Georgia Bankruptcy Blog

In re Foreman, No. 01-21400, 2007 WL 4170629 (Bankr. S.D. Ga. Nov. 26, 2007).  From the Westlaw blurb -

Wrongful death action which arose postconfirmation, when Chapter 13 debtor's husband was killed, and which no party asserted would have to be successfully prosecuted to enable debtor to fulfill her plan, was not included in “property of the estate,” and debtor was not required to amend her schedules in order to disclose this postconfirmation asset to court.

In re McIntosh,  2007 WL 4146058 (Bankr. M.D.Ga., Nov. 19, 2007) --

Debtor has presented testimony that he did not operate a business after April 1996 and, thus, could not have incurred any sales tax after that date. Debtor further presented testimony that he met with representatives of Creditor on more than one occasion to determine the amount of outstanding sales tax he owed, and that he paid those amounts in full. The Court finds Debtor's testimony credible and sufficient to refute the prima facie validity of Creditor's claim for sales tax. Creditor presented no evidence in response to Debtor's testimony and, thus, cannot meet its burden to prove its claim by a preponderance of the evidence. Therefore, the Court will disallow Creditor's claim of $11,305 for sales tax. However, Creditor's $461 claim for income tax will be allowed because Debtor did not challenge that portion of the claim.

1By: Scott B. Riddle, Esq.

In re Hainlen, Case No. 06-10678, 2007 Bankr. LEXIS 1041 (Bankr. S.D. Ga. March 26, 2006)(Barrett).

Debtor's father was a teacher, and had a retirement annuity with the Teachers Retirement System of Georgia.  He designated his daughter, the debtor, as a beneficiary of 25% of the proceeds.  Upon his death, the debtor had the option of choosing a lump sum payout or monthly payments, and she chose monthly payments.

Debtor subsequently filed a bankruptcy petition and claimed that the retirement fund either was not property of the estate or was fully exempt.  The Court determined that Section 541(c)(2) excluded the fund from estate property as the funds, under state law, were part of a "plan or trust."  Further, the retirement fund includes a "spendthrift," or anti-alienation, provision.  The analysis does not change because the retirement funds arose from debtor's father's retirement plan, rather than from the debtor.  

In re Edwards, Case No. 06-20145, 2007 Bankr. LEXIS 1738 (Bankr. S.D. Ga. April 5, 2007)(Dalis).  Debtor converted her Chapter 13 case to a Chapter 7 case, and the clerk issued a Notice of Deficiency because the debtor had not filed her Means Test, Form B22A.  However, debtor's Form B22C (Chapter 13 Statement of Monthly Current Income) reflected that her income was below the median and the Means Test Form would merely show the same thing.  The Court found that upon conversion, the debtor did not have to file an additional Form B22A.

By: Scott B. Riddle, Esq. 

In re James, 2007 Bankr. LEXIS 152 (Bankr. S.D. Ga. January 17, 2007)(J. Barrett).  Debtor filed her second case within a year, and filed a motion to continue the automatic stay beyond the thirty-day period of 11 U.S.C. §362(c)(3). The court denied the motion, as the debtor's circumstances had not changed since her last case was dismissed for failure to make plan payments and, in fact, her income had decreased and her expenses had increased.  "Upon the Court's denial of the Motion, Debtor's counsel immediately requested the Court deny the motion as moot, arguing that since no collection action was taken against the Debtor prior to the commencement of the current case, the automatic stay terminates as to no creditors, thereby mooting the motion."  The court denied the motion.

At issue is the meaning of the terms "action taken" in 11 U.S.C. § 362 (c) (3) (A) which provides in pertinent part:

(c) Except at provided in (d), (e), (f), and (h) of this section-

(3)if a single or joint case is filed by or against debtor who is an individual in a case under chapter 7, 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed . . . (A)the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case. . . .

11 U.S.C. § 362 (c) (3) (A) (emphasis added by court).

By: Scott B. Riddle, Esq.

In re Batten, 351 B.R. 256, 2006 Bankr. LEXIS 2524 (Bankr. S.D. Ga. September 29, 2006) (Dalis). 

Debtors filed a motion seeking authority to amend their schedules to reflect a tort claim that arose post-petition after the conversion from Chapter 13 to Chapter 7, and in the same month the debtors received a discharge. The motion was denied as unnecessary and improper, as there was no duty or obligation to disclose a post-petition and post-conversion asset that was not property of the estate.

David Rosendorf discusses the District Court's ruling at the ABI BAPCPA Blog -- Appeal of "Debt Relief Agency" Opinion Dismissed For Lack Of Standing.

