What Debts can a debtor discharge in Chapter 7 bankruptcy filing? A recent article in the American Bar Association Journal discussed a disbarred attorney who attempted to file chapter 7 bankruptcy to discharge the debts he owed to the State  Bar Association for restitution to clients. The article and the decision can be found at https://www.abajournal.com/news/article/disbarred-lawyer-cant-discharge-debt-he-owes-state-for-reimbursing-his-ex-clients-bankruptcy-judge-says?utm_source=maestro&utm_medium=email&utm_campaign=weekly_emailIn that case, the Bankruptcy Judge held that the disbarred lawyer's restitution obligations were fines, penalties, or forfeitures payable to and for the benefit of a government unit and non dischargeable under section  § 523(a)(7) of the Bankruptcy Code.What debts are dischargeable in chapter 7 bankruptcy? Clients and attorneys representing debtors often ask us this question.As many readers know Bankruptcy is a code-oriented area of the law and the sections  pertaining to a debtor's discharge are 523 and 727 of the Bankruptcy Code. Similarly to the analysis in the disbarred attorney case discussed above, an experienced bankruptcy attorney needs to understand the facts regarding a debt and how that debt would be characterized or treated under Section 523 and 727 of the Bankruptcy Code.What types of debts are generally dischargeable?Business and consumer loans, guaranties and good guy guaranties, credit card debt, medical bills, store purchases, phone bills, mortgage debt and car loans (providing that the debtor surrenders the collateral securing those loans)What debts generally are non dischargeable?Recent taxes, trust fund taxes such as sales tax, alimony or child support, fines or penalties owed to a government agency,  injury caused from drunk driving or driving while under the influence of drugsAnyone with questions about which debts are dischargeable in chapter 7  bankruptcy should contact Jim Shenwick   212 541 6224  [email protected] 

    In In re Elias, 2021 Bankr. LEXIS 1554, Case No. 20-10334 (Bankr. D.Vt. 10 June 2021) US Bank filed a motion for leave to file a late mortgage claim in a chapter 13 case on the claims bar date, 6 January 2021.  The debtor objected to such request, and the court determined the matter with briefs filed by the parties.  In the motion to extend time, the bank asserted an estimated claim of $36,430.54, and asserted that the failure to timely file a claim was based on excusable neglect due to a computer system error related to the debtor having filed a prior chapter 13 case which had not closed when the instant case was filed.  In the amended motion by the bank the estimated claim increased to $232.395.21 including a pre-petition arrearage of $25,710.44.     Rule 9006(b)(1) of the Federal Rules of Bankruptcy Procedure generally allows enlargement of time to complete an act when the failure to act was the result of excusable neglect.  However, section 9006(b)(3) limits application of subsection (b)(1) under certain specific provisions, and allows enlargement under these sections only to the extent and under the conditions stated in such rules.  One of these exceptions is Rule 3002(c) governing the time for filing a proof of claim in a chapter 13 case.  Rule 3002(c) provides that a claim in a chapter 13 case must be filed within 70 days after the order for relief, and in subsection (c)(6) permits enlargement only if (A) the notice was insufficient under the circumstances to give the creditor reasonable time to file a proof of claim because the debtor failed to timely file the list of creditors' names and addresses required by Rule 1007(a) or (B) the notice was insufficient under the circumstances to give the creditor a reasonable time to file a proof of claim, and the notice was mailed to the creditor at a foreign address.  US Bank has not asserted that it meets either of these exceptions, and the court noted that the  debtor scheduled the debt at US Bank's servicer at a domestic address.  Therefor the court denied the request to file a late claim.  US Bank also objected to the good faith of the plan noting that plan provided for only $1,061.02 though schedule D showed the debt at $157,055.27.  Debtor responded that the $1,061.02 figure was based on the most recent statement from the bank, and that they amended the plan to $36,430.54 based on the amount asserted in the initial motion to extend time.  Debtor indicated she declined to amend to the $232,935 figure because 'this creditor's numbers have been absolutely all over the books for the last fifteen years.'  US Bank could cite no cases to support that this would be a basis to find bad faith.  The court thus found that US Bank failed to establish any basis for an enlargement of time based on the court's equitable powers.  The court rightly then speculated on the ultimate result of disallowance of a secured claim through the chapter 13 process.  The court noted a ruling in In re Williams, 622 B.R. 54, 59 (Bankr. N.D. Ill. 2020) that assuming the bank could prove to the satisfaction of a state court that it owns the note and mortgage, it will be able to reassert its lien against the residence once the case is complete or the stay is lifted, though would not be able to pursue a deficiency judgment if the debtor receives a discharge.  The court set a status hearing to explain how the parties wish to proceed in the absence of a claim by US Bank.  The case raises the question of what Debtor intends to do with the arrearage to retain the property.  At one point they appeared willing to pay the $36,430 arrearage, and the case is not clear whether the $157,055.27 is an enlarged arrearage or the payoff on the debt.  Debtor's may have been better able to litigate the allowance of an apparently excessive arrearage in bankruptcy court than dealing with it after the case is over.Michael Barnett, Esq.Michael Barnett, PA506 N Armenia Ave,.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

