Case Update -- Amicus from NACBA

From the National Association of Consumer Bankruptcy Lawyers.

Fourth Circuit Opens Door to Class Proofs of Claim

The Fourth Circuit recently found that class proofs of claim are permissible subject to certification under Bankruptcy Rule 7023 (incorporating Civil Rule 23) and Rule 9014. Gentry v. Seigel, No. 10-2418 (4th Cir. Feb. 2, 2012). NACBA and NACA filed an amicus brief seeking reversal of the bankruptcy court's decision that the bankruptcy claims process is always superior to class proofs of claim. The Fourth Circuit agreed with NACBA's position. It held that certification of a creditor class is fact specific issue to be determined on a case-by-case basis. The court further held that a motion for class certification need not be filed before the expiration of the claims bar date. While the court ultimately affirmed the denial of class certification, it made clear that its decision was based on the specific facts of the case rather than on a bright line rule disfavoring class proofs of claim.

Appeal of Sua Sponte Dismissal after Conversion

Debtors, Lavarro and Teresa Taylor, appeal the dismissal by Bankruptcy Judge Johnson of their chapter 13 petition after they filed a notice of conversion to chapter 7. In re Taylor, No. 11-1879 (C.D. Cal.). Prior to the confirmation hearing for the Taylors' chapter 13 case, the debtors realized that they could not maintain their payments on their mortgage and they decided to convert to chapter 7 pursuant to section 1307 and Bankruptcy Rule 1017(f)(3), thereby allowing the bank to foreclose. At the previously scheduled confirmation hearing, the judge ignored the debtors' conversion and sua sponte dismissed the chapter 13 case. Debtors argue that there is an absolute right to convert to chapter 7 and that such conversion is effective upon the filing of notice. NACBA assisted in writing the debtors' brief on appeal.


In re Chilton, No. 11-40377 (5th Cir.)

Issue: Whether debtor may claim exemption for inherited IRA under 522(d)(12)

Argued February 8, 2012

NACBA filed an amicus brief in this case.

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

Issue: Whether the absolute priority rule has been abrogated in individual chapter 11 cases.

Scheduled for argument: March 22, 2012

NACBA filed an amicus brief in this case.