Southeast Landco, LLC v. 150 Beachview Holdings, LLC, 2006 U.S. Dist. LEXIS 73098 (S.D. Ga. September 21, 2006) (Alaimo).

A lawsuit was filed in federal court alleging breach of a real estate contract.  The basis for federal jurisdiction, the plaintiff argued, was that an individual who had a leasehold interest in the real property** at issue was a debtor in a Chapter 7 case.  However, in the bankruptcy case, the Chapter 7 trustee had rejected the lease and entered a no-asset report. 

The court granted the motion to dismiss.  Although the plaintiff argued that the lease was rejected, but not terminated, the distinction was not relevant.  The rejection of the lease was irrevocable and removed the lease as property of the estate.  Therefore, a dispute between two non-debtors over the lease could not be "related to" the bankruptcy case, and federal jurisdiction did not exist.

** The property interest at issue was an "estate for years" under Georgia law, and could be passed as real property. O.C.G.A. 44-6-100.

11 U.S.C. §§ 105, 362(c); Automatic Stay; Extension of Stay for Repeat Filer

In re Whitaker, 2006 Bankr. LEXIS 796, Case No. 05-1416 (Bankr. S.D. Ga. April 20, 2006) (Dalis)

Debtors filed a Chapter 13 petition after the effective date of the BAPCA. The filing was their second within a year, the first case having been dismissed after the husband was laid off from his job. Debtors' lawyer filed for an extension of the automatic stay pursuant, but such motion was not filed until 27 days after the petition date, and a hearing was not held within thirty days of the petition date. No objections to the relief requested were filed.

The court's detailed opinion began by noting that the short trigger for filing a motion, requesting a hearing and obtaining a hearing date may violate the due process and equal protection clauses of the Constitution. A debtor may only have a window of a few days to file their motion, provide proper notice to all parties, and get on the court's calendar (which may be entirely beyond the debtor's control). However, only an Article II court may overturn a statute on these grounds.

The court then discussed the language of § 362(c) insofar as it applied to repeat filers. Section 362(c)(4), which applies to debtors who have had pending more than one prior case in the previous year, provides that the stay does not go into effect at all but there is no 30 day limitation on requesting imposition of the stay. Debtors who have filed only one prior case in the previous year have a strict 30 window in which to request an extension of the stay and the court must hold a hearing in that window. § 362(c)(3). Under the plain language of these statutes, the debtors were ineligible for relief under either subsection.

Notwithstanding debtors' ineligibility, the court discussed the good faith requirement of 362(c)(3)(C). Because the statute itself contains the evidentiary burden, the court declined to look to the good faith standards of § 1307(c) or § 1325(a), as other courts have done. The court concluded that the prior dismissal of the debtors' case was due to the loss of the joint debtor's job. As both debtors are now working and making sufficient income to fund a 100% plan, the presumption of bad faith was rebutted.

Notwithstanding the debtors' ineligibility for an extension or re-imposition of the automatic stay, the court exercised its broad authority under § 105 to re-impose the stay. No objections were filed to the debtors' motion, and a dismissal may lead only to another filing and move for re-imposition under §362(c)(4)(B). Moreover, as the debtors have proposed a 100% plan, both debtors and the estate may be harmed if the stay were not re-imposed.

Author Note: While Judge Dalis raises several significant and valid points, including the arguably better treatment of multiple repeat filers, it appears that he is using the broad authority of § 105 to effectively overturn and subvert the clear provisions of §362 and would impair rights or create additional rights not provided for in the Code. See, e.g., Tucker. However shortsighted Congress may have been, their intent and language appears to be clear. However, Judge Brizendine has also used similar reasoning to extend the stay in Reed.

11 U.S.C. §§ 1307, 1328(f); Confirmation of Chapter 13 Plan; Discharge; Good Faith

In re Lewis, 2005 Bankr. LEXIS 471, Case No. 05-14070, In re Tobias, 2005 Bankr. LEXIS 471, Case No. 14078 (Bankr. S.D. Ga. March 27, 2006)(Dalis)

Debtors each filed Chapter 13 petitions and 100% plans, even though they were ineligible for a discharge pursuant to §1328(f) (Chapter 7 discharge received within 4 years). The Chapter 13 trustee moved for dismissal of both cases, arguing that because debtors are ineligible for a discharge they are ineligible for Chapter 13 relief. Alternatively, the trustee argues that the petitions were filed in bad faith and constituted an unreasonable delay that is prejudicial to creditors.

