Sometimes a person’s finances get out of control and they soon find themselves in a position where they can no longer afford to pay their debts. Bad things happen to good people all the time. Considering bankruptcy as a means to get relief is a possible alternative. Having a Springfield, Ohio bankruptcy attorney on your side should be your first step. Chapter 7 bankruptcy was designed for individuals as a means to get relief from creditors. While there are many reasons why a person might consider the bankruptcy option, most likely it is no fault of their own. People lose their jobs or get divorced or run into some other kind of financial problem that they can’t seem to find their way out of. Turning to a qualified bankruptcy lawyer is the first step to ending the constant barrage of calls and letters from the creditors’ collection efforts. If you are under the threat of lawsuits and harassed daily by creditors attempting to collect money that you simply don’t have, you might be the right candidate for chapter 7 bankruptcy. Remember that bankruptcy is an extreme remedy to financial problems. Making financial arrangements with creditors is always the best method. Sometimes, however, this just isn’t possible. Once a bankruptcy has been filed, it’s possible that all individual debts are discharged and you are no longer be responsible for paying them. It’s possible to keep some assets. However, bankruptcy has long-lasting consequences that you need to consider closely before proceeding. Bankruptcy means that you might have trouble getting credit in the future. There can potentially also be a burden on future employment as well as carry a social stigma. Bankruptcy procedures are complicated and the court system is unlike any other court. It is crucial that you have an experienced bankruptcy attorney to guide your case carefully. You need assurance that your debts are completely dissolved Take the opportunity to sit down with one of our experienced bankruptcy lawyers and explore the possibilities and pitfalls of filing bankruptcy. If you feel like this is the best advisable move, contact us, we will handle your case with all of the due diligence and personalized care that you deserve. The post Chapter 7 Bankruptcy – The Right Remedy for you? appeared first on Chris Wesner Law Office.

  What happens when an automobile is lawfully impounded before an automatic stay comes into effect for traffic ticket fines when the debtor files chapter 13?  At least when the plan treats the claim as unsecured and no timely objection is filed, this question is addressed in In re Jason Howard Scott, No 17-25141,  2018 WL 1830910 (Bankr. N.D. Ill. April 16, 2018).   This case involved a third filing within a year for the debtor, so no automatic stay came into effect upon filing pursuant to 11 U.S.C. 362(c)(4)(A).  At the time the case was filed, the debtor owed the City of Chicago approximately $17,000 in parking tickets.  The plan provided for payments of $100/month for 60 months.  Debtor's 1975 Buick Regal was impounded by the City before the case was filed.  While the city's claim was filed as secured, the plan treated the claim as unsecured and no objection to such treatment was filed by the city.    On December 29, 2017 the Debtor filed a motion to amend admitting the case was filed to obtain possession of the Regal, and noting the city was refusing the release the vehicle unless the claim was paid as secured through the plan.  The Court entered an order to show cause against the city for refusing to release the vehicle. The City of Chicago initially asserted that they were exempted from the automatic stay by the police powers exception of 11 U.S.C. 362(b)(4).  This section states that the automatic stay does not cover the commencement or continuation of proceedings by governmental units to enforce its police and regulatory power including the enforcement of a judgment other than a money judgment.  The Court rejected this argument since the city never sought adequate protection.  The city also claimed a possessory lien on the vehicle.  The Court found that the Chicago did not have a possessory lien under Illinois common law, because the requirements for such lien included the lienor to have provided goods or services for the lien, and to be able to city statutory authority for such lien, neither of which was met in this case. The Court also found that the local municipal code providing for possessory liens was not in compliance with state law on possessory liens.  Next, the city argues that they are permitted to maintain possession of the vehicle under 11 U.S.C. 362(b)(3).  This provision states that  the automatic stay of section 362(a) does not apply to any act to perfect, maintain or continue the perfection of an interest in property.  However, this violates the requirement to return collateral discussed in Thompson v. GMAC, 566 F.3d 699 (7th Cir. 2009). This case held that a secured creditor has to return collateral to the bankruptcy estate and then, if necessary, seek adequate protection of its interests from the bankruptcy court. According to the Seventh Circuit the secured creditor therein exercised control over a vehicle in violation of the automatic stay by refusing to return it upon request.  Rather, §362(b)(3) is intended to apply recording notes and mortgages, not continuing possession of collateral of debtors.    Finding that the City of Chicago waived its rights by not objecting to the plan prior to confirmation, and does not have a possessory lien on the vehicle, the Court entered an order fining it $50/day for the violation of the stay in not returning the vehicle to the Debtor. This case should not be read overly broadly given the specific facts herein, especially the lack of objection to the plan.  Michael Barnett www.tampabankruptcy.com 

