September 13, 2015
by Diane Drain
The following is for the exclusive use of attorneys. This firm does not make any representations as to the accuracy or current status of any case cited herein.
This Motion is filed on an Ex Parte basis in that JPMorgan Chase Bank, N.A. (the “Defendant”) never filed a response to the Summons and Complaint or an appearance in the adversary matter. The request for relief herein is ministerial in nature Cusano v. Klein, 264 F.3d 936, 948 (9th Cir.2001) (“The mere reopening of a bankruptcy case is a ministerial act that ‘lacks independent legal significance and determines nothing with respect to the merits of the case.”) (citation omitted). Cause exists to file this motion on an ex parte basis and to grant the relief requested by the Plaintiffs herein. The Debtors’ motion is as follows:
Also, check out section 350 of the Code.
A Chapter 7 bankruptcy is a tool to help individuals start over. Some of the information in this article is specific to cases filed in Arizona, but the majority is bankruptcy law and applies to all Chapter 7 bankruptcy. This basic information should assist you in understanding how bankruptcy works, but please understand that the information on this website is not all you need to know to file Chapter 7 bankruptcy. Video explaining chapter 7 basics.
Chapter 7 bankruptcy is designed to give an individual a “fresh start”. This includes eliminating or discharging all your unsecured debts after you have liquidated and paid to your creditors all of your non-exempt assets. Certain unsecured debts cannot be discharged in Chapter 7. Chapter 7 bankruptcy has no effect on secured debts. That means if you want to keep your home or car, and there are debts owing on that home or car, you need to keep the payments current.
A permanent resident of Arizona can file bankruptcy in the Arizona bankruptcy court. But, you must have lived in Arizona for at least half of the last 180 days (6 months) in order to file in Arizona.
An important concept in both Chapter 7 and Chapter 13 bankruptcy is “exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Chapter 7 Trustee takes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors. The Trustee cannot take your exempt property and you may keep all of your exempt property regardless of its value and amount. What property is “exempt” and what property is “non-exempt” depends on the exemption laws of the applicable state. Each state has its own exemptions for bankruptcy purposes. For a link to Arizona exemptions go to the primary menu, Bankruptcy, Arizona Exemptions. There is a download PDF of the exemptions. Only Arizona residents are able to use Arizona exemptions (YouTube video).
Just because you are an Arizona resident when you file for bankruptcy does not mean you are entitled to Arizona exemptions in bankruptcy. Therefore, before you file bankruptcy you and your bankruptcy attorney must determine which state laws will determine your exempt assets. The state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately prior to filing your bankruptcy. If you have not been a resident of Arizona for the two-year period before filing your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you lived for 180 (6 months) days immediately before the two year period, or the state in which you lived for the longer portion of that 180-day period. Confused yet? I recommend making a diagram of where you lived and when.
For example: a person filing bankruptcy in Arizona today may use the Arizona property exemptions if he or she lived in Arizona for more than two years. But, if that person did not live in Arizona for two full years, then that person will need to look to the exemptions of the state where he or she lived in that last two years. It is possible that the exemptions of the prior state are limited to residents only. Therefore, the person filing for bankruptcy will need to use federal exemptions. In many cases, the state where the person moved from will provide better bankruptcy exemptions than Arizona law.
Consider John. John sells his residence in Georgia for $100,000 and moves to Arizona in January. In March of that year John purchases an Arizona homestead for $100,000; he gets an Arizona drivers license and registers to vote in Arizona. Then, 14 months after moving to Arizona, John loses his job and files bankruptcy. Under the bankruptcy law, Georgia’s relatively limited exemption laws would apply to John’s bankruptcy, and John would not have the benefit of Arizona $150,000 homestead protection.
The means test is a formula established by Congress to determine who may be eligible to file Chapter 7 bankruptcy. People under their state’s median income and people whose debts are primarily not consumer debts are exempt from means test qualification. This means if 51% or greater of the debts are related to business obligations then the potential debtor does not need to worry about the means test.
In the bankruptcy documents you list secured debts separately from unsecured debts. Unsecured debts include personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, and other credit cards used to purchase consumable items. Vehicle leases, medical bills, and personal loans are also unsecured debts. Secured debts include those debts where the creditor has a security interest in your property to guarantee payment. Examples of secured debts include mortgages, car loans, loans from finance companies (usually secured by household items), furniture, computers or electronics. If you purchased goods at a store using a store credit card, such as a card from Home Depot, Best Buy, etc., the store probably has a security interest in certain items purchased, which makes the store a secured creditor.
