The best interests test does not provide authority to compel turnover through plan modification of settlement funds from the debtor’s post-petition personal injury case where that money would not be available to unsecured creditors in a case converted from chapter 13 to chapter 7 under section 348(f). In re Taylor, No. 16-40873 (Bankr. D. Kans. July 21, 2021). Read More
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“Effective Date of the Plan” for Best Interests Test upon Modification
Posted by NCBRC - July 28th, 2021
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Private Student Loan Not “Educational Benefit”
Posted by NCBRC - July 23rd, 2021
A private student loan is not a conditional grant and therefore does 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
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The ACA’s Shared Responsibility Payment Is Not a Priority Claim
Posted by NCBRC - July 16th, 2021
“The shared responsibility payment is neither ‘a tax on or measured by income or gross Receipts’ nor ‘an excise tax on . . . a transaction’ within the meaning of § 507(a)(8)(A) or (E) of the Bankruptcy Code.” In re Juntoff, 2021 WL 1522206 (Bankr. N.D. Ohio April 15, 2021) (case nos. 1:19-bk-17032, 1:20-bk-13035) (unpublished). Read More
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Tax Credits Exemptible as Public Assistance
Posted by NCBRC - July 13th, 2021
Where the Additional Child Tax Credit and Earned Income Tax Credit were both intended to benefit low-income households and were not limited by taxes owed, they were properly deemed “public assistance” under state exemption laws. In re Moreno, — B.R. —-, 2021 WL 1904189 (Bankr. W.D. Wash. May 11, 2021) (case no. 3:20-bk-42855). Read More
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Insurance Proceeds Don’t Enter Exemption Impairment Calculation
Posted by NCBRC - July 8th, 2021
Insurance proceeds for the repair of the debtor’s fire-destroyed house are not considered when calculating impairment to the debtor’s homestead exemption where the debtor had not made any repairs on the house prior to filing for bankruptcy. Waltrip v. Sawyers, No. 20-1130 (8th Cir. July 2, 2021). Read More
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Debtor Has Private Right of Action to Enforce Anti-Discrimination Provision
Posted by NCBRC - July 2nd, 2021
A debtor has a private right of action to enforce bankruptcy’s anti-discrimination provision and may recover damages under the court’s authority under section 105. Johnston v. Speedway, LLC, 2021 WL 1662725 (W.D. Va. April 28, 2021) (case no. 7:21-cv-100).
The plaintiff, Michael Johnston, worked as an assistant manager at Speedway for eight years, but fell on hard times and found himself homeless and living out of his car. He filed for chapter 13 bankruptcy. Speedway learned of the bankruptcy and fired him, citing as the reason that he was a risk for stealing from the cash register. The plaintiff filed an adversary proceeding in his bankruptcy case alleging discrimination under section 525(b), and seeking reinstatement, compensatory and punitive damages, and attorney’s fees. The case was later withdrawn from the bankruptcy court and transferred to district court. Speedway moved to dismiss. Read More
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Modification of Pawn Contract
Posted by NCBRC - July 1st, 2021
Where the debtor entered bankruptcy prior to the maturation date of her pawn contract, she had an ownership interest in her pawned vehicle, the lender was a lienholder, and the pawn contract could be modified under section 1322(b). TitleMax of Alabama, Inc. v. Womack, 2021 WL 1343051 (M.D. Ala. April 9, 2021) (case no. 2:20-cv-416). Read More
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Sanction Against Student Loan Servicer Exceeded Court’s Civil Contempt Power
Posted by NCBRC - June 23rd, 2021
The bankruptcy court’s contempt order against a student loan servicer requiring it to pay off the entire amount of the debtor’s student loan was punitive rather than compensatory or coercive and, therefore, the award exceeded the court’s civil contempt power. Great Lakes Educ. Loan Serv. Inc. v. Leary, No. 20-8050 (S.D.N.Y. June 22, 2021). Read More
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Scotus Punts Student Loan Case
Posted by NCBRC - June 21st, 2021
The Supreme Court today declined the opportunity to clarify the test for determining whether a debtor has met the undue hardship standard for purposes of student loan discharge under section 523(a)(8). McCoy v. United States, No. 20-886, pet’n denied, (June 21, 2021). The debtor/petitioner sought to reverse the Fifth Circuit’s application of the Brunner test under which that court found that the 62-year-old debtor, who had suffered a cascade of mental and physical catastrophes, failed to establish “total incapacity” to repay the debt in the future. In re McCoy, No. 19-40269 (5th Cir. June 5, 2020). The petition contrasted the Fifth Circuit’s Draconian test with the totality of circumstances test, under which the Eighth and the First Circuits consider whether the debtor’s “reasonable future financial resources will sufficiently cover payment of the student loan debt[] while still allowing for a minimal standard of living.” NACBA filed an amicus brief in support of the petitioner pointing out that a debtor’s chance of discharging a student loan was almost entirely dependent on what jurisdiction the debtor happened to live in. Unfortunately, the Supreme Court chose not to correct the anti-debtor stance the Fifth Circuit and other courts have adopted.
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Trustee Can Avoid Tax Penalty Lien for Benefit of Estate
Posted by NCBRC - June 19th, 2021
Under sections 724(a) and 551, the chapter 7 trustee could avoid the penalty portion of a federal tax lien on the debtor’s homestead property and preserve the value of the avoided lien for the benefit of the bankruptcy estate. United States of America v. Warfield, 2021 WL 1530094 (D. Ariz. April 19, 2021) (case no. 3:20-cv-8204). Read More
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HAVEN Act Guide
The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income.
This Guide provides an overview of the HAVEN Act identifies benefits that are excluded, and answers frequently asked questions.
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Thank you to the following organizations without whose support our work would not be possible.
American College of Bankruptcy
The American College of Bankruptcy is an honorary public service association of bankruptcy and insolvency professionals who are invited to join as Fellows based on a proven record of the highest standards of professionalism plus service to the profession and their communities. Together with its affiliated Foundation, the College is the largest financial supporter of bankruptcy and insolvency-related pro bono legal service programs in the United States.NACBA
The only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA has more than 3,000 members located in all 50 states and Puerto Rico.O. Max Gardner Foundation, Inc.
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