By Alicia Adamczyk Millennials are putting off marriage, have you heard? And while some talking heads would have you believe smart phones and video games are largely to blame, I’d posit it’s more likely a consequence of the combination of crushing student loan debt and low-paying jobs that has defined life for many people in Generation Y. Who wants to shell out for a wedding when you can barely afford your monthly student loan payments?But if you do get married, you definitely need to consider how your and/or your spouse’s loans will affect the other. Take this question, from Kathryn:If you’re on an income driven plan as part of loan forgiveness, does your partner’s income become considered your own income if you get married?Here’s what you need to know.TaxesEssentially, the answer to your question, Kathryn, is yes. If you or your spouse have student loans and you’re enrolled in the Revised Pay As You Earn plan, your monthly loan payment will increase, because the plan bases your payment off of your combined adjusted gross income.For the other three income-driven repayment plans, you can avoid this if you file your taxes separately. But you’ll miss out on the other tax benefits of filing jointly. You’ll want to ask your tax preparer which is better for your individual situation, but it’s likely filing jointly and accepting the higher monthly payment.That’s having an impact on when and if people get married, according to Travis Hornsby, founder of Student Loan Planner. “There’s a lot of people who are getting spiritually but not legally married because of this,” he says. “People are having ceremonies but not turning in their certificates for tax purposes.”Additionally, you may lose the student loan interest deduction, which allows student loan borrowers to deduct up to $2,500 of the interest paid on their loans from their taxable income. You don’t qualify for it if you and your spouse earn more than $160,000 combined (you do not qualify for the deduction if you file separately).Other FactorsBut there are a lot of other things to take into consideration, finance-wise, when you have loans and get married. “Everyone getting married these days needs to have a money conversation about loans, and it needs to happen before your engagement,” says Hornsby. “Be honest, say how much debt you have and your plans to pay it off.”One example: credit. While your spouse’s loans do not affect your credit unless you’re a co-signer, according to NerdWallet, “if your spouse takes out a student loan during your marriage and then defaults, creditors in some states can go after both of your wages and assets—or, if you file jointly, your tax refund.”And if you’re in the market for a new house, the biggest factors to take into account are your debt-to-income ratio, down payment, salary, credit history, assets, etc., the biggest being your DTI, says Mike Brown, managing director of Comet, a company that offers student loan refinancing advice. If your only debt is student loans and you make a decent income, you’ll probably be ok. If one of you has a ton of debt, though, the spouse with the lesser amount should apply for the mortgage, says Brown.One rule that makes paying your mortgage more manageable: “Your house should be no more than two times your joint income if you have debt,” says Hornsby. “You don’t want tons and tons of debt.”DivorceIf you get divorced, things get, well, complicated. You may have to split the debt with your spouse, regardless of whose it is, depending on when it was acquired, says Kathleen Campbell, a Registered Investment Advisor based in Fort Meyers, Florida. If you incurred the debt before the marriage, that’s your responsibility to pay off (and the same goes for your spouse). “So even if a couple was together for years before marriage, with the expectation that future spouse A’s income would cover spouse B’s loan payments, if spouse B incurred the loans prior to marriage, then they are spouse B’s responsibility forever,” says Campbell. But if the debt was acquired post-marriage, things “get murkier.” “That becomes more of a legal question, depending on state laws, how the money was used, earning power of both parties, how long the degree was used during the marriage, and other factors,” she says. “So it’s a case-by-case situation when it was incurred after marriage and is still in just one spouse’s name.” If you’re a co-signer, you’re likely on the hook, unless your spouse refinances. “The co-signed obligation is a contract between the signer and the lender, not between spouses, so that’s a firm contract,” says Campbell. “It definitely could be possible to refinance the loan in only one spouse’s name, assuming that spouse has the income and credit history to entice the lender to refinance. That could all be part of divorce settlement discussions.”If you’re really worried, create a prenup that stipulates what happens to the debt. Then you’ll have one less thing to worry about.© 2018 Gizmodo Media Group.  All rights reserved.  