After filing a Chapter 7 bankruptcy, you will have to choose to either reaffirm or redeem secured debts or surrender the secured items to the creditor. You are entitled to keep any secured property as long as you continue to pay the loan for that property in a timely manner. If, however, you elect to surrender secured property, the secured creditor may not sue you for and try to collect any money from you. Some mortgage companies recently have required borrowers to sign cross-collateralizated agreements. This means that the borrower agreed to allow their bank or savings union to seize their bank accounts in order to pay delinquent payments for the vehicle. If you are unsure whether you signed this type of documents, you should review the papers you signed when you purchased your vehicle and/or when you opened your account. You may want to move your money to a new bank before defaulting on a vehicle loan. Do not bank at Wells Fargo — they will freeze your account even if you did not sign a cross-collateralized agreement.
Your bankruptcy estate refers to your non-exempt assets that are subject to administration by the bankruptcy trustee. Exempt assets, such as your homestead and IRA, are not part of your bankruptcy estate.
The creditor (or you) must file a reaffirmation agreement for all secured personal property you want to retain within 60 days of the first scheduled meeting with the trustee (the meeting of creditors or 341 meeting). If you do not sign the reaffirmation agreement or redeem the property within 60 days, the automatic stay is lifted as to that property and the creditor is permitted to take all legal action allowable under the law to repossess the property. Signing a reaffirmation agreement means that you will be personally liable to pay the debts after your bankruptcy is over.
Your attorney may choose whether or not to sign your reaffirmation agreement. Issues such as negative disposable income, no concessions by the creditor as to principal or interest or the attorney believes there is a presumption of undue hardship. If your attorney does not “approve” reaffirmation, you must prepare and sign a Reaffirmation Agreement Explanation explaining why you now have the financial ability to pay a reaffirmed debt. The bankruptcy judge will review your explanation and either deny or approve the reaffirmation. The bankruptcy judge will deny reaffirmation if he believes that reaffirmation is not in your best interest for a “fresh start.”
If the reaffirmation is denied you still may be able to keep your property if payments are current, or you could request a hearing with the judge. If the court refuses to approve your reaffirmation many creditors will let you keep your property if maintain current payments. (A creditor usually will not provide a reaffirmation agreement if you are delinquent in your payments.)
The bankruptcy stay is the bankruptcy tool that stops creditors from contacting you in any way after you file bankruptcy. This could be a problem because the lender o your home or car may stop sending monthly statements. It is your responsibility to make sure you pay these debts on time, otherwise the lender may ask the court for permission to take your home or vehicle.
An executory contract is a legal term referring to an agreement between parties and an obligation due by at least one of the parties (such as a car lease or a residential lease). The most common example is a lease agreement for a car or a residence.
Chapter 7 bankruptcy permits the debtor, or the trustee, to assume or reject an executory contract. A debtor has to decide what to do about an executory contract before the court issues a bankruptcy discharge which usually happens about 90 days after filing.
An example of an executory contract is a vehicle lease. If the debtor does not want to keep the leased vehicle then he can surrender the vehicle to the leasing company and has no further liability. If the debtor wants to keep the vehicle then will need to assume the lease and keep the payments current. The debtor and creditor must sign the lease assumption, but it is not necessary for the judge to approve the lease assumption. If the debtor cannot make the lease payments the leasing company can repossess the car, but cannot sue the debtor for any deficiency.
A debtor’s tool in bankruptcy is to “redeem” secured personal property such as furniture, computers, automobiles, or other property purchased on credit. To redeem means to purchase the property from the secured lender at its current fair market value considering its age and condition. If the property is worth less than the secured debt then this may be a good option. The problem is that most redemptions require payment in full at the time the redemption is accepted or approved by the court..
Start with the understanding that student loans will not be discharged in a bankruptcy. But, there are always exceptions to every rule. In some circumstances student loans can be dischargeable if you can show that your loan payments impose “undue hardship.” This issue must be filed as a separate action within the bankruptcy. This separate action is called a adversary. You must appear before the bankruptcy judge with proof of your hardship. Most likely this will be hotly litigated by the student loan creditor. It is wise not to assume you will be one of the very few who receive a partial or full discharge for their student loan. Each bankruptcy judge, in each bankruptcy district, in each federal court has a different opinion what is an “undue hardship”.