Does Filing For Bankruptcy Target Your Disposable Income? Bankruptcy Lawyers Explain How Your Income & Assets Will Be Treated In a Bankruptcy Filing You may be thinking of filing for bankruptcy to get needed debt relief, but you may be worried that in addition to wiping out your debts, bankruptcy can also wipe out your disposable income. You may worry that you will start “fresh” with nothing to your name – no debt, but no house, no car, and no savings either. While it’s true that the bankruptcy trustee will look at your ability to pay and will expect you to use your resources to satisfy your debts if possible, that does mean that you will have to drain your resources. In many cases, your disposable income and other assets can be exempted in the bankruptcy. You will need to talk to a bankruptcy attorney to determine how your income and assets will be treated in a bankruptcy filing, but here’s some general information about how disposable income is treated: What Disposable Income Is? Your idea of what your “disposable income” is and the court’s idea of what your disposable income is are likely to be two very different things. You may have expenses that you consider very important but the court deems unnecessary. Or you may have plans for the money you have available, while the court may feel the money can be used to pay debt. The court decides what your disposable income is by looking at your total income and then subtracting all your necessary expenses, such as your rent, utilities, food, health care, taxes, and so on. For some of these expenses, like your rent or mortgage, you will deduct the exact amount, and you will be required to show proof of what you pay. For some of the other expenses, like food or clothing, you would be given a standard deduction, and that amount would be subtracted from your income, not the actual amount you spend. What’s left over after these expenses and deductions are subtracted is usually considered your disposable income, which the court would consider able to be paid toward creditors. The Means Test Most people would want to file for bankruptcy, want to file for Chapter 7 bankruptcy, which completely discharges unsecured debts like credit card debt. However, not everyone is eligible to file for Chapter 7 bankruptcy. You have to pass a means test to qualify to file. The means test compares your income to the state’s median income for your household size. The test looks at the last six months of income. If you have lost a job or have been struggling to work enough hours, that can be good for you. The test also subtracts expenses and deductions to determine your disposable income. If your income is under the threshold and you have a limited disposable income (or none), you are likely to qualify for Chapter 7 bankruptcy. The Actual Income & Expenses Quiz A secondary test will be applied to your income and assets, known as the Actual Income and Expenses Test. This test looks at what your income is likely to be going forward. So, even if you lost your job and had low income the past six months, this test would look at whether you recently got a new job and your income is now increasing or is likely to increase, among other things. Several other schedules are included in this test that look at your personal property and other assets. Many exemptions are allowed for a certain amount of equity in property or other assets. But the test creates a more comprehensive picture of your income and your ability to pay your debts, and it can be used to override the means test and disqualify you from filing for Chapter 7 bankruptcy. Chapter 13 Bankruptcy If you are found to have too much disposable income to file for Chapter 7 bankruptcy, you will still be able to file for Chapter 13 bankruptcy, which restructures your debt into a payment plan that you can afford. That payment plan is determined based on your disposable income. The court decides how much you are able to pay to your debts each month, and it creates a three- to five-year payment plan based on that. At the end of the repayment period, it is possible that some of your debt can be discharged. Determining disposable income for bankruptcy can be a bit complex. Rather than trying to use online worksheets or schedules, it is important that you talk to a bankruptcy attorney to review your finances together and get a better understanding of how bankruptcy law will apply to your circumstances specifically. An attorney can help you understand what’s possible based on the different deductions and exemptions. Hire a Qualified Bankruptcy Lawyer In Glendale, AZ The bankruptcy attorneys at My AZ Lawyers are ready to help you determine the best bankruptcy filing to get the maximum debt relief possible. We’ll review your finances and talk to you about your goals for bankruptcy, and we’ll recommend the best course of action. An attorney will then prepare your filing and all the schedules required to help you get the best possible outcome. Contact us today to schedule a free consultation with a bankruptcy attorney and learn more.   Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: [email protected] Website: https://myazlawyers.com/ Phoenix Location: 343 West Roosevelt, Suite #100 Phoenix, AZ 85003 Office: (602) 609-7000 Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Does Filing For Bankruptcy Target Your Disposable Income? appeared first on My AZ Lawyers.

