Posted by NCBRC - November 5th, 2019
A chapter 13 debtor’s voluntary post-petition contributions to his 401k plan must be included in the calculation of disposable income under section 1325. Penfound v. Ruskin, No. 18-13333 (E.D. Mich. Sept. 20, 2019).
Above-median Debtor, John Penfound, worked continuously for twenty-four years during which time he made regular voluntary contributions to his 401k plans. When he and his wife, Jill Penfound, filed a petition for chapter 13 bankruptcy, he sought to continue contributing $1,375/month to his 401k and exclude those amounts from his calculation of disposable income. Upon objection by the trustee, the bankruptcy court ordered the debtors to amend their proposed plan based on a re-calculation of disposable income including the monthly contributions to the 401k plan. The debtors appealed confirmation of the amended plan.
Relying on reasoning and dictum in In re Seafort, 669 F.2d 662 (6th Cir. 2012), the district court affirmed. Read More
Posted by NCBRC - November 2nd, 2019
In an opinion that reads like a father chastising his ungrateful children, the District Court for the Western District of Texas scolded the debtors for their proposed treatment of anticipated tax refunds and required them to adhere to the District Plan under which they could retain up to $2,000 of their refunds, but must turn over to the Trustee any amount remaining as disposable income. Vega v. Viegelahn, No. 18-796 and Diaz v. Viegelahn, No. 18-798 (W.D. Tex. Sept. 19, 2019) (consolidated for argument and decision).
Contrary to the District Plan structure, the debtors in this case sought to amortize their tax refunds as income over one year. Upon objection by the trustee, the debtors ultimately amended their plans to conform to the District Plan. They then appealed the Bankruptcy Court’s order of confirmation arguing that the District Plan’s treatment of the tax refunds violated various provisions of the Bankruptcy Code, the Local Rules and the Official Forms. Read More
Posted by NCBRC - May 14th, 2019
Where the only injury alleged was the denial of discharge, the debtors’ legal malpractice cause of action against their bankruptcy attorneys did not arise pre-petition and, therefore, was not part of the bankruptcy estate. Church Joint Venture v. Blasingame, No. 18-8017 (B.A.P. 6th Cir. April 5, 2019).
The debtors’ bankruptcy attorneys committed malpractice prior to and during the course of the debtors’ chapter 7 case, resulting in denial of discharge. The debtors sued their attorneys for malpractice in state court, and the bankruptcy court granted creditor, Church Joint Venture (CJV), derivative status to pursue a malpractice action in the bankruptcy court on behalf of the estate based on the same conduct. CJV filed an adversary complaint and sought a declaratory judgment that the cause of action for malpractice constituted estate property. On cross-motions for summary judgment, the bankruptcy court found that the cause of action arose post-petition and, therefore, belonged to the debtors rather than the estate.
CJV appealed to the bankruptcy appellate panel for the Sixth Circuit.
Relying on Underhill v. Huntington National Bank (In re Underhill), 579 F. App’x 480 (6th Cir. 2014), the panel affirmed. Read More
Posted by NCBRC - January 4th, 2019
By operation of state property law, a debtor’s interest in a joint tenancy drops out of the chapter 7 estate upon the death of the debtor, and this does not conflict with the trustee’s powers under federal law. Cohen v. Chernushin (In re Chernushin), No. 18-1068 (10th Cir. Dec. 21, 2018).
Gregory and Andrea Chernushin owned real property as joint tenants. Mr. Chernushin filed for bankruptcy but committed suicide during the pendency of his case. The chapter 7 trustee sought to retain and sell the joint tenancy. The bankruptcy court found that upon Mr. Chernushin’s death the entire interest in the property went to Ms. Chernushin and was therefore no longer part of the bankruptcy estate amenable to sale by the trustee. On appeal, the district court agreed. Cohen v. Chernushin (In re Chernushin), 584 B.R. 567 (D. Colo. 2018). Read More
Posted by NCBRC - January 2nd, 2019
A bankruptcy court lacks the power to require a chapter 13 debtor to include a plan provision pledging to pay into the plan the cash equivalent of any non-cash property obtained post-confirmation. Roseberry v. U.S. Trustee, No. 18-1039 (S.D. Ill. Dec. 18, 2018). Read More
Posted by NCBRC - November 20th, 2018
In Brace v. Speier (In re Brace), the Ninth Circuit certified the following question to the Supreme Court of California: “Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate?” No. 17-60032 (9th Cir. Nov. 8, 2018) (order certifying question). Read More
Posted by NCBRC - September 18th, 2018
Delivery and set-up costs are not included in the valuation of a mobile home under section 506(a). 21st Mortgage Corp. v. Glenn, No. 17-60533 (5th Cir. Aug. 13, 2018).
Kayla Glenn elected to retain her mobile home and pay it off with 5% interest through her chapter 13 bankruptcy. 21st Mortgage objected to Ms. Glenn’s proposed plan based on her valuation of the property as not including the cost of delivery and set-up. The bankruptcy court confirmed the plan and the district court affirmed. 21st Mortgage appealed. Read More
Posted by NCBRC - August 14th, 2018
Retail value under NADA, rather than trade-in value, governs valuation of car under section 506(a)(2). In re Burton, No. 17-10979 (Bankr. D. Del. May 16, 2018).
Deborah Burton filed an amended chapter 13 plan in which she listed the value of her secured vehicle as $8,100 and proposed a 5% interest rate. In support of her valuation, Ms. Burton submitted an appraisal from a car dealership stating the vehicle’s trade-in value, taking into account damage and wear. Ally Financial, the secured holder of the car loan, objected to the valuation and the interest rate, arguing that, based on a National Automobile Dealers Association valuation, the vehicle should have been valued at $11,105, and should be repaid at an interest rate of 7%. Both parties maintained that the holding in Assocs. Commercial Corp. v. Rash, 520 U.S. 953 (1997), supported their valuation. Read More
Posted by NCBRC - August 10th, 2018
The chapter 13 debtors who voluntarily dismissed their bankruptcy case were entitled to the proceeds from the sale of their homestead. Viegelahn v. Lopez, No. 17-50297 (5th Cir. July 31, 2018).
Chapter 13 debtors, Manuel and Dolores Lopez, sold their homestead without prior court approval and did not use the proceeds to purchase another home. Their confirmed plan provided that estate property would not revest in the debtors except upon order of the court. For various reasons, including Mr. Lopez’s arrest and deportation, the Lopezes had difficulty making plan payments. In response to the trustee’s third motion to dismiss, Ms. Lopez sought to use the proceeds from the sale of their homestead for plan payments after she paid approximately $20,000 for mandatory eye surgery. The trustee objected to any hold-back of the sale proceeds. The bankruptcy court agreed to allow Ms. Lopez’s modification, adding that if the Lopezes voluntarily dismissed their bankruptcy, they would be entitled to retain all the proceeds from the homestead sale. The Lopezes moved for voluntary dismissal and the trustee objected on the basis of bad faith. The bankruptcy judge granted the motion to dismiss and found that the proceeds should be returned to the Lopezes. The district court affirmed the dismissal but reversed on the issue of returning the proceeds. Read More
Posted by NCBRC - February 13th, 2018
By operation of state law, a tax sale purchaser has title to the purchased property and cannot have its rights modified in chapter 13 to permit the debtor to redeem over the course of the plan. Deed Co. v. Jimerson, No. 17-513 (N.D. Ga. Jan. 23, 2018). Read More