Make certain you provide your attorney information about all liabilities, no matter how remote. List any claim that anyone might have against you even if you are certain that claim will never arise. If you are a co-debtor on a note, have personally guaranteed any debt, or are liable on any mortgage, the debt should be listed and explained in the bankruptcy. You also must list debts you dispute. This includes any past obligations to any mortgage companies for a foreclosed home or even a short sale, make sure to include any mortgage insurance company (such as a VA loan). You should also include any obligations that someone promised to pay for you, such as selling your home to someone who promised to pay you, but the sale was done without paying off the entire debt.
The discharge is the legal process that eliminates most of your legal liability to your creditors. Creditors who have been discharged in bankruptcy can never again try to collect debts that you incurred prior to filing bankruptcy. There are certain debts that remain even after the discharge is entered. These debts include child support, alimony, student loans, most taxes, and several other obligations. A good bankruptcy attorney can guide you as to what debts are discharged and what are not. Video explaining the discharge.
By Jon Alper, as edited by Diane L. Drain
The following is for the exclusive use of attorneys. This firm does not make any representations as to the accuracy or current status of any case cited herein.
In re Costas, 06-16520, 555 F.3d 790 (2009) (BAP 9th Cir. 2008) Costas inherited $34,800, but refused to accept it and, on November 7, 2002, executed a disclaimer under Arizona law to relinquish her claims to the Trust property.
December 3, 2002, Costas filed a Chapter 7. Maureen Gaughan, trustee, sought to avoid Costas’ disclaimer of the Trust property under 11 U.S.C. § 548 as a fraudulent conveyance within a two year pre-petition. The question in this case is whether an Arizona disclaimer qualifies as a “transfer … of an interest of the debtor in property.” BAP decided “not a transfer”Arizona’s relation-back rule says that a disclaimant neither transfers nor possesses an interest in disclaimed property and thus creditors cannot reach the disclaimed interest. We hold that a disclaimer, properly executed under Arizona law, is not a “transfer … of an interest of the debtor in property” for purposes of § 548.
Homeowner Association Receive Special Treatment in Bankruptcy
Homeowner Associations received special treatment in bankruptcy, based on both federal law and Arizona statutes. First, there is contract law – read your Conditions, Covenants and Restrictions “CC&R’S” to determine your liability. Most likely you are personally liable for the dues/assessments and the dues/assessments are liens on your property.
Here is an example: You live in a condo in Phoenix. You pay $300 a month for HOA dues/assessments. Unfortunately, you are behind in your payments for the last 3 months. This means you owed $900, plus interest and fines (as provided by the CC&RS). You just received notice that the HOA has assessed a $1,500 special assessment for the repairs to the common area; to be paid in three installments of $500 each over the next 6 months. The first payment is due immediately.
Let’s start the discussion with the premise that you want to keep the condo. Therefore, you need to make arrangements to pay the debt, including the fines provided by the CC&R’s. But, your neighbor just told you that you could file bankruptcy and eliminate those dues. This is partially true, but there are several twists and turns. Filing bankruptcy be a solution to your problem, but only a chapter 13. That type of bankruptcy will allow you to pay the HOA arrears over time, while you continue to pay all new dues/assessments current as they come due.
What your neighbor did not understand is that Arizona statutes provide that an automatic lien exists for any unpaid dues/assessments. So even if the dues/assessment was due and payable before the date the bankruptcy was filed, the lien would still attach to the condo. Thus, your personal obligation may be discharged, but there will still be a lien on the condo. The lien only lasts for 3 years, but the HOA can foreclose on the lien at any point prior. So, if you want to keep the condo you have to pay the assessment, or risk a foreclosure.
Now we change the premise that you do not wish to keep the condo. Depending on the CC&R’s both your and your property are “liable” for the debts so long as you own the condo. If you file a bankruptcy, the assessments, fines and interest that accrued before the filing of the bankruptcy will be discharged (the HOA cannot pursue you personally, but can foreclose on the condo). The problem is you still own the condo until the lender completes the foreclosure. So if you file for bankruptcy before the foreclosure is completed then under the bankruptcy law (11 U.S.C. 523(a)(16)) you are responsible for the new dues/assessments that arise after the date your bankruptcy was filed. Therefore, it is best to file your bankruptcy after the foreclosure is complete and the condo is no longer in your name.