 You Can’t Find a Cab. Uber Prices Are Soaring. Here’s Why.The number of drivers and for-hire cars on the streets plunged during the pandemic, frustrating those seeking rides as the city starts to recover.90Less than half of the city’s 13,500 taxis are operating, with many drivers saying there is not enough demand to justify returning to work yet.Credit...Michael M. Santiago/Getty ImagesBy Winnie Hu, Patrick McGeehan and Sean PiccoliJune 15, 2021Updated 6:42 a.m. ET The taxi line at La Guardia Airport had barely budged.There were no cabs in sight, and the grumbling was getting louder. People scanned the road for any glimpse of yellow. A dispatcher grimaced.Finally, a lone taxi rolled up for a waiting passenger. Then it was gone.“I haven’t seen it like this,” said Alex Hyken, 28, who lives in Brooklyn and had just returned from visiting relatives in St. Louis, only to find herself stuck behind 40 people who were also trying to get a taxi. Ten minutes later, she whirled off with her suitcase in search of an Uber or Lyft.When the pandemic shut down New York, it all but wiped out the city’s taxi industry, as commuters worked from home, tourists stayed home and businesses closed. Fleet owners reduced operations or suspended them altogether. Many drivers found other jobs, including driving trucks or making Amazon deliveries.Now, as the city starts to recover, buoyed by low virus rates and widespread vaccinations, yellow taxis are largely missing from many street corners and airport arrival areas.There are about 6,000 cabs on the road currently, according to industry analysts. That represents fewer than half of the total pool of 13,500 medallions, the city-issued permits required to operate a yellow taxi. Some 5,700 of those that are not working were taken out of service indefinitely by owners who put them into storage voluntarily and returned the license plates.The shortage is the latest setback for an industry that has struggled amid an influx of ride-hailing services and a spate of suicides among taxi owners and for-hire drivers. Even before the pandemic, some taxi owners faced financial ruin after being lured into taking on reckless loans to buy medallions at artificially inflated prices.In New York, Chicago, Las Vegas and other cities, demand for taxis and ride-hail cars has rebounded sharply from pandemic lows, outpacing the return of both drivers and cars. That has led to frustrating waits for riders, when taxis are even available.With drivers slow to return to work, the lack of for-hire cars has also pushed up the fares charged by ride-hailing apps like Uber that switch to so-called surge pricing when demand peaks.Many taxi owners are wary about how soon business will rebound. Demand is inconsistent and could be diluted if more cabs come rushing back to the streets, they said. The industry’s immediate future also depends on how soon workers return to their offices, and how soon tourists and business travelers come back to New York in big numbers.Editors’ PicksDon’t Play With Your Kids. Seriously.The Most Exciting Place to Eat in Los Angeles Is ChinatownYou May Not Want to Get Your Beauty Tips From TikTokContinue reading the main storyRichard Wissak, whose family operates 140 taxis, took his cars out of service last year as the coronavirus shut down the city. He later put the entire fleet into storage to save thousands of dollars in insurance, taxes and fees.“The city was in awful shape,” he said. “No airport work, no office work, and that’s the heartbeat of the yellow taxi industry.”ImageMany drivers for Uber and other ride-hailing services have also been slow to return to work, contributing to an increase in fares. Credit...Amr Alfiky/The New York TimesMr. Wissak wants to get his taxis back on the road, but he worries that there is not enough business yet. “Why are we going to put our toe back in the water if we’re not going to be able to survive?” he said.Many owners of single medallions also received a temporary reprieve on their loan payments during the pandemic. Once they start working again, the payments may restart again too, without a guarantee that the owners can earn enough to afford them, said Bhairavi Desai, the executive director of the New York Taxi Workers Alliance.“They don’t want to go back to work before there’s substantial debt restructuring,” said Ms. Desai, whose group has started a fund to help taxi owners pay off their medallions in cash at lower prices.Another thing causing the shortage of available taxis is that some drivers who qualified for expanded unemployment benefits during the pandemic have not yet come back to work. Others have moved away or taken other jobs.Mohammad Hossain, 45, a driver from Queens, said that two of his friends — one who drove taxis, the other who drove for Uber — continue to collect unemployment, though “I’ve tried to tell them our business is a little bit better.”About 6,000 taxi drivers were working in April, according to Bruce Schaller, a transportation analyst. That was up from 2,200 in April 2020, at the pandemic’s height, but far below the 20,000 who were working in February, Mr. Schaller found.Many fleet owners have tried to attract more drivers by slashing leasing rates for taxis to