Type: Amicus
Date: February 6, 2019
Description: Whether the bankruptcy court erred in ruling that a creditor and its law firm did not violate the discharge injunction when, after the Chapter 7 debtor’s discharge, she was arrested pursuant to a state court bench warrant that had been issued in supplemental collection proceedings against the debtor in state court.
Result: Pending
Bankruptcy Court holds Debtor is Entitled to Chapter 13 Discharge even if Co-Debtor is Delinquent on Post-Petition DSO Payments
A bankruptcy court recently reviewed the issue of whether a debtor can receive a discharge under § 1328 even if her co-debtor husband is delinquent on a post-petition DSO payment. The court examined the requirements for discharge using the plain language of § 1328(a).
In this case, the debtors, Mr. and Mrs. Hernandez, filed a joint Chapter 13 bankruptcy. At filing, neither owed a DSO. Approximately two years into their confirmed plan, Mr. Hernandez became liable for a DSO and subsequently fell behind in those payments. Both parties were aware of the DSO and neither reported the delinquency to their attorney nor the trustee.
After completion of the plan payments, Mrs. Hernandez moved for entry of discharge under 11 U.S.C. § 1328(a). The Trustee objected arguing Mrs. Hernandez was unjustly enriched and that failure to amend the plan demonstrates bad faith. No party disputed that all plan payments were made.
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Eleventh Circuit Interprets Section 1328(a)’s “Provided for”
A mortgage paid outside the plan is not “provided for by the plan” for purposes of discharge of the debtor’s liability under section 1328(a). Dukes v. Suncoast Credit Union, No. 16-16513 (11th Cir. Dec. 6, 2018).
When she filed her bankruptcy petition, Chapter 13 debtor, Mildred Dukes, was current on two mortgages held by Suncoast Credit Union. Though she listed both mortgages in her schedules, the credit union filed a proof of claim only for the second mortgage. Her confirmed plan stated that the mortgages would be paid outside the plan. Ms. Dukes completed her plan payments and was granted discharge of all debts provided for by the plan. During the plan, however, Ms. Dukes defaulted on both mortgages. The credit union foreclosed on the property under the second mortgage and sought deficiency judgment against Ms. Dukes under the first mortgage. It moved to reopen her bankruptcy to obtain an order that her liability on the first mortgage was not discharged. The bankruptcy court found in favor of the credit union, and the district court affirmed. [Read more…] about Eleventh Circuit Interprets Section 1328(a)’s “Provided for”
Omissions on Written Applications Satisfies Writing Requirement for Non-Dischargeability
A bankruptcy court found that the omission of income data from numerous applications for food stamps and other public-assistance benefits satisfies the requirement of a materially false written statement respecting the debtor’s financial condition for purposes of exclusion from discharge. State of Oregon v. Maxwell, (In re Maxwell), No. 17-32084, Adv. Proc. No. 17-03113 (Bankr. D. Ore. Oct. 18, 2018) (unpublished letter opinion).
In this case, Antoinette Maxwell failed, on numerous public-assistance applications, to disclose employment income and child support payments she was receiving. The State of Oregon filed an adversary complaint in her Chapter 7 bankruptcy seeking an order of non-dischargeability of over $16,000 in benefits it claimed she received by reason of the fraudulent omissions. [Read more…] about Omissions on Written Applications Satisfies Writing Requirement for Non-Dischargeability
Taggart v. Lorenzen, No. 18-489 (USSCt)
Type: Amicus
Date: November 15, 2018
Description: Whether creditor’s unreasonable belief that conduct did not violate discharge injunction precludes finding of contempt.
Result: Vacated and Remanded, June 3, 2019. On remand, affirmed, No. 16-35402 (9th Cir. Nov. 24, 2020).
Subjective Belief that Conduct Not Subject to Discharge Order Precludes Sanctions
A creditor’s good faith belief that its conduct did not violate the discharge order precludes a finding of contempt for violation of the discharge injunction even if that belief is unreasonable. Taggart v. Lorenzo (In re Taggart), No. 16-35402 (9th Cir. April 23, 2018).