Back to the fact pattern above: if you intend on surrendering the condo, the first part of the special assessment will be discharged in your bankruptcy. But all the new dues/assessments, including the the next two installments of the special assessment, are still your responsibility. If you did not pay this before the foreclosure completes and legal title transfers, the HOA can sue you, and collect on any judgment obtained. It is best to talk to a good bankruptcy attorney with expertise in real estate matters. Not many bankruptcy attorneys also have real estate experience. Diane Drain does – she has taught both areas of law since 1990. Feel free to call our office if you would like help.
HICKS v. E. T. LEGG & ASSOCIATES (05/25/01 – No. D034398) Civil Code 2924c(e), and 2924g(d) do not prohibit the postponement of a foreclosure sale for successive periods of five of fewer business days during the period a sale is on hold because of an injunction or bankruptcy stay.
Bankruptcy of Wytch, USBAP 9th, Nos. 97-1089 and 79-1145, 7/1/98: 11 U.S.C. Section 349(b) does reinstate a debtor’s prepetition property rights by invalidating specified bankruptcy court orders, Section 349(b) does not vacate orders for relief from the automatic stay under 11 U.S.C. Section 362(d). real property sold 2 hours after BK filed (chapter 7) property purchased by TP with no knowledge of BK, LR brought action to annul stay, no objection , relief granted. Case inadvertently dismissed, then reinstated, DR’s argued that set aside earlier Order lifting stay – BK Court and BAP did not agree – Order lifting stay stands.
In re SNTL Corp., 571 F.3d 826, Bankr. L. Rep. ¶ 81,515 (9th Cir., June 23, 2009), pages 154, 183 (case no. 08-60001) The Ninth Circuit Court of Appeals, in a unanimous panel decision, affirmed, and adopted as its own, In re SNTL Corp., 380 B.R. 204 (9th Cir. B.A.P. 2007), holding that an unsecured creditor may include, as part of its claim, attorney’s fees incurred postpetition but based on a prepetition contract. The opinion reasoned that (1) Code § 506(b), permitting an oversecured creditor to recover postpetition attorney’s fees, speaks only to the secured status of a claim, and not to its allowability; (2) the claim for attorney’s fees exists on the petition date, although it is contingent and unliquidated, as the “right to payment” exists on the petition date; thus, the claim is not disallowed under Code § 502(b)(1), requiring a bankruptcy court to “determine the amount of such claim … as of the date of the filing of the petition”; and (3) neither United Sav. Ass’n of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (1988) (holding that an undersecured creditor could not receive postpetition interest on the unsecured portion of its debt) nor public policy mandated disallowance of such a claim.
The following is for the exclusive use of attorneys. This firm does not make any representations as to the accuracy or current status of any case cited herein.
KC Appraisal Service (623-780-0189) and Sierra Auction (one of the auction houses that the trustees uses) (602- 242-7121).
Lender claiming purchase money secured interest in “negative equity” in vehicle traded during purchase of new vehicle. In re Penrod vs Americredit Financial, No. 08-60037 (9th Circuit Ct of Appeals) The bankruptcy court held that AmeriCredit did not have a purchase money security interest in the portion of the loan related to the negative equity charges. However, the bankruptcy court acknowledged that AmeriCredit had a purchase money security interest in the remaining balance. In doing so, the bankruptcy court adopted the dual status rule, which allows part of a loan to have non-purchase money status, while the remainder is covered by a purchase money security interest.2 BAP and 9th Cir upheld lower court’s decision. Disagreeing with the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Tenth and Eleventh Circuits, the Ninth Circuit concluded that held a creditor which financed the debtor’s automobile purchase did not have a purchase money security interest in the “negative equity” of the debtor’s trade-in. Payment of the remaining debt on the trade-in was not an “expense” or “other similar obligation,” within the definition of “purchase-money obligation.”
