Employment Contract Is Domestic Support Obligation

Posted by NCBRC - April 13th, 2022

An employment contract between the debtor and his ex-spouse where the ex-spouse’s only responsibilities were to assist the debtor in family matters, was in the nature of domestic support and was entitled to priority treatment in the debtor’s chapter 7 bankruptcy. In re Wibracht, No. 21-50477 (Bankr. W.D. Tex. March 31, 2022). Read More

NCBRC Files Amicus on Pre-Confirmation Trustee Fees when Plan Not Confirmed

Posted by NCBRC - April 6th, 2022

NCBRC has filed an amicus brief on behalf of the NACBA membership in the Tenth Circuit case of Goodman v. Doll (In re Doll). The case addresses the issue of whether a chapter 13 standing trustee is entitled to keep pre-confirmation statutory fees when the case is ultimately dismissed prior to plan confirmation. Case No. 22-1004 (filed April 6, 2022). The bankruptcy court found in favor of the trustee and the district court reversed. Read More

Terms of Promissory Note Not Enough to Show Nondischargeability of Student Loan

Posted by NCBRC - April 5th, 2022

Because it was unclear whether the debtor’s private student loan was issued under the auspices of a federally-funded program, neither the debtor nor the student loan creditor were entitled to summary judgment on the issue of whether the loan was excepted from discharge under section 523(a)(8)(A)(i). Mazloom v. Navient Solutions, LLC., No. 18-60206, Adv. Proc. No. 20-80033 (Bankr. N.D.N.Y. March 29, 2022).

The debtor received a $38,400 private student loan through the EXCEL Grad Loan Program to fund her attendance in medical school. The lender was Nellie Mae, Navient’s predecessor in interest. The debtor filed for chapter 7 bankruptcy listing the loan as a “student loan.” Two years after she received her discharge, the bankruptcy court allowed the debtor to reopen her bankruptcy case to bring an adversary complaint against Navient seeking a declaration that her loan did not fall under any of the student loan exceptions enumerated in section 523(a)(8)(A) and had therefore been discharged in bankruptcy. Read More

Mortgage May Be Bifurcated Under Section 1322(c)

Posted by NCBRC - April 1st, 2022

The Bankruptcy Court for the Eastern District of Wisconsin joined the majority of courts in finding that section 1322(c)(2) “authorizes modification of a principal residence loan through bifurcation, when the last payment on the original payment schedule is due before the final plan payment is due.” In re Harris, No. 21-26280 (Bankr. E.D. Wisc. March 16, 2022).

The debtor filed her chapter 13 petition shortly after the final balloon payment was due on her home mortgage. At the time of her petition, she owed $78,009.00 on the mortgage and she valued the residence at $45,000.00. In her plan, she proposed to bifurcate the claim and pay the entire secured portion and none of the unsecured portion. The mortgage creditor objected to confirmation on three grounds only one of which was addressed in this order. That issue was whether section 1322(b)(2) precluded the debtor from modifying the treatment of the mortgage beyond altering the terms of the repayment schedule. Read More

IRS Had No “Substantial Justification” for Challenging Jurisdiction

Posted by NCBRC - March 30th, 2022

The IRS had no reasonable basis for challenging the bankruptcy court’s exercise of personal jurisdiction, where it consented to jurisdiction when it filed a claim in the debtor’s chapter 7 bankruptcy, and the debtor notified it of his objection to the claim using the address the IRS provided. For that reason, the debtor was entitled to recover fees and costs associated with litigation of the IRS’s claim. Nicolaus v. United States of America, No. 21-3010 (N.D. Iowa March 8, 2022). Read More

Efforts to Collect Domestic Support Violates Automatic Stay

Posted by NCBRC - March 28th, 2022

An ex-husband’s efforts to collect medical expenses and a $50.00 direct payment ordered by the Family Court violated the automatic stay, where, unlike the debtor’s other domestic support obligations which he collected through wage garnishment, payment for the debts was not limited to non-estate property as required by the domestic support exception to the automatic stay. In re Dougherty-Kelsay, No. 19-8013 (B.A.P. 6th Cir. March 21, 2022). Read More

Debtor May Not Exempt Portion of Worker’s Comp Order Earmarked for Medical Care Providers

