The IRS has filed an amicus brief in the First Circuit taking the position that the Fifth Circuit erred in McCoy v. Miss. State Tax Comm’n, 666 F.3d 924 (5th Cir. 2012), when it held that a late-filed return can never be a “return” for dischargeability purposes unless filed under IRC section 6020(a). Wood v. Mass. Dept. of Rev., Nos. 14-9004, 14-9006 and Pendergast v. Mass. Dept. of Rev., 14-9005, 14-9007 (1st Cir.) (amicus brief filed Nov. 4, 2104). [Read more…] about Not Even the IRS Approves of McCoy
Supreme Court to Hear Chapter 7 Lien Stripping Cases
The Supreme Court granted certiorari today in two of the three Chapter 7 lien-strip-off cases challenging the Eleventh Circuit decision in McNeal. Bank of Amer. v. Toledo-Cardona, No. 14-163 and Bank of Amer. v. Caulkett, No. 13-1421 (petition granted Nov. 17, 2014) (consolidated for argument) (Bank of Amer. v. Bello, No. 14-235 is still pending). In McNeal v. GMAC Mortg., 735 F.3d 1263 (11th Cir. 2012) pet. den. (May 20, 2014), the court bucked the trend to find that Dewsnup v. Timm, 502 U.S. 410 (1992), which held that a partially secured lien could not be stripped-down in chapter 7, did not apply to wholly unsecured liens. There are more than a dozen cases currently pending in the Eleventh Circuit challenging this decision, but, after an early abortive attempt to bring the issue before the Supreme Court (Bank of America v. Sinkfield, No. 13-700 (cert. denied, March 31, 2014)) the issue is now on track for final resolution. Briefing should be completed by March and argument is likely to be scheduled for the last week of March, with decision by June. The debtor is being represented by Stephanos Bibas, the Director of the Supreme Court Clinic at the University of Pennsylvania Law School.
Arbitration Judgment Applies to Determination of Nondischargeability
The doctrine of collateral estoppel mandated that findings in a state court arbitration judgment applied to the determination of nondischargeability of a debt in chapter 7 bankruptcy. Margolis v. Hensley (In re Hensley), No. 12-42785, Adv. Pro. 12-4180 (Bankr. E.D. Tex. Oct. 1, 2014). [Read more…] about Arbitration Judgment Applies to Determination of Nondischargeability
Ongoing Homeowners Association Assessments Dischargeable
Approximately a year and a half after the debtors abandoned their condominium and stopped paying their homeowners’ assessments, they filed for chapter 13 bankruptcy. Their plan proposed to transfer title to the secured creditor, Bank of America, and made no provision for payment of ongoing Homeowners Association assessments. Both the bank and the HOA objected to confirmation of the plan. The bankruptcy court sustained the Bank’s objection but denied the HOA’s and confirmed the plan insofar as it did not include payment of ongoing HOA assessments. In re Coonfield, No. 14-2533 (Bankr. E.D. Wash. Sept. 25, 2014). [Read more…] about Ongoing Homeowners Association Assessments Dischargeable
“Public Assistance” Exemption Revisited
In contrast with the recently reported case, In re Vazquez, the BAP for the Eighth Circuit reiterated its analysis of what constitutes “public assistance,” under Minnesota exemption laws, to take into consideration whether the recipient of the assistance is “needy.” Christians v. Dmitruk (In re Dmitruk), No. 14-6023 (B.A.P. 8th Cir. Sept. 15, 2014). [Read more…] about “Public Assistance” Exemption Revisited
No En Banc Rehearing in Crawford
The Eleventh Circuit declined to revisit its decision in Crawford v. LVNV Funding, No. 13-12389 (11th Cir. July 10, 2014), where it found that a proof of claim to collect a stale debt in chapter 13 bankruptcy violates the Fair Debt Collection Practices Act. See NCBRC post here. On September 18th, the court denied LVNV Funding and Resurgent Capital Services’ petition for rehearing en banc.
Some commentators predicted that the court might take on the rehearing because the decision upset a body of law prohibiting such FDCPA claims. See, e.g., Inside ARM blog here, and Bankruptcy Law Blog here. Specifically, the Crawford decision conflicts with Walls v. Wells Fargo Bank, N.A., 276 F. 3d 502 (9th Cir. 2002), where the court found that the Bankruptcy Code preempts the FDCPA and that, therefore, the debtor’s remedy for violation of the discharge injunction was limited to contempt under section 105 of the Bankruptcy Code.
In Crawford, the court side-stepped the question of preemption, stating: “Some circuits hold that the Bankruptcy Code displaces the FDCPA in the bankruptcy context. See Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir. 2010); Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002). Other circuits hold the opposite. See Simon v. FIA Card Ser., N.A., 732 F.3d 259, 271−74 (3d Cir. 2013); Randolph v. IMBS, Inc., 368 F.3d 726, 730−33 (7th Cir. 2004). In any event, we need not address this issue because LVNV argues only that its conduct does not fall under the FDCPA or did not offend the FDCPA’s prohibitions. LVNV does not contend that the Bankruptcy Code displaces or “preempts” §§ 1692e and 1692f of the FDCPA.”
Disclose, Disclose, Disclose
If you are filing for bankruptcy, do not forget to mention in your schedules the business interest you recently sold or the property you own in Mexico. That was the lesson learned by a couple of debtors who were denied discharge for just such omissions. Gronlund v. Anderson (In re Gronlund), No. 13-1566 (B.A.P. 9th Cir. Aug. 19, 2014) on appeal No. 14- 60053 (9th Cir.); In re Michelotti, No. 12-21679, Adv. Proc. No. 13-40 (Bankr. W.D. Tenn. July 17, 2014) on appeal, No. 14-8048 (B.A.P. 6th Cir.). [Read more…] about Disclose, Disclose, Disclose
“Public Assistance Benefit” Not Tied to Wealth of Debtor
The definition of “public assistance benefit” for bankruptcy exemption purposes is not tied to the affluence of the debtor. In re Vazquez, No. 13-32174 (Bankr. N.D. Ill. Sept. 8, 2014). [Read more…] about “Public Assistance Benefit” Not Tied to Wealth of Debtor
Proof of Claim Violates Discharge Injunction
An Alabama district court upheld a sanction award for violation of the discharge injunction based on the creditor’s filing a proof of claim in a subsequent bankruptcy. McLean v. Greenpoint Credit (In re McLean), No. 13-925 (M.D. Ala. Sept. 4, 2014). [Read more…] about Proof of Claim Violates Discharge Injunction
Canadian Retirement Benefits Excluded from Current Monthly Income
A Treaty between Canada and the United States that became effective in 1984 was the basis for a bankruptcy court finding that Canadian Old Age Security (OAS) benefits should be treated the same way as U.S. social security benefits for purposes of application of the Bankruptcy Code. In re McPhee, No.13-36046 (Bankr. E.D. Va. Aug. 26, 2014). [Read more…] about Canadian Retirement Benefits Excluded from Current Monthly Income