Bradley Taggart, a 25% owner of a real estate business, became embroiled in state litigation involving two other 25% owners of the business after he transferred his share to his lawyer without giving the co-owners their contractual right of first refusal. Mr. Taggart filed for Chapter 7 bankruptcy and the state court stayed the business litigation until after he obtained his discharge. At that time, the business litigation resumed for the purpose of unwinding the business interest, but with the condition that, due to his bankruptcy discharge, Mr. Taggart would not be liable for any monetary judgment. At the conclusion of the business litigation, however, the state court permitted both parties to seek attorneys’ fees. The attorneys for Mr. Taggart’s opponents sought attorney fees for their post-discharge work on the basis that Mr. Taggart had “returned to the fray” and the fees were thus the result of post-discharge conduct not related to the bankruptcy discharge. [Read more…] about Subjective Belief that Conduct Not Subject to Discharge Order Precludes Sanctions
Exception to Discharge for Criminal Fines and Costs
Where state law treats criminal fines, fees, and costs as punitive rather than compensatory, those debts are excepted from discharge in bankruptcy. Sanders v. AllianceOne Receivables Management Inc., No. 15-15243, Adv. Proc. No. 16-1204 (Bankr. W.D. Wash. July 6, 2018).
When Randy Sanders filed for Chapter 13 bankruptcy, AllianceOne Receivables Management, Inc., as a collection agency for Bellingham Municipal Court and Whatcom County, filed proofs of claim based on criminal fines, costs, and fees. The debts, or “Legal Financial Obligations” (LFO) arose out of Sentencing Orders following numerous criminal convictions. Mr. Sanders filed an adversary complaint alleging that AllianceOne’s conduct relating to the debts for which it filed proofs of claim and a debt based on a criminal conviction in the Whatcom County District Court, violated state consumer protection statutes as well as the discharge injunction from his prior chapter 7 bankruptcy. Both parties moved for summary judgment. [Read more…] about Exception to Discharge for Criminal Fines and Costs
Wells Fargo on the Hook for Misreporting Delinquency
Finding genuine issues of material fact, the district court denied Wells Fargo’s motion for summary judgment on most of the Chapter 13 debtors’ federal and state claims based on Wells Fargo’s misapplication and misreporting of mortgage payments while the debtors were in bankruptcy. Anderson v. Wells Fargo Bank, No. 16-2514, 2018 WL 3426269 (N.D. Tex. July 13, 2018).
Tony and Hanna Anderson were current on their mortgage when they filed their Chapter 13 petition. Their confirmed plan provided for continued payment on the mortgage outside the plan. Though the Andersons made all mortgage payments promptly, the mortgage servicer, Wells Fargo, misapplied the payments and reported the debt as delinquent. The Andersons sent Wells Fargo five qualified written requests for information under RESPA and filed a request for investigation under the FCRA. Wells Fargo admitted its error and sent the corrected information to credit reporting agencies approximately two months later. [Read more…] about Wells Fargo on the Hook for Misreporting Delinquency
Post-Petition Condo Fees Dischargeable
Condominium association assessments that become due after the debtor has filed for chapter 13 bankruptcy are dischargeable. Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. 16-35384 (9th Cir. July 10, 2018).
When Chapter 13 debtor, Penny Goudelock, stopped her condominium association (CA) payments in 2009, Sixty-01 initiated foreclosure proceedings. In March 2011, Ms. Goudelock moved out of her condominium. She filed for bankruptcy and surrendered her unit. Sixty-01 filed a proof of claim for $18,780.35 for unpaid pre-petition assessments and noted that the assessments continued to accrue at $388.46 per month. The mortgage lender foreclosed on the property in February 2015, and Ms. Goudelock completed her plan in July, 2015. Sixty-01 moved the bankruptcy court for an order finding that the CA assessments that accrued between the time Ms. Goudelock filed her bankruptcy petition and the time the mortgage lender foreclosed were not dischargeable. The bankruptcy court granted summary judgment in favor of Sixty-01, and the district court affirmed. Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. C15-1413-MJP, 2016 WL 1365942 (W.D. Wash. Apr. 6, 2016). [Read more…] about Post-Petition Condo Fees Dischargeable
Government Penalty Not Dischargeable
A penalty owed to a governmental agency based on fraud falls under section 523(a)(2) and is therefore nondischargeable under section 1328(a) even though the debt also falls under section 523(a)(7), which is not listed in the debts excepted from discharge. Andrews v. Mich. Unemployment Ins. Agency, No. 16-2383, Kozlowski v. Mich. Unemployment Ins. Agency, No. 16-2680 (6th Cir. May 29, 2018).
In two separate cases, Chapter 13 debtors, Priscilla Andrews and Richard Kozlowski, sought to discharge penalties imposed upon them for fraudulent collection of unemployment insurance benefits. The bankruptcy courts denied discharge under section 1328(a). The district courts affirmed in both cases. [Read more…] about Government Penalty Not Dischargeable