make it easier for drivers to make money.The Taxi and Limousine Commission, which oversees the industry, is working closely with taxi operators to ensure there are enough taxis to meet demand and trying to help drivers by streamlining the regulatory process, said Allan Fromberg, a commission spokesman.The lack of drivers and cars has also affected ride-hailing services. About 54,000 worked for the services in New York in April, compared with 79,000 in February 2020, Mr. Schaller said. Across the United States, a ride with such a service costs as much as 40 percent more than it did a year ago, according to the research firm Rakuten Intelligence.Uber has dangled $250 million in bonuses and incentives to recruit more drivers around the county. In New York, the result has been more drivers and fewer rides at surge-pricing levels. “Drivers are returning to Uber in force to take advantage of higher earnings opportunities from our driver stimulus,” said Alix Anfang, an Uber spokeswoman.The shortage is a temporary problem that should be resolved as more drivers answer the demand for rides, Mr. Schaller said. But while the availability of cars may return to prepandemic levels, he added, Uber and Lyft fares may remain high, in part because customers are willing to pay them.“It’s like restaurants, it’s like Broadway, it takes a while to put things back in place,” said Mr. Schaller. “And things will go back differently than before.”Sunny Madra, who visited New York from California in late May, tweeted that an Uber from Midtown Manhattan to Kennedy International Airport had cost him $248, or nearly as much as his $262 plane ticket.“We all have this prepandemic muscle memory: You walk out, you hail an Uber and it’s reasonably priced,” Mr. Madra said in an interview. “A $200-plus Uber, you sort of say, ‘What happened here?’”Elizabeth Halem, 43, said she wanted to support taxi drivers by taking cabs but that even before the pandemic, she never saw them in her neighborhood, Greenpoint in Brooklyn.“Sighting a cab would be like sighting Bigfoot,” she said. “Cabs are sort of mythical beings here.”Instead, Ms. Halem ends up ordering cars using Lyft, which can cost nearly $50 for a ride, or almost twice what she paid before the pandemic.On a Thursday in Downtown Brooklyn this month, shoppers loaded with heavy bags waved down passing taxis. One woman, Lissette Carter, 41, said she was occasionally forced to settle for an Uber even if it cost more. “It’s painful, but you’ve got to get around when you don’t have a car, especially if you’ve got small children and it’s raining,’’ she said.The taxi shortage has led to long lines at La Guardia, where there is no direct link to the subway or commuter rail lines. Supply and demand can fluctuate, with taxis outnumbering passengers at times since there are still fewer air travelers than before the pandemic.“It’s almost impossible to survive,” said Stephen Benesoczky, 70, a taxi driver who waited close to an hour to pick up a fare. He spends nearly $200 a day to lease the taxi and cover his gas and expenses. If he makes $400 in fares, he said, “that’s a good day.”ImageThere were about 54,000 ride-hail drivers working in April, compared with 79,000 in February 2020, one transportation analyst found. Credit...Mark Abramson for The New York TimesThe Port Authority of New York and New Jersey, which runs La Guardia and Kennedy, has taken steps to try to bring in more cabs, including sending regular updates to drivers through the taxi network’s internal messaging system. The authority has also created Twitter feeds to post information about airport hold lots, where cabs wait to be dispatched to a terminal.At terminal curbs, airport workers have even urged people waiting for taxis to try ride-hailing services instead.“There clearly is a shortage of taxi drivers,” said Rick Cotton, the authority’s executive director. “Part of the coming back from the pandemic is the taxi drivers were decimated and they need to see that the passenger volume has come back to return to the roads.”Sergio Cabrera, 57, who has owned and driven taxis for more than 20 years, was already hurting financially before the pandemic, losing passengers to the ride-hail cars that, he said, officials allowed to flood New York’s streets.Mr. Cabrera said he had also been laid up for three months after getting sick with Covid-19. When he was able to return to driving, he said, he went hours without a passenger. He made grocery deliveries and took out a pandemic-related loan meant to help small businesses.Mr. Cabrera said he was picking up about 10 passengers a day now, half of what he did before the outbreak.“I’ve lost my motivation for this business,” he said. “I wish I didn’t have to drive. I wish I didn’t have this burden on my shoulders.”Winnie Hu is a reporter on the Metro desk, focusing on transportation and infrastructure stories. She has also covered education, politics in City Hall and Albany, and the Bronx and upstate New York since joining The Times in 1999. @WinnHuPatrick McGeehan writes about transportation and infrastructure for the Metro section. He has been a reporter for the Times since 1999 and has covered Wall Street, executive pay, transportation, the New York City economy and New Jersey. @NY Tpatrick

