Recent Blog Posts

"S.1102 -- Fairness for Struggling Students Act of 2011 (Introduced in Senate - IS)" --

Robert Kovacs — Tue, 08 May 2012 04:25:00 GMT

Proposed law to allow private, non-government, student loans to be discharged in bankruptcy

Below is the full text of the proposed change to the bankruptcy code, allowing private student loans to be discharged in bankruptcy. This change would not affect any loan that is backed by the federal government. Federal or government loans would remain non-dischargeable in bankruptcy

S.1102 -- Fairness for Struggling Students Act of 2011 (Introduced in Senate - IS)

S 1102 IS

112th CONGRESS

1st Session

S. 1102

To amend title 11, United States Code, with respect to certain exceptions to discharge in bankruptcy.

IN THE SENATE OF THE UNITED STATES

May 26, 2011

Mr. DURBIN (for himself, Mr. FRANKEN, and Mr. WHITEHOUSE) introduced the following bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To amend title 11, United States Code, with respect to certain exceptions to discharge in bankruptcy.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Fairness for Struggling Students Act of 2011'.

SEC. 2. EXCEPTIONS TO DISCHARGE.

Section 523(a)(8) of title 11, United States Code, is amended by striking `dependents, for' and all that follows through the end of subparagraph (B) and inserting `dependents, for an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit or made under any program funded in whole or in part by a governmental unit or an obligation to repay funds received from a governmental unit as an educational benefit, scholarship, or stipend;'.

Ask Your Lawmaker to Cosponsor Student Loan Dischargeability

Robert Kovacs — Tue, 08 May 2012 04:18:00 GMT

"NACBA is committed to working with you and our lawmakers to provide the fresh start that families need, including relief from student loan debt. Recently, S. 1102, the “Fairness for Struggling Students Act,” sponsored by Sen. Durbin was the focus of a congressional hearing. This bill would repeal the 2005 Bankruptcy Act’s provision on private student loans and restore the dischargeability of private student loan debt in bankruptcy. Although NACBA’s agenda is broader and calls for restoring the dischargeability of both private and federal government student loans in bankruptcy, the Board of Directors has decided to endorse S. 1102 as an important step forward in our fight to restore bankruptcy protection for student loans.

Now is the time to take advantage of the opinion environment that has been created with the media coverage of NACBA’s student loan report issued in February. With over 600 media articles citing NACBA and the burgeoning student loan “debt bomb,” we have a tremendous opportunity to build support for remedial legislation. We are asking you to help by sending a letter (email) to your U.S. Senators requesting that they cosponsor S. 1102.

Please contact Zach Manifold and you will shortly receive the letter for personalizing and the email address to contact your legislator. In addition to sending you the sample letter and contact information, we will provide additional detail on the legislation and FAQs, as well as responses to the arguments against the bill raised by our opponents.

For those lawmakers who have cosponsored the bill, we’ll be asking you to say thank you instead. So, just send Zach an email by clicking here and we’ll get you all the necessary information.

Thank you for all you do!

Angie"

Cases In Review

Robert Kovacs — Sun, 06 May 2012 22:33:00 GMT

©National Consumer Bankruptcy Rights Center

www.ncbrc.org

1 of 4

______________________________________________________________________

Cases In Review

April 2012

"Cases In Review" highlights recent cases that may be of particular

interest to consumer bankruptcy practitioners. It is brought to you by

Consumer Bankruptcy Abstracts & Research (www.cbar.pro) and

the National Consumer Bankruptcy Rights Center (www.ncbrc.org).

Chapter 13—Confirmation of plan—Good faith—Fee-only plan: Reversing In re

Puffer, 453 B.R. 14 (D. Mass., July 8, 2011), the First Circuit Court of Appeals said that

a "fee-only" Chapter 13 plan (i.e., a Chapter 13 plan under which the only creditor

receiving significant payment is the debtor's attorney) is not necessarily proposed in

bad faith for the purpose of Code § 1325(a)(3), nor is a Chapter 13 case necessarily

filed in bad faith for the purpose of Code § 1325(a)(7) because the debtor proposes a

fee-only plan. While fee-only plans should not be used as a matter of course, the court

said, there may be special circumstances, albeit relatively rare, in which this type of

odd arrangement is justified. The judge concurring in the judgment said that he would

leave application of the test entirely to bankruptcy judges instead of prescribing a rule

requiring "special circumstances" limited to "relatively rare" instances." In re Puffer, ---

F.3d ----, 2012 WL 954860 (1st Cir., March 22, 2012).

