan modification, and the mortgage arrears were not cured either through the plan or outside it. Read More
Posted by NCBRC - June 5th, 2019
In a unanimous decision, the Supreme Court held that “a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.” Taggart v. Lorenzen, No. 18-489, 587 U. S. ___ (June 3, 2019).
Chapter 7 debtor, Bradley Taggart, was involved in pre-petition litigation in state court at the time he filed for bankruptcy. After he obtained his discharge, Sherwood, an opposing party in the state court litigation, obtained a judgment against him. Sherwood then sought attorney’s fees, and the state court awarded those fees notwithstanding Ninth Circuit precedent making clear that the post-petition attorney’s fees were discharged along with Taggart’s other debts. The bankruptcy court found that Sherwood was aware of the discharge and intended the act that violated it and, under that standard, it held Sherwood in contempt of the discharge order. The bankruptcy appellate panel reversed the sanction award and the Ninth Circuit affirmed, holding that Sherwood could not be held in contempt in light of its good faith belief that its conduct did not violate the discharge injunction regardless of whether that belief was reasonable. Read More
