The Ninth Circuit has issued a significant ruling in In re Cooper, reversing the Bankruptcy Appellate Panel’s (BAP) decision that allowed the Social Security Administration (SSA) to recoup overpaid Social Security Disability Insurance (SSDI) benefits from a debtor who had received a bankruptcy discharge. The court’s decision strengthens the protections afforded to debtors under the Bankruptcy Code by ensuring that the SSA cannot automatically sidestep the discharge injunction through the doctrine of equitable recoupment.
[Read more…] about Ninth Circuit Holds that SSA Cannot Automatically Recoup Overpaid Benefits from a Bankrupt BeneficiaryCan Debtors Prioritize Retirement Over Creditors? Trustee Seeks Supreme Court Review in In re Saldana
In a move that could have sweeping implications for Chapter 13 bankruptcy cases nationwide, Martha G. Bronitsky, the Chapter 13 Trustee, has filed a petition for certiorari with the Supreme Court in In re Saldana. The case centers on whether voluntary contributions to retirement accounts should be excluded from a debtor’s disposable income calculation. The Ninth Circuit’s decision in In re Saldana sided with the debtor, holding that voluntary retirement contributions are shielded from creditors, a ruling that some argue disrupts the balance between debtor protections and creditor rights under the Bankruptcy Code. Now, the Supreme Court is being asked to step in, potentially impacting thousands of Chapter 13 cases filed each year.
[Read more…] about Can Debtors Prioritize Retirement Over Creditors? Trustee Seeks Supreme Court Review in In re SaldanaLangston v. Dallas: The Fifth Circuit’s Chance to Reinforce the Finality of Bankruptcy Deadlines
In consumer bankruptcy, finality and procedural certainty are paramount. The ability of debtors to claim exemptions—and for creditors to challenge those claims—is governed by well-defined rules that ensure the timely administration of cases. Yet, in Langston v. Dallas Commodity Company, the courts have permitted an untimely objection to stand, raising critical concerns about the enforceability of procedural deadlines and the integrity of the bankruptcy process.
[Read more…] about Langston v. Dallas: The Fifth Circuit’s Chance to Reinforce the Finality of Bankruptcy DeadlinesFighting for Fairness: NCBRC, NACBA, and NCLC File Amicus Brief in Michigan Bankruptcy Exemptions Battle
“Michigan’s most vulnerable debtors deserve protection—not political obstruction.”
That’s the central argument made by the National Consumer Bankruptcy Rights Center (NCBRC), the National Association of Consumer Bankruptcy Attorneys (NACBA), and the National Consumer Law Center (NCLC) in a critical amicus brief filed before the Michigan Court of Claims. These leading consumer advocacy organizations are weighing in on a legal battle that could determine the financial future of countless struggling Michiganders.
At issue is House Bill 4901 (HB 4901)—a long-overdue update to Michigan’s bankruptcy exemption laws that would allow debtors to keep their homes, cars, and basic assets while seeking financial relief. The bill passed both chambers of the Michigan Legislature. But in a stunning act of defiance, House Speaker Matt Hall and Clerk Scott Starr have refused to present the bill to Governor Gretchen Whitmer, effectively blocking it from becoming law.
[Read more…] about Fighting for Fairness: NCBRC, NACBA, and NCLC File Amicus Brief in Michigan Bankruptcy Exemptions BattleNCBRC and NACBA Stand Firm on Bankruptcy Rights in Duarte v. Hillard
What happens when a creditor misses their deadline but tries to bend the rules to get paid anyway? That’s the central issue in Duarte v. Hillard, a case before the Ninth Circuit Court of Appeals, where the National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) have stepped in to defend the integrity of the bankruptcy system.
In this appeal, creditor Jerry Duarte argues that even though he failed to file a timely proof of claim in Jenna Denise Hillard’s Chapter 13 bankruptcy case, he should still be entitled to receive payment. His legal argument? That the debtor’s amended bankruptcy schedules and plan should count as an “informal” proof of claim—something the law does not support.