Proof of claim—Class claims: The Fourth Circuit Court of Appeals concluded that

Bankruptcy Rule 3001 should be construed to allow class proofs of claim, at least on a

tentative basis, until the court rejects the class-action process. If the bankruptcy court

approves class representation, the court explained, the approval will function

retroactively to legitimize the class proof of claim, but if the court rejects such

representation, the putative class members will have to file individual proofs of claim.

Gentry v. Siegel, 668 F.3d 83 (4th Cir., Feb. 2, 2012).

Property of the estate—Exemptions—Inherited IRA: The Fifth Circuit Court of

Appeals, the Ninth Circuit BAP, and a district court all held that the debtor may

exempt an inherited IRS under Code § 522(d)(12) or § 522(b)(3)(C). See In re Chilton, - -- F.3d ----, 2012 WL 762924 (5th Cir., March 12, 2012) In re Hamlin,--- B.R. ----, 2012 WL 898790 (9th Cir. B.A.P., Feb. 21, 2012); and In

re Clark, 2012 WL 233990 (W.D. Wis., Jan. 5, 2012) (reversing In re Clark, 450 B.R.

858 (Bankr. W.D. Wis., May 10, 2011).

Chapter 13—Treatment of unsecured claims—Inclusion of "straddling tax claim":

Resolving an issue that has roiled the lower courts in the circuit, the Sixth

Circuit Court of Appeals held that a Chapter 13 debtor may file a protective proof of

claim for a "straddling tax claim," that is, a proof of claim for the debtor's debt for

her prior year's state income taxes, where the debtor filed her bankruptcy petition in

January 2009, before the April 15, 2009, date on which her 2008 taxes were due. In re

Hight, --- F.3d ----, 2012 WL 688526 (6th Cir., March 5, 2012).

Property of the estate—Exemptions—Of "100% of FMV": Three more courts disallowed exemptions claimed by debtors in the form of "100% of the fair market value" of, or "100% of the equity" in, property. See In re Messer, Case No. 11-1505

(9th Cir. B.A.P., March 9, 2012); In re Massey, --- B.R. ----, 2012 WL

616587 (1st Cir. B.A.P., Feb. 27, 2012); and In re Luckham, 464 B.R.

67 (Bankr. D. Mass., Jan. 13, 2012).

Chapter 13—Stripping unsecured lien—Effect of debtor's ineligibility for discharge:

In the continuing judicial conversation on whether a Chapter 13 debtor

may permanently strip a wholly unsecured lien without receiving a discharge, a total of

six courts (three district courts and three bankruptcy courts) allowed a debtor to do

so. See In re Waterman, 2012 WL 872623 (D. Colo., March 13, 2012) (affirming In re Waterman, 447 B.R. 324 (Bankr. D. Colo., April 7, 2011)) ; Frazier v.

Real Time Resolutions, Inc., 2012 WL 812387 (E.D. Cal., March 9, 2012) (affirming In re Frazier, 448 B.R. 803 (Bankr. E.D. Cal., Jan. 10, 2011)); TD Bank,

NA v. Davis, Case No. 8:11-cv-1270 (D. Md., Jan. 12, 2012) (summarily affirming In re Davis, 447 B.R. 738 (Bankr. D. Md., March 30, 2011)); In re Scantling, ---

B.R. ----, 2012 WL 593218 (Bankr. M.D. Fla., Feb. 24, 2012) (Bankruptcy Judge

Michael Williamson); In re Dang, --- B.R. ----, 2012 WL 899620

(Bankr. M.D. Fla., March 12, 2012) (Bankruptcy Judge Paul Glenn);

In re Blendheim, 2011 WL 6779709 (Bankr. W.D. Wash., Dec. 27, 2011) (Bankruptcy Judge Marc Barreca)

One district court and two bankruptcy courts disagreed. See Victorio v. Billingslea, 2012

WL 628310 (S.D. Cal., Feb. 24, 2012) (affirming In re Victorio, 454 B.R. 759 (Bankr.