Posted by NCBRC - March 23rd, 2022

The chapter 7 debtor was not entitled to exempt the portion of a settlement he negotiated with his employer and worker’s compensation insurer where that amount was in a trust for the benefit of his medical care providers and, therefore, did not become part of the bankruptcy estate. Ryan v. Branko PRPA MD, LLC, No.21-449 (E.D. Wisc. March 2, 2022). Read More

Canadian Pension Plan Not Qualified Retirement Plan

Posted by NCBRC - March 21st, 2022

Under Illinois and federal law, a pension plan that is organized in Canada does not meet the definition of a qualified retirement plan and may not be exempted from the debtor’s bankruptcy estate. In re Green, No. 21-6189 (Bankr. N.D. Ill. March 9, 2022).

The debtor sought to exempt from his bankruptcy estate his $72,300 interest in a Retirement Fund which was organized in Canada. The chapter 7 trustee objected to the exemption on the basis that the plan was not a qualified retirement plan within the meaning of the state or federal exemptions. Read More

Changes to Bankruptcy Code Dollar Amounts

Posted by NCBRC - March 18th, 2022

Certain dollar amounts in the U.S. Bankruptcy Code will increase effective April 1, 2022, pursuant to 11 U.S.C. §104. On February 4, 2022, the Judicial Conference of the United States announced and detailed these changes in The Federal Register. See Adjustment of Certain Dollar Amounts in the Bankruptcy Code, 87 Fed. Reg. 6625 (February 4, 2022).

Changes relevant to consumer bankruptcy attorneys include:

11 U.S.C. § 109(e) (debt limits for chapter 13):
- The unsecured debt cap has increased from $419,275 to $465,275.
- The secured debt cap has increased from $1,257,850 to $1,395,875.
11 U.S.C. § 522(d) (federal exemptions):
- Section 522(d)(1) (homestead exemption) has increased from $25,150 to $27,900.
- Section 522(d)(2) (motor vehicle exemption) has increased from $4,000 to $4,450.
- Section 522(d)(3) (household goods etc. exemption) has increased from $625 to $700 for value in any particular item and from $13,400 to $14,875 in aggregate value.
- Section 522(d)(4) (jewelry) has increased from $1,700 to $1,875.
- Section 522(d)(5) (unused amounts from 522(d)(1)) has increased from $1325 to $1,475 for value in any particular item and from $12,575 to $13,950 in aggregate value.
11 U.S.C. § 522(n) (Exemption cap for certain individual retirement accounts) has increased from $1,362,800 to $1,512,350.
11 U.S.C. § 707(b)(2)(A)(i)(Means Test) – CMI is not less than the lesser of –
- Section 707(b)(2)(A)(i)(I) 25% of unsecured claims or $9,075 (up from $8,175) or
- Section 707(b)(2)(A)(i)(II) $15,150 (up from $13650).
- Section 707(b)(2)(A)(ii)(IV) (necessary dependent school expenses) has increased from $2,050 to $2,275.
- Section 707(b)(6)(C) (to calculate median income for family greater than 4) the amount per additional family member has increased from $750 to $825.

Interest Rate on Tax Debts

Posted by NCBRC - March 14th, 2022

Illinois Property Tax law provides an interest rate of 18% for tax debts where the debtor does not intend to redeem the property, even where the debt is owned by tax purchaser at the time of the debtor’s chapter 13 petition. In re Drake, No. 21-4903 (Bankr. N.D. Ill. Feb. 23, 2022).

The debtor failed to pay Illinois property taxes on her real property and Integrity Investment Fund, LLC, purchased the tax debt (“Sold Taxes”). Over the next few years, the debtor failed to pay the property taxes and Integrity, in accordance with its rights as the tax debt purchaser, paid the taxes (“Subsequent Taxes”) and added the amount to the debt. The debtor did not redeem the property by paying the delinquent tax debt as permitted by Illinois law. Instead, she filed for chapter 13 bankruptcy and proposed a plan under which she would pay off the debt of $30,711 at a 0.5% interest rate. Integrity objected to confirmation of the plan, arguing, in part, that the appropriate interest rate was 18% for the tax debts. The debtor objected to Integrity’s claim. Read More