[Read more…] about NCBRC and NACBA Stand Firm on Bankruptcy Rights in Duarte v. HillardTenth Circuit to Decide Dispute Over Child Tax Credit Exemption in Bankruptcy
Facts
The Tenth Circuit is reviewing a case that centers on Colorado’s bankruptcy exemption statute, which allows debtors to exempt the “full amount” of tax refunds attributed to the Child Tax Credit (CTC). The debtor, Jose L. Garcia-Morales, filed for Chapter 7 bankruptcy in 2021 and claimed an exemption for his $1,800 CTC, which resulted in a $1,455 tax refund.
The Chapter 7 trustee, Robertson Cohen, objected, arguing that the refund was only partially exempt and sought to retain $914.40 for the bankruptcy estate using a pro-rata allocation method. The bankruptcy court, and later the district court, sided with Garcia-Morales, finding that the entire refund was exempt under the plain meaning of the statute. The trustee has appealed to the Tenth Circuit.
[Read more…] about Tenth Circuit to Decide Dispute Over Child Tax Credit Exemption in BankruptcyEleventh Circuit to Decide Key Issues in Post-Confirmation Plan Modifications
Facts
In In re Conte, the Eleventh Circuit is reviewing a decision from the District Court for the Southern District of Alabama that upheld a bankruptcy court’s denial of a Chapter 13 trustee’s motion to modify confirmed plans based on debtors’ post-confirmation personal injury settlements.
[Read more…] about Eleventh Circuit to Decide Key Issues in Post-Confirmation Plan ModificationsThe Sixth Circuit Reverses Bankruptcy Court’s Denial of Discharge Based on Intent to Hinder Trustee
Facts
Jason and Leah Wylie filed for Chapter 7 bankruptcy in 2020 following financial hardships caused by Mr. Wylie’s health issues. Before filing, they delayed filing tax returns for 2018 and 2019. When the returns were filed, the Wylies elected to apply their substantial overpayments from those years to future tax liabilities instead of requesting refunds.
The bankruptcy trustee filed an adversary proceeding under 11 U.S.C. § 727 to deny discharge, alleging the Wylies transferred anticipated tax refunds from the bankruptcy estate with the intent to hinder, delay, or defraud creditors. The bankruptcy court agreed with the trustee on one count—related to post-petition transfers—and denied discharge. On appeal, the district court reversed, and the trustee appealed to the Sixth Circuit.
Analysis
The Sixth Circuit focused on whether the bankruptcy court’s finding of specific intent to hinder the trustee was clearly erroneous. Section 727(a)(2) requires evidence of actual intent to hinder, delay, or defraud a creditor or the trustee.
The court found no evidence that the Wylies acted with such intent. The bankruptcy court had itself noted that the Wylies’ primary motive was to ensure their taxes were paid, not to hinder the trustee. The Sixth Circuit emphasized that a mere preference to pay certain creditors, such as taxing authorities, over others does not meet the statute’s specific intent requirement. It also pointed out that the Wylies were not intimately familiar with the Bankruptcy Code’s priority scheme, undermining the trustee’s claim of intentional hindrance.
The court found the bankruptcy court’s reasoning inconsistent, as it had dismissed a similar claim related to pre-petition transfers due to a lack of specific intent. The Sixth Circuit ultimately affirmed the district court’s decision and remanded the case for entry of discharge.
Conclusion
The Sixth Circuit’s decision highlights the high burden of proof required under § 727(a)(2). Without clear evidence of specific intent to hinder creditors or the trustee, courts are reluctant to deny debtors a discharge, given the extreme consequences of such a penalty.
NCBRC and NACBA filed an amici brief in support of the debtor.
Ninth Circuit Clarifies Disposable Income Exclusions for Chapter 13 Debtors Concerning Voluntary Contributions to Retirement Plans
Facts
Jorden Marie Saldana, a surgical technician earning approximately $101,776 annually, filed for Chapter 13 bankruptcy to reorganize her finances and address over $64,000 in unpaid taxes and unsecured debts. In calculating her disposable income, Saldana excluded $747 per month in voluntary contributions to her employer-managed retirement plan.