S.D. Cal., July 8, 2011)); In re Slate, 2012 WL 293591 (Bankr. M.D.

Fla., Feb. 1, 2012) (Bankruptcy Judge Arthur Briskman; adhering to previouslyestablished

position); In re Pierre, --- B.R. ----, 2012 WL 928192 (Bankr. M.D. Fla., March 16, 2012) (Chief Bankruptcy Judge Karen Jennemann).

Chapter 13—Confirmation of plan—Good faith—Contribution of Social

Security income: Two courts reached conflicting resolutions of the question whether a Chapter 13 debtor's failure to contribute the debtor's Social Security income to the debtor's plan payments may support a finding of a lack of good faith under Code § 1325(a)(3). Compare In re Welsh, --- B.R. ----, 2012 WL 603818 (9th Cir. B.A.P., Feb. 17, 2012) (affirming In re Welsh, 440 B.R. 836 (Bankr. D. Mont., Nov. 16, 2010) in a 2- 1 decision, the Bankruptcy Appellate Panel held that the only substantial repayment requirement is that set out in the Code; a debtor's lack of good faith cannot be found based solely on the fact that the debtor is doing what the Code allows) with Mains v. Foley, 2012 WL 612006 (W.D. Mich., Feb. 24, 2012) (affirming In re Mains, 451 B.R. 428 (Bankr. W.D. Mich., May 25, 2011), the district court said

that the Chapter 13 debtors' Social Security income could be taken into account in

assessing whether the debtors' Chapter 13 plan was proposed in good faith for the

purpose of Code § 1325(a)(3), which was a subjective assessment, even though the

income was not considered in applying the objective "disposable income" test of §

1325(b)).

Chapter 13—Eligibility—Debt limits: Denying reconsideration of In re Scotto- DiClemente, 459 B.R. 558 (Bankr. D. N.J., Nov. 18, 2011), and disagreeing with In re Shenas, 2011 WL 3236182 (Bankr. N.D. Cal., July 28, 2011) and Cavaliere v. Sapir, 208 B.R. 784 (D. Conn. 1997), the Bankruptcy Court for the District of New Jersey held that a debt as to which the debtor has only an in rem liability, because the debtor's personal liability was extinguished in a prior Chapter 7 case, counts in determining the debtor's compliance with the Chapter 13 debt limits. In re Scotto-DiClemente, 463 B.R. 308 (Bankr. D. N.J., Jan, 25, 2012)

Proof of claim—Secured claims—Court orders review by mortgage creditor:

After the mortgage creditor acknowledged that, in its proof of claim filed in a Chapter

13 case, it had overstated the costs incurred in a prepetition state-court foreclosure

action by $443.15, the Bankruptcy Court for the Northern District of Ohio, in order

to "determine whether there is a systemic problem that must be independently

addressed," ordered the mortgage creditor's counsel to review the mortgage claims it

had filed on behalf of the creditor in the district between January 1, 2009, and

November 29, 2011, to confirm the accuracy of any foreclosure costs claimed in

mortgage arrearages, and file a report of its review. In re Hasselbach, 2011 WL 6936216

(Bankr. N.D. Ohio, Dec. 29, 2011)

Property of the estate—Avoidance of liens impairing exemptions—Debtor ineligible for discharge: The Bankruptcy Court for the District of New Mexico held that avoidance of a lien under Code § 522(f) does not require that the debtor receive a discharge. In re Mulholland, 2012 WL 601784 (Bankr. D. N.M., Feb. 23, 2012)

Chapter 13—Treatment of unsecured claims—Unfair discrimination: The Bankruptcy Court for the Middle District of Georgia held that, while Code §

