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WHO CAN BE A DEBTOR? INCLUDING DEBTOR’S DUTIES

IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO.  WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.

In re Jewell 347 B.R. 120 (Bkrtcy.W.D.N.Y. 2006) JOHN C. NINFO, II, Bankruptcy Judge DEBTOR WHO WAS NOT DOMICILED IN STATE OF FILING FOR PRECEDING 730 DAYS AND IS NOT ELIGIBLE FOR EXEMPTIONS OF STATE OF PREVIOUS RESIDENCE MAY CLAIM THE FEDERAL EXEMPTIONS

Debtor moved from Colorado to New York less than 730 days prior to filing chapter 7 in New York, thus debtor was not eligible for N.Y. exemptions. Debtor claimed Colorado exemptions. Colorado was an “opt-out” state and its exemptions under Colorado law were available only to debtors who resided in Colorado at the time the bankruptcy was filed. The court ruled that N.Y. exemptions were not available due to the 730-day rule, and the Colorado exemptions were not available due to the Colorado exemption statute, but that the language of § 522(b)(3) permitting debtors in those circumstances to elect the Federal exemptions.

Debtors can only file for Chapter 13 if their total unsecured and secured debts are less than certain statutory amounts (11 U.S.C 109(e)). The Bankruptcy Code provides for an increase of the Chapter 13 debt limits every three years. The new debt limits for Chapter 13 were published on February 12, 2019. Beginning April 1, 2019, the Chapter 13 debt limit increased to (a) $419,275 for a debtor’s noncontingent, liquidated unsecured debts, and (b) $1,257,850 for a debtor’s noncontingent, liquidated secured debts. This increase is about 6 percent, which is roughly double the increase in 2016.


In re Hernandez, 9th Cir BAP 4/17/117 Debtor filed chapter 7 – listing both first and second mortgages on her residence.  Then filed chapter 13 in order to lien strip the second.  She listed the second in Schedule D as “0” and in Schedule F for the full debt.  Creditor, Asset Management Holdings objected to confirmation for lack of good faith and moved to dismiss the chapter 13 case on eligibility grounds (over the secured debt limit). “The bankruptcy court ruled that Debtor’s debts did not place her over the eligibility limits because the debt to AMH did not need to be included in the eligibility calculation. The court found that the debt should not be treated as secured because the lien was avoidable under § 506(a), nor should it be treated as unsecured because Debtor’s personal liability on the debt had been discharged in her prior chapter 7 case. The bankruptcy court also found that the plan was filed in good faith. Accordingly, the court denied the motion to dismiss and confirmed the plan, and AMH appealed. We AFFIRM.”

180-day Bar to Eligibility in 11 U.S.C. Section 109(g) – in general.  Article by Keith Lundin (with updated cases as of 1/24/20)


In re Umali (10/03/03 – No. 02-15010/16379) (9th Cir) A bankruptcy petition filed in violation of a court-imposed 180-day bar is properly excluded from the automatic stay provisions of the Bankruptcy Code, even though the Court later modified the Order removing the 180-day bar. http://caselaw.lp.findlaw.com/data2/circs/9th/0215010p.pdf

PRE-BAPCPA

Bank of China v. Huang (01/14/02 – No. 00-57056) (9th Cir. Ct App) Settlement agreement where party agreed not to declare bankruptcy does not have collateral estoppel effect on a later bankruptcy petition for fraud claims where fraud claims were not incorporated into the original settlement agreement. http://caselaw.lp.findlaw.com/data2/circs/9th/0057056p.pdf

PRE-BAPCPA

Can the Debtor file a new 13 while his 7 is open? In re Keach, 243 B.R. 851 (Bankr. 1st Cir. 2000); In re Turner, 207 B.R. 373 (Bankr. 2nd Cir. 1997); In re Strohscher, 278 B.R. 432 (Bankr. N.D. Ohio 2002). In re Strohscher (Bankr. N.D. Ohio) (6th Cir) Rule 1015 Debtor allowed to maintain Chapter 13 case filed prior to closing of same debtor’s Chapter 7 case.

