In a consolidated opinion, the Bankruptcy Court for the District of Massachusetts held that the “equal payment provision of § 1325(a)(5)(B)(iii) is best read to prohibit confirmation of a sale plan, over the objection of a secured creditor holding a mortgage of a principal residence, that contemplates periodic payments followed by a lump-sum payment.” In re Materne, No. 20-40027, and In re Gnaman, No. 19-40930 (Bankr. D. Mass. April 7, 2022). [Read more…] about Provision for Balloon Payment after Sale Precludes Confirmation
Terms of Promissory Note Not Enough to Show Nondischargeability of Student Loan
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…] about Terms of Promissory Note Not Enough to Show Nondischargeability of Student Loan
Mortgage May Be Bifurcated Under Section 1322(c)
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…] about Mortgage May Be Bifurcated Under Section 1322(c)
IRS Had No “Substantial Justification” for Challenging Jurisdiction
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…] about IRS Had No “Substantial Justification” for Challenging Jurisdiction
Efforts to Collect Domestic Support Violates Automatic Stay
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…] about Efforts to Collect Domestic Support Violates Automatic Stay
Debtor May Not Exempt Portion of Worker’s Comp Order Earmarked for Medical Care Providers
The Chapter 7 debtor was not entitled to exempt the portion of a settlement he negotiated with his employer and workers’ 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…] about Debtor May Not Exempt Portion of Worker’s Comp Order Earmarked for Medical Care Providers
Canadian Pension Plan Not Qualified Retirement Plan
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 that 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…] about Canadian Pension Plan Not Qualified Retirement Plan
Changes to Bankruptcy Code Dollar Amounts
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.
Trustee in Dismissed Case May Keep Pre-Confirmation Fees
In a cursory opinion, the District Court for the Eastern District of New York found the chapter 13 trustee was entitled to retain his statutory fees despite the fact that the debtor’s bankruptcy was dismissed before confirmation. Soussis v. Macco (In re Soussis), No. 20-5673 (E.D.N.Y. Jan. 24, 2022) (online publication only). [Read more…] about Trustee in Dismissed Case May Keep Pre-Confirmation Fees
Costs of Attorney Disciplinary Proceeding Not Dischargeable
An order by the state that a lawyer pay the costs of the regulatory authority’s action against him for professional misconduct was penal rather than compensatory for purposes of nondischargeability. Osicka v. Office of Lawyer Reg., No. 21-1556 (7th Cir. Feb. 7, 2022).
The Chapter 7 debtor, a Wisconsin lawyer, was subjected to disciplinary proceedings before the Wisconsin Office of Lawyer Regulation for misconduct in the handling of one of his clients’ cases. The referee recommended a temporary suspension of his law license, full restitution of $150, and the costs of the disciplinary proceedings. In re Disciplinary Proceedings Against Osicka, 765 N.W.2d 775 (Wis. 2009). The debtor appealed to the Wisconsin Supreme Court, which reduced the suspension to a public reprimand and upheld but reduced the order for costs to $12,500.64. [Read more…] about Costs of Attorney Disciplinary Proceeding Not Dischargeable