The court found that eligibility to be a debtor is determined by §109(e), and that §1328(f) is not an eligibility provision. Because the debtors otherwise qualify under §109(e), they are eligible to be debtors. Further, under the test set forth in In re Kitchens, 702 F.2d 885 (11th Cir. 1983), the debtors filed their petitions in good faith. Eligibility for a discharge is one element under the test, but the debtors have proposed 100% plans that otherwise meet all of the elements of good faith. Under the circumstances, the plans were superior to a race to the courthouse, and confirmable

11 U.S.C. §§ 506, 1325; Secured Claims

In re Brown, 2006 Bankr. LEXIS 476, Case No. 05-21764 (Bankr. S.D. Ga. March 27, 2006)(Dalis)

Debtor purchased a personal vehicle within 910 days of filing a Chapter 13 petition, and the creditor filed a claim stating that the vehicle debt was 100% secured. The debtor proposed a plan that paid the creditor less than the present value of the claim and the creditor objected to confirmation. Debtor argued that the unnumbered paragraph added to §1325 in the BAPCPA regarding the purchase of personal use vehicles within 910 days of filing stated that §506 was not applicable and, therefore, the creditor did not have an allowed secured claim. Therefore, debtor argues, §1325(a)(5)(B)(ii), requiring the payment of the present value of secured claims, is not applicable to the claim.

The court found debtor's argument unpersuasive, finding that the unnumbered paragraph of §1325 does not alter the claims described in the paragraph as secured, and it does not exempt such claims from the present value requirements of §1325(a)(5)(B)(ii). Rather, it means that the secured claims it describes cannot be bifurcated into secured and unsecured portions pursuant to §506(a).

Note: For further discussion of this issue, see this article at the ABI BAPCPA Blog.

11 U.S.C. §§ 506, 1325; Secured Claims

In re Carver, 2006 Bankr. LEXIS 327 (S.D. Ga. March 6, 2006) (Walker)

Debtors filed a Chapter 13, listing a vehicle (purchased within 910 days of filing) with a current value of $14,500 and subject to a claim of $15,000. Debtors' plan proposed to pay the entire $15,000 claim in monthly installments, without interest.

The issue was whether debtors must pay interest to a creditor whose collateral is a "910 vehicle." The court ruled that the "test of the statute plainly prevents 910 claims from being treated as secured under a Chapter 13 plan…. By creating a special provision solely for 910 claims, Congress has demonstrated an intent to treat them differently that other unsecured or secured claims, but it has not provided a basis for treating them preferentially." Therefore, in a Chapter 13 plan, a 910 claim must receive the greater of 1) the full amount of the claim without interest, or 2) the amount the creditor would receive if the claim were bifurcated and crammed down (secured portion with interest, unsecured portion pro rata). Since the creditor in this case would receive more than $15,000 if the secured portion were paid with interest, its objection was sustained.

Note: For further discussion of this issue, see this article at the ABI BAPCPA Blog.

11 U.S.C. §541; Property of the Estate; Judicial Estoppel

Wooten v. Altahama Bank and Trust, 2005 U.S. Dist. LEXIS 36186, Case No. CV203-100 (S.D. Ga. October 4, 2005)(Alaimo)

Plaintiff filed a complaint against former employees and others for numerous state law claims, including fraud and conversion, and civil RICO. The defendants moved for summary judgment on the grounds that the plaintiff had previously filed a Chapter 7 petition, and failed to identify the claims as an asset of the Bankruptcy estate. As a result, the claims belonged to the estate and the plaintiffs lack standing to pursue them.

The court noted that the accrual of a cause of action for purposes of triggering the statute of limitations may be different than the accrual of a claim for purposes of determining ownership under §541. Under Georgia law, claims for fraud and conversion accrue on the dates of the alleged false representation and the date of the actual conversion, respectively. These alleged acts took place prior to the bankruptcy filing and, therefore, were property of the estate and Chapter 7 trustee, and not the plaintiff. With respect to Civil RICO, however, the claim "begins to accrue as soon as the plaintiff discovers, or reasonably should have discovered, both the existence and source of his injury and that the injury is part of a pattern." Plaintiffs did not discover the alleged activities, injuries or pattern until after the bankruptcy was filed. Therefore, Plaintiffs, and not the trustee, had standing to pursue the RICO claims.

11 U.S.C. §101(12A); Debt Relief Agencies; Attorneys

In re Attorneys at Law and Debt Relief Agencies, 322 B.R. 66 (Bankr. S.D.Ga. October 17, 2006) (Davis)

Although the language defining the term "debt relief agencies" in §101(12A) was broad enough to cover attorneys, the court held that members of the bar of the court, or attorneys admitted pro hac vice, are not covered by the provisions of the Code regulating debt relief agencies.