WARNING: PRE-BAPCPA

Raybould v. Markel (In re Raybould) 

Nos. OR-17-1326-SLB, OR-17-1327-SLB (9th Circuit BAP, Mar 26,2019) Not Published Ruling : Bankruptcy case was properly dismissed because debtor failed to obtain credit counseling, to timely make plan payments, and to file required tax returns.

bankruptcyAs of 2019 we have a problem with states who have legalized certain drugs that are illegal under federal law.  Bankruptcy is governed by federal law, therefore it becomes a significant problem trying to determine if someone who makes money from legalized (under state law) drugs.

It will take several years, if ever, for Congress (the ones who write the bankruptcy laws) to universally deal with this issue.  Meanwhile, the courts will peace-meal their way through this complicated issues.


In re Garvan, No. 18-35119, D.C. No. 3:17-cv-05516-BHS (9th Cir Ct Appeals May 2, 2019).  FACTS: Cook Investments NW, DARR, LLC (“Cook DARR”), one of the Cook companies, owns commercial real estate in Darrington, Washington (the “Darrington Property”). Cook DARR leased the Darrington Property to two tenants, one of which was Green Haven. The lease with Green Haven (the “Green Haven Lease”) provides that Green Haven will use the Darrington Property exclusively as a marijuana establishment. Although Green Haven appears to be in compliance with Washington law, the Green Haven Lease puts Cook in violation of the federal Controlled Substances Act, 21 U.S.C. §§ 801-971, which prohibits “knowingly . . . leas[ing] . . . any place . . . for the purpose of manufacturing, distributing, or using any controlled substance,” id. § 856(a)(1).

The panel affirmed the district court’s decision affirming the bankruptcy court’s order confirming the second amended Chapter 11 plan of five real estate holding companies.
One of the debtors leased property to a company that used the property to grow marijuana. The United States
trustee objected that the lease violated federal drug law, and so the plan was unconfirmable under 11 U.S.C. §1129(a)(3) because it was proposed by means forbidden by law.
FINDING: The panel held that § 1129(a)(3) directs bankruptcy courts to police the means of a reorganization plan’s proposal, not its substantive provisions. The panel affirmed confirmation of the plan because it was not proposed by any means forbidden by law.

Cannot amend petition to add spouse to existing chapter 7 petition

In re Scott, 2:19-bk-11722-DPC (Ariz BK Court 10-3-19) : Debtor Lavelle Curtis Scott, Jr. (“Debtor”) has filed a motion (“Motion”) to amend his Chapter 7 petition to add his spouse, Diana Charae Scott (“Ms. Scott”) (DE 20), as a joint debtor. The amended petition is attached to the Motion. Debtor commenced this case by filing a Chapter 7 petition on September 13, 2019, as sole petitioner. That petition was captioned with the name Lavelle Curtis Scott Jr. only and was only signed by him. Debtor now seeks to amend his petition to a joint petition and add his spouse as a co-debtor.

There is no authority to retroactively convert the original single filing to a joint filing. The non-filing spouse may not be added to this case by amendment or motion,  largely due to the importance of the petition date, order for relief and creation of the bankruptcy estate. A debtor cannot have a separate petition date from his or her spouse because there can only be one petition date per one petition. In re Clinton, 166 B.R. 195, 200 (Bankr. N.D.Ga. 1994).

The non-filing spouse must file a separate bankruptcy petition; a joint bankruptcy case must be commenced by both spouses signing a single petition at the beginning of the case. In re Chilson, 525 B.R. 130 (Bankr. D. N.M. 2015); In re Austin, 46 B.R. 358 (Bankr. E.D. Wis. 1985); In re Woodell, 96 B.R. 614 (Bankr. E.D. Va. 1988); In re Kirkus, 97 B.R. 675 (Bankr. N.D. Ga. 1987); and In re Sobin, 99 B.R. 483 (Bankr. M.D. Fla. 1989).