1322(b)(5), permitting cure and maintenance of a long-term debt, does not "trump" §

1322(b)(1), which prohibits unfair discrimination in the treatment of unsecured

creditors, a proposed Chapter 13 plan that separately classified the debtor's student

loan debt and proposed to pay more on that debt than to other general unsecured

creditors did not unfairly discriminate against the other unsecured creditors, where

allowing the debtor to separately classify and pay more on her student loan debt

would allow the debtor to participate in a public service loan forgiveness program,

thereby giving her the chance to write off approximately $50,000 of the debt, and the

cost of the discrimination to other unsecured creditors was the difference between a

dividend of 15 and 20 percent, or a total of approximately $5,000. In re Pracht, 464

B.R. 486 (Bankr. M.D. Ga., Jan. 10, 2012)

National Associaiotn of Consumer Bankruptcy Attorney's - Case Update and Amicus

Robert Kovacs — Sun, 29 Apr 2012 20:01:00 GMT

National Associaiotn of Consumer Bankruptcy Attorney's – Case Update and Amicus

Riverside Bankruptcy Court's Sua Sponte Dismissal Reversed

The District Court for the Central District of California reversed Bankruptcy Judge Johnson's dismissal of the debtors' chapter 13 case, a dismissal that occurred after debtors filed a notice of conversion to chapter 7. Taylor v. Danielson (In re Taylor), No. 11-1879 (C.D. Cal April 13, 2012). The court distinguished Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) where the Supreme Court found that a debtor does not have an absolute right to convert a case from chapter 7 to chapter 13 under section 706(a). In Marrama, the Court reasoned, in part, that conversion from chapter 7 to chapter 13 could result in a debtor either escaping the consequences of bad faith by voluntarily dismissing under chapter 13, or benefiting from the conversion despite bad faith by gaining access to estate assets to the detriment of creditors.

Conversions from chapter 13 to chapter 7 are distinguished by the fact that upon such conversion the trustee has control over estate assets and the court retains jurisdiction over the debtor, so the concerns that were dispositive in Marrama are not present. Additionally, the Bankruptcy Rules treat conversions from chapter 7 to chapter 13 differently than conversion from chapter 13 to chapter 7. Rule 1017(f)(2) contemplates judicial scrutiny over conversions from chapter 7 to chapter 13, while, in contrast, Rule 1017(f)(3) provides that a "chapter 13 case shall be converted without court order when the debtor files a notice of conversion under . . . [§] 1307(a)." NCBRC's Tara Twomey assisted in the writing of debtor's brief.

Bankruptcy-Only Exemptions Constitutional

In a comprehensive opinion, Judge Karlin of the Bankruptcy Court of Kansas, overruled the trustee's objection to debtor's claimed exemption for earned income tax credits under a state bankruptcy-only exemption scheme. In re Westby, No. 11-40986, 2012 Bankr. LEXIS 1428, (Bankr. Kan. April 4, 2012).The court found that the exemption scheme violated neither the Uniformity nor Supremacy Clause of the U.S. Constitution.

Discussing a long line of Supreme Court cases, the court concluded that the Uniformity Clause is a constraint on congressional power and does not impose any requirement of uniformity with respect to state laws. The court further found that the uniformity requirement is met when a law applies equally to defined classes of debtors such as bankruptcy debtors.

With respect to the claimed violation of the Supremacy Clause, the court found that, where Congress had explicitly given states the power to apply their own exemptions in bankruptcy, there could be no field preemption and the exemption at issue did not conflict with either of the primary bankruptcy goals: providing debtor a fresh start, and optimizing return to creditors, and that its effect on creditors was true of all exemptions. It further noted that where Congress allowed states to choose between federal and state exemptions, the fact that a creditor may receive a different return from a debtor outside bankruptcy than from a debtor in bankruptcy, was irrelevant.

NACBA filed an amicus brief in the companion case of In re Rolin, No. 11-40950 (objection to exemption withdrawn) was considered by the court in this case.