  Judge Thorne in In re: Cleveland L. Carr, Debtor. In re: Antoinette L. Lindsey, Debtor., No. 17-25013, 2018 WL 1750540 (Bankr. N.D. Ill. Apr. 10, 2018) examined whether contracts between debtors and their attorneys supported plan provisions providing for payment of counsel's fees prior to or concurrently with payment of secured auto lenders.  Debtor provided an affidavit asserting that he was informed of the precise terms of the accelerated compensation s well as the detrimental effect it would have on the early plan payments on the car loan; resulting in it being much more difficult for him to keep his vehicle if the case were dismissed early.  In another case included in the same decisions, In re Lindsey, the debtor provided for preconfirmation adequate protection to the lender of $25/month with post-confirmation payments increasing to $500/month.     The chapter 13 trustee objected that 1) secured creditors were not being paid in equal monthly payments, 2) the attorneys have not shown that they have benefited the estate, 3) the attorneys breached their fiduciary duty to their clients by not disclosing that they would be paid ahead of other creditors; particularly the auto lenders; and 4) the attorneys violated a local rule by coming to an agreement with their clients concerning their compensation and the agreements were not then reduced in writing, signed by both parties, and filed with the court.  The Court initially found that accelerated payment of attorneys fees is permissible under the Bankruptcy Code.   Section 1325(a)(5) provides in relevant part that:with respect to each allowed secured claim provided for by the plan— (A) the holder of such claim has accepted the plan; (B) ... (iii) if— (I) the property to be distributed pursuant to this subsection is in the form of periodic payments, such payments shall be in equal monthly amounts; and (II) the holder of the claim is secured by personal property, the amount of such payments shall not be less than an amount sufficient to provide to the holder of such claim adequate protection during the period of the plan; or (C) the debtor surrenders the property securing such claim to such holder ....whereas Section 1326(b) provides in relevant part that:Before or at the time of each payment to creditors under the plan, there shall be paid— (1) any unpaid claim of the kind specified in section 507(a)(2) of this title.   Under §1326(b) initial payments to administrative expenses cannot commence on a date later than the date on which initial payments to creditors begin.  The query then is whether plan can propose a lower payment to secured creditor until attorneys fees are paid?  Then, does it matter if the secured creditor objects to such treatment?  The majority of courts have found that the secured creditor's failure to object to such treatment satisfies §1325(a)(5)(A) when the creditor was properly noticed.  Finding no such objections were filed in these cases, the trustee's objection as to equal payment provision was overruled.  The trustee's objection on good faith grounds was also overruled, in that there is no per se rule against plans that propose payment of attorneys fees prior to payment of the auto lender.   In re Crager, 691 F.3d 671, 675-76 (5th Cir. 2012).     In ruling on the trustee's objections to compensation, the Court initially found that there is no requirement that the chapter 13 debtors' attorneys' fees benefit the estate.  Until 1978 counsel were permitted to have their fees paid from the estate as an administrative expense only if they could demonstrate that their services had provided a 'clear and substantial benefit to the bankruptcy estate'.  This was changed with the 1978 enactment of the Bankruptcy Reform Act and the 1994 amendment to §330; resulting in the general rule that while chapter 7 attorneys can only be compensated from the estate when their services benefit the estate; §330(a)(4) permits compensation to chapter 12 and 13 attorneys based on the benefit and necessity of such services to the debtor regardless of separate benefit to the estate.  