In re: Taylor, No. 08-60033 (U.S. 9th Circuit Court of Appeals, March 22, 2010) In debtors’ appeal from the bankruptcy court’s order avoiding a transfer of a security interest in an automobile to a bank, the order is reversed where the bankruptcy court’s determination of the value of the security interest was clearly erroneous, because there was no evidence to support the bankruptcy court’s finding that the value of the security interest equaled the amount of the original loan at the time the bank perfected its security interest.
B. The filing and issuance of a new certificate of title as provided in this article is constructive notice to creditors of the owner or to subsequent purchasers of all liens and encumbrances against the vehicle described in the certificate of title, except those that are authorized by law and that are dependent on possession. If the documents referred to in this article are received and filed in a registering office of the department within thirty business days after the date of their execution, the constructive notice dates from the time of execution. Otherwise, the notice dates from the time of receipt and filing of the documents by the department as shown by its endorsement.
C. The method provided in subsection B of this section for giving constructive notice of a lien or encumbrance on a vehicle required to be titled and registered under section 28-2153 or a mobile home required to be titled under section 28-2063 is exclusive, except for liens dependent on possession. A lien, encumbrance or title retention instrument or document that evidences any of them and that is filed as provided by this article is exempt from the provisions of law that otherwise require or relate to the recording or filing of instruments creating or evidencing title retention or other liens or encumbrances on vehicles of a type subject to registration under this chapter.
In re Roser, (C.A.10 (Colo.)) July 23, 2010: Avoidance – Trustee could not avoid, as hypothetical lien creditor, bank’s lien against debtor’s motor vehicle perfected postpetition. Pursuant to the bankruptcy statute making a trustee’s avoidance powers subject to any generally applicable law permitting the perfection of an interest in property to be effective against an entity acquiring rights in the property before the date of perfection, a Chapter 7 trustee could not avoid, as a hypothetical lien creditor under his strong-arm powers, the lien against a debtor’s motor vehicle held by a bank that had a purchase money security interest in the vehicle and filed its motor-vehicle lien within 20 days of the debtor obtaining the vehicle. Pursuant to Colorado’s version of the Uniform Commercial Code (UCC), the bank’s timely acts gave it priority over any interests in the vehicle that arose between the prepetition attachment of its security interest at the loan closing and its postpetition perfection of its lien, including the trustee’s hypothetical judgment lien that arose on the intervening petition date. In so holding, the Tenth Circuit Court of Appeals rejected an earlier decision in which a Bankruptcy Appellate Panel had ruled that the UCC provision did not apply to liens, such as that of the bank, that were perfected under the Colorado Certificate of Title Act (CCTA)
Ransom v. MBNA Am. Bank, N.A., 380 B.R. 799 (B.A.P. 9th Cir., 2007, No. 08-15066 US Supreme Court 09-907 1-11-11 (affirmed) U.S. 9th Cir Ct of Appeals, August 14, 2009. Considered the issue of ownership allowance vs operation expenses in the context of a Chapter 13 plan confirmation rather than dismissal under Section 707(b). In an appeal from the Bankruptcy Court’s refusal to approve Debtor’s Chapter 13 plan, the Bankruptcy Court’s order is affirmed, where an above-median income debtor seeking bankruptcy relief under Chapter 13 may not deduct from his projected disposable income a vehicle “ownership cost” for a vehicle he owns free and clear. The BAP held that in determining projected disposable income for purposes of Chapter 13 plan confirmation, a debtor is not able to deduct a vehicle ownership expense pursuant to § 707(b)(2)(A)(ii)(I) when a debtor owns the vehicle free and clear of any liens or encumbrances. (Although Ransom deals with the confirmation of a plan under Chapter 13, it is instructive in Chapter 7 cases because § 1325 uses the means test under § 707(b)(2)(A) to determine the debtor’s projected disposable income.) In re Sawicki, Debtor., WL No. 2-07-bk-3493-CGC. (Feb. 12, 2008) Judge Case followed Ransum, but did not like it. (Thorough discussion on BAP decisions and why judges should follow despite their differences.)
· In re Chamberlain, 369 B.R. 519 (Bkrtcy. Ariz. 2007). Judge Haines held that where the debtor owned a vehicle free and clear, the debtor nevertheless could claim an ownership expense deduction in calculating “the debtor’s projected disposable income” under §707 for purposes of a Chapter 13 plan.