NACBA Files Amicus on Issue of Social Security Benefits in Chapter 13 Plan

NACBA has filed an amicus brief on the issue of whether debtor's social security income may be considered by the court when addressing whether debtor's chapter 13 plan is proposed in good faith and is confirmable over the trustee's objection. Beaulieu v. Ragos (In re Ragos), No. 11-31046 (5th Cir.).

In its brief, NACBA argues that Congress has clearly removed social security income from the reach of creditors both under section 407 of the Social Security Act as well as the Bankruptcy Code. Section 101(10A) of the Bankruptcy Code defines current monthly income as: "[T]he average monthly income from all sources that the debtor receives . . . but excludes benefits received under the Social Security Act." Unlike property that enters the estate and then is removed through the mechanism of exemption, under the clear statutory language, social security benefits are excluded from the estate altogether and may not be considered for any purpose. Likewise, section 1325(b)(2), which requires that debtor apply all of his projected disposable income to the repayment of unsecured creditors, defines disposable income with reference to current monthly income which, in turn, excludes social security benefits. Contrary to the trustee's argument, the decision in Hamilton v. Lanning, 506 U.S. ___, 130 S.Ct. 2464 (2010), which addressed how to interpret the application of "projected," does not alter the underlying definition of "disposable income." Finally, NACBA's brief argues that because debtors have no obligation to contribute social security benefits to their plans, those benefits may not be considered by the court when conducting a "good faith" analysis under section 1325(a)(3).

Geoff Walsh of the National Consumer Law Center authored NACBA's brief.

Argued:

In re Maharaj, No. 11-1747 (4th Cir.)

Issue: Whether the absolute priority rule applies to individual debtors in chapter 11.

Argued: March 22, 2012

NACBA filed an amicus brief in this case and participated in the argument.

Oral argument scheduled:

Dehart v. Michael (In re Michael), No. 11-1992 (3d Cir.)

Issue: Whether section 1302(b)(1) places obligation on trustee to distribute funds collected prior to conversion to chapter 7 or whether section 348(e) divests trustee of that responsibility

Date of argument: May 9,, 2012

NACBA filed an amicus brief and will participate in argument.

In re Fisette, No. 11-3119 (8th Cir.)

Issue: Whether, under Nobelman, debtor may strip wholly unsecured lien in chapter 13 plan

Date of argument: May 15, 2012

NCBRC assisted in writing debtor's brief.

Warren Sapp Bankruptcy

Robert Kovacs — Mon, 16 Apr 2012 04:32:00 GMT

Warren Sapp Bankruptcy

Warren Sapp, the hard hitting defensive lineman and now sports commentator, has filed for bankruptcy. Sapp had commented that some poor real estate investments lead to the filing.

Sapp has also noted that he has lost both his super bowl ring and his college championship ring. These items have not been stolen or sold simply lost.

Direct Air Bankruptcy - Case Update

Robert Kovacs — Wed, 11 Apr 2012 18:14:00 GMT

Direct Air Bankruptcy – Case Update

Today, April 11, 2012, the bankruptcy court order Direct Air's chapter 11 bankruptcy converted to one under chapter 7.

In chapter 7 a case trustee will be appointed and will be responsible for collecting all assets of Direct Air, liquidating the assets to cash and to the extent possible paying back valid claims of creditors with said cash.

This decision by the court will effectively end Direct Air's operation.

Bankruptcy Can Stop Foreclosure Instantly

Robert Kovacs — Sun, 01 Apr 2012 23:10:00 GMT

Bankruptcy Can Stop Foreclosure Instantly

Filing bankruptcy will instantly stop foreclosure on your home. With limited exception, when you file bankruptcy the automatic stay under section 362 of the bankruptcy code is put in place. The automatic stay acts to stop or stay most collection actions including foreclosure.

The stay is instant so even if your foreclosure is a few hours away, there is likely still time to act.

Recent Bankruptcy Cases from the National Association of Consumer Bankruptcy Attorneys

Robert Kovacs — Sun, 01 Apr 2012 00:15:00 GMT

Recent Bankruptcy Cases from the National Association of Consumer Bankruptcy Attorneys

Debtors have been the beneficiaries of some significant appellate decisions in recent weeks, with NACBA and NCBRC (National Consumer Bankruptcy Rights Center) involved in many of the cases.