Bankruptcy and arbitration are both intended to provide a quick and relatively efficient resolution to disputes between a debtor and his creditors. Both allow adjudication without a jury. Both systems should be able to move more swiftly than a court of general jurisdiction because there are no competing priorities, such as in criminal cases subject to the requirement of a speedy trial. Both are recognized by federal law, specifically the Federal Arbitration Act and the Bankruptcy Code. So what happens when a party to a bankruptcy proceeding requests permission to proceed with arbitration? The Court in In re McPherson, 2021 Bankr. LEXIS 1487 (Bankr. D. Md. 6/2/21) grappled this issue with frustrating results. What Happened The Debtor and Camac Fund, L.P. ("Camac") entered into a Litigation Funding Agreement (the "Funding Agreement"). Under the Funding Agreement, Camac would advance money to the Debtor in return for a percentage the debtor’s interest in any recoveries from certain whistleblower lawsuits. Under the Funding Agreement, Camac was to extend financing to the Debtor in exchange for a percentage of the Debtor's interest in certain whistleblower litigation cases. Disputes arose between the parties under the Funding Agreement, and Camac invoked its rights under the Funding Agreement's arbitration clause. The Debtor filed a response disputing, among other things, the validity of the arbitration and asserting counterclaims against Camac. A hearing was scheduled in the arbitration proceeding but was stayed by the filing of this Chapter 11 case. Opinion, pp. 3-4. After the bankruptcy was filed, the lawyers got busy. Camac filed a Motion for Relief from Automatic Stay seeking to proceed with the arbitration. The Debtor filed an adversary proceeding against Camac. Camac filed an adversary proceeding to determine dischargeability against the Debtor. Camac asked the Court to abstain from hearing the Debtor’s suit. The Bankruptcy Court found that there were several types of claims involved: (i) claims concerning the parties' performance under, and alleged breaches of, the Funding Agreement (the "Contract Claims"); (ii) claims under the Fair Debt Collection Practices Act ("FDCPA") and state law allegedly governing the Funding Agreement (the "Non-Bankruptcy Claims"); and (iii) claims under sections 502, 510, 523, 543, 544, 547, and 553 of the Code (the "Bankruptcy Claims" Who Gets to Decide? The Bankruptcy Court is the gatekeeper which gets to decide where the ultimate issue will be decided. The automatic stay prevents actions in other forums absent bankruptcy court permission, while the broad grant of jurisdiction in 28 U.S.C. §1334 allows most disputes to be heard in the Bankruptcy Court. Thus, with limited exceptions, unless the Bankruptcy Court lifts the automatic stay and abstains from hearing the dispute itself, the matter will proceed in bankruptcy. The Bankruptcy Court has a second gatekeeper function, which is to determine “arbitrability.” As the Bankruptcy Court explained: [F]irst, it must determine whether the parties agree to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration. Opinion, pp. 15-16. Although the Bankruptcy Court didn’t get there until page 15 of its opinion, the decision whether to allow arbitration is really a two-step process. First, the Court decides whether the parties intended this particular dispute to be subject to arbitration. Then it decides how to exercise its discretion as to whether to allow arbitration. The Bankruptcy Court’s position as gatekeeper should provide the debtor with an important home field advantage in keeping the dispute in the debtor’s chosen forum. However, in Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 226 (1987), the Supreme Court found that "the party seeking to prevent enforcement of an arbitration agreement [must] show that 'Congress has evinced an intention to preclude waiver of judicial remedies for the statutory rights at issue.'” Opinion. p. 9. Therefore, the rule is that the Court should allow arbitration unless there are important bankruptcy reasons not to. Fortunately, Congress has provided guidance on what disputes are most important to the bankruptcy process. In 28 U.S.C. §157(b)(2)(B), Congress has defined certain bankruptcy disputes as “core” proceedings. These include such matters as allowing proofs of claim, selling property and deciding whether the stay should apply. The Supreme Court has further provided that some, but not all, core proceedings are “constitutional core” proceedings meaning that the Bankruptcy Court has authority to enter a final judgment without the consent of the parties. See Stern v. Marshall, 564 U.S. 462 (2011) and the Supreme Court’s subsequent decisions. Thus, if a decision is a “constitutional core” proceeding, there are good grounds for retaining the suit. So, is there a hard and fast rule? No. As explained by the Bankruptcy Court: If a claim is a constitutionally core proceeding, the bankruptcy court has the discretion to retain the proceeding and not enforce the terms of the parties' arbitration agreement. See, e.g.,Taylor, 420 F. Supp. 3d at 448 ("Arbitration of constitutionally core