The Chapter 13 trustee objected, arguing that voluntary retirement contributions constitute disposable income under the Bankruptcy Code and must be applied to repay creditors. The bankruptcy court agreed, sustaining the trustee’s objection and requiring Saldana to adjust her Chapter 13 plan. Saldana appealed to the district court, which affirmed the bankruptcy court’s decision. Saldana then appealed to the Ninth Circuit.
Analysis
The Ninth Circuit reversed the lower courts, holding that voluntary contributions to employer-managed retirement plans are excluded from disposable income under Chapter 13. The court relied on the “hanging paragraph” in 11 U.S.C. § 541(b)(7), which explicitly states that such contributions “shall not constitute disposable income as defined in section 1325(b)(2).”
The Ninth Circuit emphasized that the statutory language is unambiguous, allowing Chapter 13 debtors to exclude any amount of voluntary contributions to qualified retirement plans from their disposable income calculations. This interpretation aligns with Congress’s intent in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, which sought to protect retirement savings while encouraging Chapter 13 reorganizations.
The court rejected alternative interpretations that would limit the exclusion to pre-petition contributions or cap it based on historical contribution levels. It also dismissed concerns about debtor abuse, noting that Chapter 13’s good faith requirements and other safeguards adequately address potential misuse of the exclusion.
Conclusion
The Ninth Circuit’s decision in In re Saldana reinforces the broad protections for retirement contributions in Chapter 13 bankruptcy cases. By excluding voluntary contributions from disposable income, the ruling encourages debtors to maintain long-term financial stability while reorganizing their debts.
NCBRC and NACBA filed an amici brief in support of the debtor
The 9th Circuit Confirms that Chapter 13 Debtors Have an Absolute Right to Dismiss
In TICO Constr. Co. v. Van Meter (In re Powell), Case No. 22-60052 (9th Cir. October 1, 2024) the court considered whether a debtor has an absolute right to dismiss a Chapter 13 bankruptcy case under 11 U.S.C. § 1307(b), even if the debtor is potentially ineligible for Chapter 13 relief at the time of filing due to bad faith.
Holding:
The court held that a debtor has an absolute right to voluntarily dismiss their Chapter 13 bankruptcy case under 11 U.S.C. § 1307(b), regardless of bad faith allegations or ineligibility for Chapter 13 relief at the time of filing.
Facts:
Powell, the debtor, filed for Chapter 13 bankruptcy. TICO Construction Company, a creditor, challenged Powell’s eligibility for Chapter 13 relief, asserting that he should proceed under a different chapter of the Bankruptcy Code. Powell sought to dismiss his case under § 1307(b) voluntarily, and the bankruptcy court granted his request. The key issue was whether Powell could dismiss his Chapter 13 case despite his alleged ineligibility.
The case was decided based on a disputed interpretation of the law, particularly whether Powell’s eligibility for Chapter 13 impacted his right to voluntary dismissal under § 1307(b).
Analysis:
The court focused on the plain language of 11 U.S.C. § 1307(b), which gives a debtor the right to dismiss their Chapter 13 case as long as they meet four requirements: they request dismissal, they are a debtor, the case is under Chapter 13, and the case has not been converted to another chapter under Title 11. The court held that Powell met these requirements, and thus had an absolute right to dismiss his case, regardless of his eligibility for Chapter 13 relief or whether he had filed the petition in bad faith.
The court relied on the precedent set in Nichols v. Marana Stockyard & Livestock Market, Inc. (In re Nichols), which similarly recognized the debtor’s right to dismissal under § 1307(b). The majority emphasized that a debtor’s certification of eligibility when filing under Chapter 13 is presumptively valid and that any challenge to eligibility does not negate the debtor’s right to voluntary dismissal.
In contrast, Judge Collins dissented, arguing that eligibility for Chapter 13 relief is a precondition for the rights and procedures afforded, including the right to voluntary dismissal. According to Collins, Powell’s ineligibility for Chapter 13 should have led the court to deny his request for dismissal and instead convert the case to a different chapter. However, the majority rejected this view, prioritizing the plain language of § 1307(b) over any concerns about eligibility or bad faith at the time of filing.
NCBRC submitted an amicus brief in support of the debtor/appellee.