Two Appellate Courts Find that Debtor May Exempt Inherited IRA

The Fifth Circuit held that a debtor may exempt an inherited IRA from the bankruptcy estate under section 522(d)(12). In re Chilton, No. 11-40377 (March 12, 2012) (affirming the decision of the U.S. District Court for the Eastern District of Texas). The court based its decision on the findings that the plain language of the Code requires only that the funds be "set apart" for retirement and does not require that the funds be contributed by the debtor, and that the definition of IRAs set forth in section 408(d)(3)(C)(2) of the Tax Code encompasses inherited IRAs. Under section 408(e), inherited IRAs enjoy the same tax exempt status as those funded by the debtor's own contributions as required for exemption under section 522(d)(12).

NACBA filed an amicus brief in support of debtors' position in this case.

Following similar reasoning, the Bankruptcy Appellate Panel for the Ninth Circuit reached the same decision in the case of In re Hamlin, No. 11-1083 (B.A.P. 9th Cir. February 21, 2012).

NACBA filed an amicus brief in support of debtors' position in this case as well.

Win for Debtors on Absolute Priority Rule in Chapter 11

In a thoughtful and comprehensive opinion, the BAP for the Ninth Circuit held that the absolute priority rule does not apply to individual debtors filing chapter 11 bankruptcy. In re Friedman, Nos. 11-1149, 11-1105 (B.A.P. 9th Cir. March 19, 2012). Relying on rules of statutory interpretation the court found that section 1129(b)(2)(B)(ii) explicitly creates an exception to the absolute priority rule where a debtor is permitted to retain property included in the estate pursuant to section 1115. Section 1115 provides that property of the estate "includes, in addition to the property specified in section 541 . . ." property or earnings acquired after commencement of the case. Examining the language of both provisions within the overall context of the entire statutory scheme, the court found that there was no clear legislative directive requiring application of the absolute priority rule to individual debtors. Next, it found that the underlying context of the individual chapter 11 statutory construct, which is reflective of many chapter 13 provisions designed to encourage reorganization rather than liquidation, favors non-application of that rule.

Judge Jury filed a dissenting opinion finding that the language of the statute is ambiguous. While agreeing that section 1115 carves out certain property as not subject to the absolute priority rule, the dissent focused on the meaning of the word "included" in section 1115 to determine the extent of that carve out. Judge Jury agreed with the "narrow view" that section 1115 is intended only to supplement section 541 by adding post-petition earnings to the estate property, in which case, only those post-petition assets are released from the absolute priority rule.

NACBA was represented by Daniel Press at oral argument in the Friedman case and he had the opportunity to argue the issue on NACBA's behalf again on March 22, 2012, before the Fourth Circuit Court of Appeals in the case of In re Maharaj, No. 11-1747.

Fee-Only Plans Not Per Se Bad Faith

Making specific reference to NACBA's "helpful" amicus brief, the First Circuit Court of Appeals found that fee-only chapter 13 plans are not per se bad faith under section 1325(a)(3). In re Puffer, No. 11-1831 (1st Cir. March 22, 2012). Debtor's chapter 13 plan proposed to pay $2,900 to his counsel, $300 to general unsecured creditors and $400 as trustee fees. The bankruptcy court declined to confirm the plan on the basis that it was per se bad faith to file a plan in which debtor's bankruptcy counsel was essentially the only beneficiary. In reversing, the First Circuit borrowed the totality of the circumstances analysis from section 706(a), placing the burden on the debtor to establish that the facts are such that the chapter 13 plan is in good faith.

Though the decision is a win for debtors it is important to be cognizant of its limitations. Warning that fee-only plans have the superficial appearance of abuse by debtor's counsel, the court noted that there may be "relatively rare" circumstances in which such plan may be proposed in good faith. In addressing the issue of good faith, a bankruptcy court may consider such factors as whether the debtor could have filed a pro se chapter 7 case or whether the debtor could have waited to file until he had the money to pay his attorney fees up front. The debtor carries a "heavy burden" of showing that the plan is in proposed in good faith.