· In re Garcia, 2007 WL 2692232 (Bkrtcy. Ariz. September 11, 2007). In contrast to Judge Haines’ ruling in In re Chamberlain discussed immediately above, Judge Marlar held that where the debtor owned a vehicle free and clear, the debtor may not claim an ownership expense deduction in calculating “the debtor’s projected disposable income” under §707 for purposes of a Chapter 13 plan.
A lease payment should be deducted as ownership expense on lines 23 and/or 24 of the means test and is not deducted as a secured debt. The lease payment is limited to standard deduction.“Tired Iron”: vehicles over six years old and/or more than 75,000 miles
Each of these cases were decided by a different Arizona bankruptcy judge.
Because we agree with the trustee that above-median-income debtors cannot claim the $200 older vehicle operating expense, we REVERSE and REMAND for further proceedings.
The official cite for this IRS deduction is found in the Internal Revenue Manual § 220.127.116.11.2 (09-01-2005).
In the last year was under the hanging paragraph A dump truck purchased less than one year prepetition was found to be covered by the hanging paragraph in In re Littlefield, 388 B.R. 1 (Bankr. D. Me. 2008). In that ruling, Judge Haines said “Reading the statute as I do means just this: Congress extended (910 days, as opposed to 1-year) anti-modification protection to creditors holding PMSIs in motor vehicles acquired for a debtor’s personal use. It did not target PMSIs in motor vehicles generally as a category of security that, but for the personal use proviso, would receive less anti-modification protection than all other things of value.”
3:13-bk-09233-RJH (AZ Bankruptcy court, January 14, 2014) In a Chapter 13 a creditor filed an objection to the debtor using the personal vehicle exemption on a vehicle used primarily for business purposes. The issue presented is whether the Debtors may exempt two vehicles, utilized primarily for business purposes in a sole proprietorship, using Arizona’s personal item exemptions provided in A.R.S. § 33-1125(8). As this specific question has not been addressed in Arizona case law, the Court took this matter under advisement. The Court holds that debtors in Arizona, doing business as sole proprietors, may not exempt vehicles used primarily for business using Arizona personal item exemptions, and instead must use Arizona’s tools of the trade exemptions.
In re Gibson, 234 B.R. 776, 3 Cal. Bankr. Ct.Rep. 88 (Bankr.N.D.Cal. Jun 03, 1999) in which the court held that “Pursuant to choice of law clause contained in loan and security agreement executed by Chapter 13 debtors, Illinois law, not California law, governed determination of whether agreement’s dragnet clause was enforceable; although debtors’ collateral presumably had always been in California, enforceability of dragnet clause was not an issue of perfection or the effect of perfection or non-perfection”, then held that the dragnet clause was too vague and unenforceable. The Court said that: “agreement consisted of one page, with text on two sides and, although debtors expressly agreed to items and conditions on both sides of document, front side of agreement contained all key terms of agreement other than dragnet clause in conspicuous, easy-to-read print, dragnet clause was buried in long, complex paragraph on reverse side of document, which was packed from margin to margin with a multitude of single- spaced provisions in minute, difficult-to-read type, parties were of unequal bargaining power, and nothing called debtors’ attention to substance of the dragnet clause in particular.”
Also look at In re Dumlao, Slip Copy, 2011 WL 45014029th Cir.BAP (Nev.),2011 and In re Zaochney, 2011 WL 6148727, *3+, 76 UCC Rep.Serv.2d 340+ (Bankr.D.Alaska Dec 12, 2011) – “I conclude that the dragnet clauses found in the debtor’s loan documents with Alaska USA are valid and enforceable. The debtor’s vehicle is valued at $12,950.00. Because Alaska USA is owed less than this, $11,097.87, on the vehicle loan, it wants to use the balance of the equity in the vehicle to secure roughly $1,852.13 of the outstanding balance on the debtor’s credit line. It may do so under the terms of the loan documents. The debtor’s motion to value security interest is granted, in part. Alaska USA’s secured claim is valued at $12,950.00.”
In re Quevedo, 345 B,R, 238 (Bankr.S.D.Cal. 2006). Decent case. Used background from Congressional proceedings, various changes as proposed to Sect. 1325 over the years, and Collier and Brown and Ahern comments.
