The Ninth Circuit affirmed the opinion of the bankruptcy appellate panel finding that a state-mandated notification to the state taxing authority of a change in the taxpayer’s federal taxes is a “return, or equivalent report or notice,” which, if not filed by the taxpayer, renders the state tax debt nondischargeable under section 523(a)(1)(B). Berkovich v. Cal. Franchise Tax Bd., No 20-60046 (9th Cir. Oct. 14, 2021) (see discussion of In re Berkovich, 619 B.R. 397 (B.A.P. 9th Cir. 2020) here). [Read more…] about Notification to State Tax Board of Federal Tax Reevaluation is Return “Equivalent”
Debtor Cannot Cure Default After Expiration of Plan
The bankruptcy court correctly dismissed the debtor’s chapter 13 case after she missed her final two mortgage payments under her five-year plan, even though, shortly after the plan expired, she paid the arrears in full. In re Kinney, No. 20-1122 (10th Cir. July 23, 2021).
The debtor entered bankruptcy current on her mortgage payments, and her chapter 13 plan provided for continued payments to the mortgagee, HSBC Bank USA, “under the plan.” A few months prior to completion of her plan, the debtor was injured in a car accident and, for that reason, missed two mortgage payments before the plan expired and two additional payments after its expiration. She then made the back payments and sought discharge. The bank opposed discharge and moved to dismiss her bankruptcy. The bankruptcy court found that it lacked discretion to grant a discharge and granted the motion to dismiss. After her motion for reconsideration was denied, the debtor was granted leave to appeal directly to the Tenth Circuit. [Read more…] about Debtor Cannot Cure Default After Expiration of Plan
Private Student Loan Not “Educational Benefit”
A private student loan is not a conditional grant and therefore does not fall within the meaning of section 523(a)(8)(A)(ii) which excepts from discharge an “educational benefit, scholarship, or stipend.” Homaidan v. Sallie Mae, Inc., No. 20-1981 (2d Cir. July 15, 2021).
The chapter 7 debtor received a bankruptcy discharge that was ambiguous as to whether it applied to the “Tuition Answer Loans” he obtained from Navient (as successor to Sallie Mae,Inc.) The loans, in the amount of $12,567, were paid directly into the debtor’s bank account, and exceeded the debtor’s tuition obligation. Post-discharge, Navient pursued repayment of the loans, and the debtor complied, ultimately paying them off. The debtor then reopened his bankruptcy and filed an adversary proceeding seeking an order holding Navient in contempt for violation of the discharge violation. The court determined that the loans had been discharged and denied Navient’s motion to dismiss. Homaidan v. SLM Corp. (In re Homaidan), 596 B.R. 86, 107 (Bankr. E.D.N.Y. 2019). The Second Circuit granted Navient’s petition for direct appeal. [Read more…] about Private Student Loan Not “Educational Benefit”
Law Firm and Counsel Joint and Severally Liable for D/C Injunction Violation
A creditor law firm and one of its individual attorneys may be held in contempt on a joint and several liability basis for violation of the discharge injunction when the lawyer fails to cease a garnishment action and return collected wages upon learning of the debtor’s discharge in bankruptcy. Ragone v. Stefanik & Christie, LLC, No. 20-8013 (B.A.P. 6th Cir. May 13, 2021). [Read more…] about Law Firm and Counsel Joint and Severally Liable for D/C Injunction Violation
Student Loan Guaranteed by TERI Was Nondischargeable
The debtor’s student loan was “funded” by TERI, a nonprofit organization that guaranteed the loan, and was, therefore, nondischargeable under section 523(a)(8). Medina v. Nat’l Collegiate Student Loan Trust 2006-3, No. 20-1912 (S.D. Cal. April 20, 2021). [Read more…] about Student Loan Guaranteed by TERI Was Nondischargeable
Missed Payments to Mortgagee Do Not Preclude Discharge
The debtors’ missed plan payments to the mortgage creditor were a result of forbearance and COVID 19-related financial difficulties and were therefore not an impediment to discharge under section 1328. In re McCollum, No. 15-3502 (Bankr. D. S.C. Feb. 4, 2021). [Read more…] about Missed Payments to Mortgagee Do Not Preclude Discharge
First-Time-Homeowner Tax Credit Debt Is Tax rather than Loan
The debt created by the IRS’s first-time-homeowner’s tax credit, which requires a debtor to repay the credit over fifteen years, was a nondischargeable “tax” rather than a dischargeable “loan.” In re Shin, No. 17-13509 (Bankr. E.D. Va. Feb. 16, 2021).
The debtor bought a house with his mother and sister, taking the $7,500.00 first-time homeowner federal tax credit offered by the IRS. The Internal Revenue Code, sections 36(f)(1) and (7), provides that homeowners receiving the tax credit must repay that credit over fifteen years by increasing their yearly taxes. The tax recapture is automatically accelerated upon sale of the property within the fifteen-year payback period. For several years, the debtor paid the recapture tax to the IRS, but when he and his co-owners sold the house, there remained $5,000.00 in unpaid recapture tax. The debtor filed for chapter 7 bankruptcy and received a discharge. After the case was closed the debtor moved to reopen to allow him to seek a ruling that the recapture tax was discharged. The IRS opposed the motion. [Read more…] about First-Time-Homeowner Tax Credit Debt Is Tax rather than Loan
Fraudulent Transfer Claim Precluded by Discharge Injunction
Because an action for fraudulent transfer is not merely a collection action, the creditors were precluded by the discharge injunction from pursuing their state court appeal of that action even though the predicate debt was found to be nondischargeable in the debtor’s bankruptcy. SuVicMon Dev. Inc. v. Morrison, No. 20-11681 (11th Cir. March 25, 2021). [Read more…] about Fraudulent Transfer Claim Precluded by Discharge Injunction
Scotus: Three Denials and a Pending
The Supreme Court recently denied cert petitions in three bankruptcy-related cases: Hull v. Rockwell, No. 20-499 (pet’n denied Feb. 22, 2021); GE Capital Retail Bank v. Belton, 20-481 (pet’n denied March 8, 2021); and Marino v. Ocwen Loan Servicing, No. 20-409 (pet’n denied March 22, 2021). [Read more…] about Scotus: Three Denials and a Pending
Ex-Wife’s Interest In Marital Residence Does Not Enter Debtor’s Estate
The debtor’s ex-wife’s interest in the marital residence did not enter the bankruptcy estate even though the property was titled to the debtor, where their dissolution agreement gave her half interest and the debtor was prohibited from unilaterally disposing of the property. But the debtor’s ex-wife did not show that his failure to comply with the dissolution agreement generally, was an indication that he undertook the debts created by the agreement by fraud where the evidence did not support her contention that he never intended to comply. Williams v. Williams, No. 18-1197 (Bankr. D. Colo. Jan. 8, 2021). [Read more…] about Ex-Wife’s Interest In Marital Residence Does Not Enter Debtor’s Estate