Although the court did not list specific circumstances that would establish good faith, when considering a fee-only plan instead of a chapter 7 petition, debtor's counsel may want to look at such factors as imminent harm facing a debtor who does not have the funds to pay attorney's fees up front for a chapter 7 case, as in the case of a utility shutoff, the threat of foreclosure or car repossession, the inability to obtain a chapter 7 discharge due to a prior discharge, or the presence of a debt that would be discharged in chapter 7, but not chapter 13.

Retired Supreme Court Justice Souter was a member of the panel deciding this case.
Tara Twomey authored NACBA's amicus brief.

NACBA Amicus Brief on Issue of Applicable Commitment Period

NACBA has filed an amicus brief in the case of American Express Centurion Bank v. Henderson, No. 11-35864 (9th Cir.), arguing that a chapter 13 plan for an above-median debtor with negative disposable income need not extend for 60 months under the plain language of section 1325(b)(4) because there is no "projected disposable income." The brief seeks to have the court follow its earlier decision in Maney v. Kagenveama, 541 F.3d 868 (9th Cir. 2008), in which the court found that the commitment period set forth in section 1325(b)(4) did not apply where there was negative or zero disposable income. The creditor, and the trustee in the separate but connected case of McCallister v. Henderson, No. 11-35865, argued that the recent Supreme Court holdings in Hamilton v. Lanning, 506 U.S. __, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010), and Ransom v. FIA Card Services, N.A., 131 S. Ct. 716, 178 L.Ed 2d 603 (2011), overruled the decision in Kagenveama. As neither of those Supreme Court opinions addressed the issue of applicable commitment period, NACBA argued that they did not overrule Kagenveama and the the doctrine of stare decisis supports the continued viability of that precedent. NACBA's brief also argued that, to the extent Lanning is relevant, it supports the Kagenveama holding. This case will be argued before the same panel as the case ofDanielson v. Flores (In re Flores), 11-55452 (9th Cir.). NACBA's amicus brief was written by Raymond DiGuiseppe.

Exemption May Not Be Claimed as 100% FMV

Although NACBA has enjoyed some successes in recent appeals, not all decisions have been favorable. The Bankruptcy Appellate Panel for the First Circuit found that a debtor may not claim an exemption in property in the amount of 100% of the fair market value. In re Massey, No. 11-60 (B.A.P. 1st Cir., Feb. 27, 2012). In its amicus brief, NACBA argued that under section 522(d)(1) and (2) a debtor is permitted to exempt his aggregate "interest" in certain property up to a specified amount. Listing the exemption as 100% of the FMV alerts the trustee to the fact that the debtor intends to exempt the asset to extent of its actual value or the statutory cap, whichever is lower. Based upon the description in the petition of the interest sought to be exempted, in this case 1/3 of the value of real estate, the trustee has sufficient information to determine the efficacy of objecting to the exemption. In rejecting this argument, the court mischaracterized the issue as whether a debtor was permitted to exempt an asset "in kind," thereby entitling the debtor to the actual asset regardless of whether its value exceeds the statutory limit. This is not the purpose of the 100% FMV exemption, however, and the Massey decision simply ignores the unequivocal statement by the Supreme Court that an exemption may be claimed in the amount of 100% of the FMV. Schwab v. Reilly, 560 U.S. __,130 S.Ct. 2668 (2010).

Arguments scheduled:

Danielson v. Flores, No. 11-55452 (9th Cir.): Whether an above-median debtor with negative disposable income must have a plan that extends for sixty months. NACBA assisted with debtor's brief. The argument is scheduled for May 11, 2012.

In re Schafer, No. 11-1340 (6th Cir.): Constitutionality of bankruptcy-only exemptions. NACBA filed an amicus brief. The argument is scheduled for June 1, 2012.