In Re: Peaslee, No. 073962 U.S. 2nd Circuit Court of Appeals, October 20, 2008 In appeal from judgment reversing a Bankruptcy Court finding that negative equity on a trade-vehicle is included in the purchase money security accompanying a new car’s purchase and is therefore protected from cram down by the Hanging Paragraph of Section 1325 of the Bankruptcy code, the court here certifies the question of whether negative equity is included in a purchase money security interest under state’s interpretation of the Uniform Commercial code (UCC).
In re Rodriguez, 375 B.R. 535, 2007 WL 2701295 (9th Cir. BAP August 28, 2007). Reversing the Bankruptcy Court for the Western District of Washington, the BAP decided to follow the minority line of decisions and held that under the “hanging paragraph” following §1325(a)(9), a Chapter 13 debtor surrendering a motor vehicle acquired within 910 days of the petition date cannot thereby eliminate any remaining deficiency claim.
Capital One Auto Fin. v. Osborn, No. 07-1726 (8th Cir Ct App, 2/5/08) The hanging paragraph in 11 U.S.C. section 1325 does not eliminate an under-secured creditor’s deficiency claim when, in a Chapter 13 plan, debtors propose to surrender a car purchased within 910 days before filing for bankruptcy. The creditor is entitled to an unsecured deficiency claim if there is a right to a deficiency judgment under state law.
In re Brown, 346 B.R. 868 (Bkrtcy.N.D.Fla. 2006) Lewis M. Killian, Jr., Bankruptcy Judge: creditor holding PMSI not entitled to deficiency claim in chapter 13 where debtor surrenders vehicle in full satisfaction of debt § 1325(a)5) (hanging paragraph), § 506, 502.
Debtor proposed to surrender a motor vehicle subject to a PMSI and purchased for personal use within 910 days of filing the petition, in full satisfaction of the undersecured debt. Creditor objected.
The court first held that despite language in § 1325(a) (hanging paragraph) that Code § 506 does not apply to a PMSI debt, the debt is still a secured debt. The court ruled that “just because § 506 does not apply does not mean that there is no secured claim. Section 506(a) simply provides for the bifurcation of claims into secured and unsecured portions in accordance with the value of the collateral; it does not form the basis for a secured debt.” The court essentially held that § 502 is the section that determines the secured status of a claim.
The court then observed that “Secured creditors, like every other party to a bankruptcy case, have to take both the good and the bad,” held that . . . the Hanging Paragraph following § 1325(a)(9) allows the Debtor to surrender his vehicle, which is the subject of a 910 claim, in full satisfaction of the debt owed to Wells Fargo.”
10/08: The prevailing view is that BAPCPA eliminated the “fourth option” of staying current on collateral but not reaffirming. However, there are some recent decisions saying that while the automatic stay may terminate, there may be state law limitations on when a creditor may repossess the collateral. See In re Steinhaus, 349 B.R. 694 (Bankr. D. Idaho 2006) and In re Malachin, 2007 Pa. Dist. & Cnty. Dec. LEXIS 158 (October 2008), in which a state court refused a creditor’s efforts to repo a car post-bankruptcy when the debtor was current on payments. The case is a reminder that ride through may be a state law issue, not a bankruptcy issue.
· In re Dumont, 383 B.R. 481 (9th Cir. BAP 2007). In a decision authored by Judge Baum, the BAP joined all the other courts that have considered the issue in confirming that the former “ride-through” option for retaining collateral simply by continuing to make payments on the relevant debt was eliminated by BAPCPA’s changes to 11 U.S.C. §§362 and 521. The BAP also held that the bankruptcy court lacked jurisdiction to determine whether the creditor’s subsequent repossession of the debtor’s vehicle violated state law.
· In re Moustafi, 371 B.R. 434 (Bkrtcy. Ariz. 2007). In a case involving a pro-se Chapter 7 debtor, Judge Hollowell held that (a) a proposed reaffirmation agreement relating to a car loan where the debtor had no equity in the vehicle was not in the debtor’s best interest, and (b) despite §§362 and 521, because the debtor had made an effort to reaffirm (even though disapproved by the Bankruptcy Court), the car loan would “ride through” the bankruptcy and the debtor would be entitled to retain the vehicle so long as she met her obligations under the loan contract.