claims 'inherently conflict[s] with the purposes of the Bankruptcy Code,' and therefore a bankruptcy court is generally well within its discretion to refuse arbitration of constitutionally core claims.") (citation omitted). Again, this discretion arises from the inherent conflict in allowing an arbitrator to resolve proceedings that are grounded in the Code itself or that are integral to the debtor's reorganization efforts. A bankruptcy court's discretion is far more limited with respect to non-constitutionally core or non-core proceedings. Opinion, p. 12. Essentially, the Bankruptcy Court has a lot of discretion to retain a constitutionally core matter and a little bit of discretion to retain anything else. While the “constitutional core” distinction is helpful, the decision still comes down to the Bankruptcy Court’s discretion. The Bankruptcy Court was following Fourth Circuit precedent in Moses v. CashCall, Inc., 781 F.3d 63 (4thCir. 2015), where the Court held that sending a constitutionally core proceeding to arbitration “would pose an inherent conflict with the Bankruptcy Code” while requiring arbitration of a claim which was not a constitutional core proceeding would not. Interestingly, the judge who wrote the opinion dissented from the court’s opinion as to the claims which were not constitutionally core. The judge found that the non-core claim was directly tied to the core claim and that it would be inefficient to have two tribunals adjudicate the identical issue. The Fifth Circuit, while relying on a similar standard, has concluded that dividing a case and sending some claims to arbitration “would be of disservice to the parties and defeat the purposes of the Bankruptcy Code.” Gandy v. Gandy (In re Gandy), 299 F.3d 489, 499 (5thCir. 2002).   The Court’s Ruling The Court found that the parties agreed to arbitrate disputes arising under the Funding Agreement. For reasons that are unclear to me, the Court found it unnecessary to resolve whether the parties had agreed to arbitrate the specific disputes at issue. After an extensive discussion, the Court decided to bifurcate the claims. The claims arising under the Bankruptcy Code would not be subject to arbitration while the contract and non-bankruptcy claims would go to arbitration. This is a very unsatisfactory answer although it mirrors the result in CashCall. How could the Bankruptcy Court determine allowance of Camac’s claim (a bankruptcy claim not subject to arbitration) without determining the parties’ performance under the Funding Agreement (a non-bankruptcy claim subject to arbitration)? The only thing that makes sense is sending the FDCPA claim to arbitration since this is an independent claim between the two parties. However, was that even covered by the arbitration clause? As I mentioned above, I don’t think that the FDCPA claim arose under the Funding Agreement and therefore should not have been subject to arbitration at all. Another Way to Look at This Case I found this opinion to be very confusing and the outcome to be arbitrary. I would like to suggest a simplified approach. First, decide if the contract requires arbitration. If the contract does not require arbitration, that is the end of the inquiry. If the contract does require arbitration, then consider the impact on the bankruptcy process and other parties. For example:If a contract requires arbitration of any attempt to restructure a debt, that interferes with the Court’s ability to confirm a plan and arbitration should not be allowed.If a contract requires arbitration of disputes as to lien priority and validity and there are three parties asserting a lien, two of whom do not have arbitration clauses, arbitration should not take place.If the bankruptcy case cannot proceed without resolution of the dispute and the arbitration clause refers disputes to the Mongolian Arbitration Forum which requires a minimum of three years and two gallons of yak milk to decide, arbitration should not be granted. I offer impact on the bankruptcy process and other parties as an alternate test because the whole constitutional core test doesn’t really work. Most arbitration clauses are going to decide claims between the parties. The Supreme Court has said that the authority of bankruptcy courts is greatest when “the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process.” Stern v. Marshall, 564 U.S. at 499. Since most arbitration clauses apply to deciding who owes what to whom, they are always likelyto involve constitutionally core claims (unless it is purely a matter of a claim by the debtor against the contract counter-party). If constitutionally core claims are the norm, it doesn’t make much sense to use this as the basis for a decision. Additionally, as shown by this case and CashCall, bifurcating claims between those that are subject to arbitration and those which are not can lead to twin forums deciding the same issues which should be a real problem. Thus, impact on the process and other parties is a much more workable test. If I were to apply my test to the case, I would probably have denied arbitration in its entirety. The parties agreed to arbitrate claims “arising under” the Funding Agreement. The FDCPA claims do not appear to arise under the Funding Agreement since the FDCPA will only apply when a debt collector is attempting to collect a debt. In Bankruptcy Court, we know the difference between “arising under” and “relating to” and these claims do not appear to “arise under” the Funding Agreement. I would also have found that the preference and fraudulent transfer claims did not arise under the Funding Agreement, since they arise under the Bankruptcy Code.  