Tax Masters -- $195 Million fraud judgment

Robert Kovacs — Sat, 31 Mar 2012 17:55:00 GMT

Tax Masters -- $195 Million fraud judgment

Tax Masters, whom many people recognize because of their large national ad campaign, has been found to have committed fraud on their clients by a Texas jury. They were fined $195 Million, most of which will be used to refund money to their clients.

Tax Masters seems to have very similar problems as the Tax Lady, Roni Deutch. Both of which promised to help people over come tax problems through the IRS's offer in compromise program. However, this program is limited to those individuals who truly cannot afford to pay and both Deutch and Tax Masters advertised heavily that these programs were available to many people.

As with any service company, I have always and continue to advise that you use a local reputable provider. I do not see a problem with communicating with your lawyer, accountant, or other service provider, mostly through e-mail and phone. But if the need arises it is important that you are able to meet in person.

Tax Masters -- $195 Million fraud judgment

Robert Kovacs — Sat, 31 Mar 2012 17:55:00 GMT

Tax Masters -- $195 Million fraud judgment

Bankruptcy Hand Out - Your Rights During Bankruptcy - from NCLC

Robert Kovacs — Sun, 25 Mar 2012 17:43:00 GMT

Bankruptcy Hand Out – Your Rights During Bankruptcy – from NCLC

Please click below to read the National Consumer Law Center's article Your Rights During Bankruptcy.

Your Rights During Bankruptcy

Bankruptcy Hand Out - Using Credit Wisely After Bankruptcy - from NCLC

Robert Kovacs — Sun, 25 Mar 2012 17:41:00 GMT

Bankruptcy Hand Out – Using Credit Wisely After Bankruptcy – from NCLC

Please click below to read the National Consumer Law Center's article entitled Using Credit Wisely After Bankruptcy.

Using Credit Wisely After Bankruptcy

Bankruptcy Hand Out - Common Bankruptcy Questions - from NCLC

Robert Kovacs — Sun, 25 Mar 2012 17:37:00 GMT

Bankruptcy Hand Out – Common Bankruptcy Questions – from NCLC

Please click below to read the National Consumer Law Center's article entitled Common Bankruptcy Questions.

Common Bankruptcy Questions

Direct Air - Bankruptcy - Case Update

Robert Kovacs — Fri, 23 Mar 2012 15:10:00 GMT

Direct Air – Bankruptcy – Case Update

Today, March 23, 2012, the United States Trustee ("UST"), filed a Motion seeking conversation of the case to one under Chapter 7 or appointment of a trustee.

The UST in its motion expressed concern that Direct Air will not be able to operate and generate revenue. The airline has stopped all flights and its ability to run fly again is in question.

If the case is converted to one under chapter 7, all the assets of Direct Air will be sold and the money then used to pay its debts.

If a trustee is appointed a third party will be appointed to administer the assets of Direct Air as they attempt to reorganize.

TODAY: Senate Judiciary Subcommittee Hearing on Student Loans

Robert Kovacs — Tue, 20 Mar 2012 13:51:00 GMT

Dear NACBA Member,

This morning at 10 a.m. EDT, the Senate Judiciary Subcommittee on Administrative Oversight and the Courts will hold a hearing on “The Looming Student Debt Crisis: Providing Fairness for Struggling Students.” Senator Richard Durbin (D, IL), lead sponsor of S. 1102 , the “Fairness for Struggling Students Act of 2011,” which would restore bankruptcy protection for private student loans, will chair the hearing. It was the release of NACBA’s survey and report last month that spurred Senate Durbin to hold this hearing and to return his attention to this issue.

Witnesses will include the Attorneys General of Kentucky and Illinois, a student loan borrower, Deanne Loonin with the National Consumer Law Center, a Stanford law professor and a representative of a Washington think tank.

To watch the hearing in real time or to view an archived version of it at a later date, go to:
http://www.judiciary.senate.gov/hearings/hearing.cfm?id=eb997a7c3376c76b36a041cf2a10ca10

Maureen Thompson
NACBA Legislative Director

This e-mail was sent from National Association Of Consumer Bankruptcy Attorneys (LegDirector.MaureenThompson@nacba.org) to robert@rkovacslaw.com.