· In re Anderson, 2007 WL 1839699 (D. Ariz. June 26, 2007). An auto dealer that sold the debtor a vehicle submitted a title application to the Tempe MVD that was rejected because the debtor had an outstanding fine owed to ADOT. The dealer then re-submitted the application with funds sufficient to pay the fine. After the application was re-submitted, the debtor filed her Chapter 7 bankruptcy. Subsequent to the debtor’s bankruptcy filing — and more than 10 days after the debtor and the dealer had signed the security agreement — the application was granted. On these facts, the District Court affirmed the Bankruptcy Court’s grant of summary judgment in favor of the Chapter 7 trustee, determining that the dealer’s claim was unsecured because (a) the dealer did not obtain perfection until after the debtor had filed her bankruptcy, and (b) the post-petition granting of the application did not relate back.
Physically disabled, plus is motor home a motor vehicle: In re Sleeth, 300 B.R. 351, 30-00628-YUM-EWH Trustee had burden of proving that the debtors were not entitled to increased motor vehicle exemption (physically disabled). Court holds Trustee failed that burden.
Does the filing of bankruptcy stop the running of state statute of limitations?
In re: Brenda Marie Jones, No. 10-60000 In a bankruptcy dispute involving the discharge of taxes owed by debtor in a new chapter 7 case to the California Franchise Board, judgment of the bankruptcy court is affirmed where debtor’s prior Chapter 13 bankruptcy case had no effect on the look back period such that the period was not suspended and the tax debt discharged.
Shamus Holdings LLC v. LBM Financial, LLC, No. 10-2216 United States First Circuit, 06/09/2011 …11 U.S.C. § 362(a), which “gives debtors breathing room by stopping collection efforts in their tracks and permitting their resumption only when the stay is lifted by the bankruptcy court or dissolved by operation of law.” 229 Main St. Ltd. P’ship v. Mass. Dep’t of Envtl. Prot. (In re 229 Main St. Ltd. P’ship), 262 F.3d 1, 3 (1st Cir. 2001). The automatic stay prevents “the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor.” 11 U.S.C. § 362(a)(1).
Another statute within the Bankruptcy Code is implicated here. That statute, 11 U.S.C. § 108(c, is a tolling provision; it extends state statutes of limitations for creditors who are barred by the automatic stay from taking timely action against the debtor. See Young v. United States (In re Young), 233 F.3d 56, 59 n.3 (1st Cir. 2000). It provides in pertinent part:
Here, the bankruptcy occurred before the expiration of the limitations period and, at that time, LBM had the right to pursue judicial foreclosure. Id. § 1. Its ability to exercise that right was frustrated by the automatic stay. That stay prevented LBM, then and thereafter, from exercising its right to foreclose by commencement of a court action within the limitations period fixed by the Obsolete Mortgages Statute. See Perry v. Blum, 629 F.3d 1, 6 (1st Cir. 2010) (explaining that the automatic stay must be lifted to allow foreclosure to proceed).
The bottom line is that this case falls squarely within the maw of 11 U.S.C. § 108(c). That tolling provision preserves LBM’s option to commence a judicial foreclosure action until after the lifting of the automatic stay. See Spirtos v. Moreno (In re Spirtos), 221 F.3d 1079, 1080-81 (9th Cir. 2000); Morton v. Nat’l Bank of N.Y.C. (In re Morton), 866 F.2d 561, 565-66 (2d Cir. 1989); LBM Fin., LLC v. 201 Forest St., LLC (In re 201 Forest St., LLC), 422 B.R. 888, 895 (B.A.P. 1st Cir. 2010).
The 3-year period that ordinarily commences on the most recent date the tax return for the year in question is due, pursuant to 11 U.S.C. § 507(a)(8)(A)(i). The basic rule is, if the tax collection entity (state or federal) is prohibited from tax collection due to the existence of the automatic stay in a bankruptcy case that arose during, or overlapped, the running of the 3-year time, the time is tolled (or “suspended”) for the time in which the previous case’s automatic stay overlaps the 3-year period, plus an additional 90 days.
That rule is relatively simple to apply. You begin with the due date, plus extensions, extend it out 3 years, then add the time a prior bankruptcy case stay overlapped, then add on an additional 90 days. See also Taxes and Bankruptcy. Again, it is extremely important to talk to a competent tax attorney before advising your clients.