If the parties had agreed to arbitrate disputes “related to” the Funding Agreement, the result might have been different. The disputes concerning performance under the Funding Agreement certainly arise under the Funding Agreement. However, they are part and parcel of claims allowance process which arises under the Bankruptcy Code. That would take us to the second level of my analysis: what is the impact on the bankruptcy process and other parties? The opinion doesn’t really answer these questions, and in fairness, the parties may not have raised them. What I would like to have learned is how long the arbitration process would last and how would the allowance or denial of claims have affected other creditors and parties in interest. This was a Chapter 11 case. The Debtor has an exclusive period to propose a plan (or if it was a SubChapter V case, an absolute deadline to propose a plan). Would arbitration interfere with that process? How would determination of who did what to whom affect other creditors? If the only issue was how much Camac would owe the Debtor, then there probably would not have been much of an impact on other creditors. Similarly, if all the other creditors were secured creditors and Camac was the only unsecured creditor, then maybe allowance of Camac’s claim would not have affected other creditors. However, if Camac was one of several unsecured creditors and the amount payable to each unsecured creditor would depend on whether Camac had a big claim or a small claim, it might have had a lot of impact on other creditors. If there is a law professor looking for his next article, I suggest this would make a great subject.

   A recent case from the 11th Circuit affirmed the rulings of the bankruptcy and district court that a debtor failed to show that she met the standards for undue hardship in order to discharge a student loan.  In Graddy v. Educ. Credit Mgmt. Corp. (In re Graddy), 2021 U.S. App. LEXIS 16371, 2021 WL 2224350, Case No 20-12267 (11th Cir., 2 June 2021) the Debtor had gone to NYU School of Law from 1994-1997 then practiced as a prosecutor at $35,000/year, then moved to Georgia and worked for various law firms before deciding she had to change careers.  She graduated from a master's program in cinematic arts in 2008 but had to move back to Georgia working in various legal jobs since then.  Ms. Graddy filed bankruptcy in 2009, then sought to reopen that case in 2015 in order to seek discharge of the student loans.  Per 11 U.S.C. §523(a)(8) a debtor must show that excepting the student loan debt from discharge would impose an undue hardship on her and her dependents.  ECMC, the student loan creditor, asserted about $389,000 in student loan debt.  The bankruptcy court found Ms. Graddy had an average monthly income of about $8,600, and the Pay As You Earn repayment program would require her to pay $673/month at most for a $389,000 debt.  The court also found that Graddy had found adequate employment with her degrees, and she did not make a good faith effort to repay her loans.  The district court affirmed, rejecting her arguments that discovery issues did not cause reversible error, and that Graddy did not show clear error for the undue burden issues.  The 11th Circuit initially note that the Bankruptcy Code provides generally that student loans should not be discharged, with a narrow exception for cases where a debtor shows undue hardship.   The Court reaffirmed the Brunner test, requiring debtor's to show 1) that the debtor cannot maintain, based on current income and expenses, a 'minimal' standard of living for herself and her dependents if forced to repay the loans; 2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and 3) that the debtor has made good faith efforts to repay the loans.1  The 11th Circuit noted that it is the debtor's burden to show by a preponderance of the evidence that all three factors are met.2   As there was no dispute that the student loan itself existed, the issue on appeal was whether Graddy carried this burden.  This is a mixed question of law and facts.  However Graddy failed to provide any controlling case law to show an error of law in the bankruptcy court's conclusion that she failed to prove circumstances indicating a future inability to make payments on the loans. Further she failed to meet the stringent standard of the 11th Circuit to show that such inability would be likely to continue for a significant time, such that there is a certainty of hopelessness that the debtor will be able to repay the loans within the repayment period.3  Further, the bankruptcy court's factual findings are not clearly erroneous unless the appellate court, after reviewing all the evidence, is left with the definite and firm conviction that a mistake has been committed.4  As the lower court examined her work history, her employability, and her home and car ownership, the 11th Circuit could not find that this was insufficient evidence to find a lack of certainty of hopelessness.  Graddy also complained that some documents brought forth by ECMC should have been excluded due to lack of initial disclosures, failure to bring various loan histories 30 days prior to trial, and admission of third party documents.  The 11th Circuit found that any such failures did not excuse her inability to show an entitlement to discharge.  Any error as to admission of loan histories or third party documents would be harmless, as they went toward proving the amount of the debt rather than the existence of the debt; and ECMC was not required to show the amount of the debt.  As to her allegation of a trial by ambush, both the initial and pretrial disclosures are matters the trial court has leeway in handling.  The court further rejected her due process claim it found Graddy had not shown that any of the alleged errors prejudiced her or that the court abused its discretion.1 Brunner v. New York State Higher Education Services Corporation, 831 F.2d 395, 396 (2nd Cir. 1987).↩2 In re Mosley, 494 F.3d 1320, 1324 (11th Cir. 2007)↩3 Mosley, 494 F.3d at 1326.↩4 In re Cox, 338 F.3d 1238, 1241 (11th Cir. 2003).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

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Are you eligible for student loan relief? Obtaining a student loan discharge -- or sometimes partial relief -- is not impossible.

“Does Reaffirming My Car Loan Help My Credit Score?” Ray and Theresa, who filed bankruptcy with me last fall, asked me that last week. Lots of people ask that same question after they look at their after-bankruptcy credit report and see that their car payments don’t show.  Then, they are told by their car finance […] The post Does Reaffirming Your Car Loan Help Your Credit Score? by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.

   Placing the title of a house into a joint revocable living trust appears to have caused the loss of an exemption to the property in In re Givans, 2021 Bankr. LEXIS 1449, Case No. 6:19-bk-01928-KSJ (27 May 2021).  The property had been transferred by Debtor and his spouse into the trust in 2014.  The trust provided that Debtor and his spouse were both settlors and trustee's of the trust, and that upon the death of either, the the surviving spouse would remain a settlor and trustee, and would become an income beneficiary.  Upon the death of both their children would would become the beneficiaries of the trust.  The Debtor filed for relief under chapter 7 in 2019.    The Debtors asserted a tenancy by entireties exemption on the property, which was rejected as a trust cannot hold real property by tenancy by the entireties.  Upon the trustee's request to administer the Debtor's 50% interest in the property, the Debtor asserted that the trust was subject to a valid spendthrift trust provision.  The court noted that a restriction on transferring a debtor's interest in a trust which is enforceable under nonbankruptcy law would remain enforceable in bankruptcy; and such property would be excluded from property of the estate under §541.   Florida law governs the trust, and enforceability of the spendthrift provision.  Florida law recognizes the validity of spendthrift trust provisions only if the provision restrains both voluntary and involuntary transfers of the beneficiary's interest.1   It is also  a problem that the Debtor and his spouse transferred the assets into the trust and are allowed to retain control and decision-making power over the assets,  thus making this a self-settled trust.   The trust provides that the Debtor and his spouse can revoke or terminate the trust during their lives, or require the trust to pay the entire trust estate to them.  Debtor could terminate the trust at his sole option if his spouse predeceases him.  Further the trust terminates on the death of Debtor and his spouse.   This was not a trust designed to provide a fund for the maintenance of their children or protect such children from their own improvidence, and does not qualify as a spendthrift trust.  §736.0505 Fla. Stat. provides that a revocable trust is subject to the claims of the settlor's creditors during the settlor's lifetime to the extent they are not otherwise exempt and if owned directly by the settlor.  Transferring the house to the trust converted the ownership interest from tenancy by the entireties to joint tenants in common.   Under joint tenants in common, each owner has their own separate share which is presumed to be equal, and which can be reached by a creditor holding a claim against such owner.  This interest can be reached without the consent of a co-trustee even if the terms of the trust require such consent.2    The Court granted the request of the trustee to administer the Debtor's 50% interest in the estate, including authority to partition the property if necessary.    Query if there is a malpractice claim out here somewhere that also may be property of the estate.1 Fla. Stat. §736.0502↩2 Fla. Stat. §736.0505↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com