Upon allowance by the court, such fees become an administrative expense, requiring payment in full prior to or concurrently with payments to creditors.  The court noted the trend from lodestar fee computations to presumptively reasonable fees, and found a $4,000 presumptively reasonable fee in their district.   Next the Court examined whether counsel's fiduciary duty required disclosure of the negative ramifications of an early dismissal on the interest of the debtor where fees are paid on an accelerated basis.  The Court found disclosure was required prior to or simultaneously with entering the retention agreement that if a case were dismissed early, it could substantially impair the debtor's ability to keep their vehicle.  This requirement is found under Illinois state law rather than bankruptcy law, as the relationship between private lawyers and their clients is a local concern.  However, a violation of such duty may render the compensation sought excessive and unreasonable.  Even as to presumptively reasonable fees, a reasoned objection shifts the burden of proof back on the fee-claimant who must establish the reasonableness of such fees under §330.    The attorney-client relationship is a fiduciary relationships as a matter of law.  When counsel places their own personal interest above that of the client, counsel is in breach of the fiduciary duty by reason of the conflict.   Horwitz v. Holabird & Root, 212 Ill. 2d 1, 9, 816 N.E.2d 272, 277 (2004) (quoting RESTATEMENT (SECOND) OF AGENCY § 14N, cmt. a, at 80 (1958)).  On the other hand fees due under contract  has a more limited role as to fiduciary duty; and the fact that counsel seeks to be paid for services in chapter 13 under contract does not create a conflict of interest.    Treating the compensation issue as a matter of contract, and given the minimal fees received prior to filing, it is clear the parties anticipated payment of the fees through the plan, as permitted under §330.  Under Illinois law even a fiduciary relationship can exist even before a retainer contract in certain situations, such as the attorney-client relationship.  RESTATEMENT (SECOND) OF AGENCY § 390 cmt e. (1958).  This  duty requires full disclosure of the compensation under the fee contract and consequences thereof.   The application of the pre-retention fiduciary duty is based on three reasons.  1) The debtors are debtors with primarily consumer debts.  The duty is designed to protect vulnerable and unknowledgeable parties.  2) the agreements were signed on the eve of bankruptcy, when debtors are often anxious and desperate to retain houses, vehicles, or other property.  3) Even when a debtor is not vulnerable and unknowledgeable, there is a heightened reliance on fair dealing from a prospective agent in setting the terms of compensation where the implications of the fee structure on the interests of the client can only be known based on information within the control of the prospective agent.  This applies here where the implications of the fees could only be known by reference to the Bankruptcy Code's provisions for payment of fees from the estate and provisions of the chapter 13 plan.  Because in the Carr case the affidavits showed the debtor understood the implication of early payment of fees would result in a practical inability to retain his car if the case were dismissed early, the objection is overruled in that case, and sustained in the Lindsey case where no such understanding has been shown.  Both fee applications were denied for failing to comply with the local rule requiring filing of any agreement pertaining to compensation be signed and filed with the court. The rule encompasses agreements disclosing that the attorneys would be paid ahead of other creditors and the debtors' acknowledgement and acquiescence of that fact.  While counsel filed the locally mandated Court Approved Retention Agreement, under the local rule they are also required to file the required full written agreement regarding their understanding as the precise manner of the attorneys compensation under the chapter 13 plan.  ,

  In In re: Tony Randall & Wendy Randall, Debtors., No. 17-33322-HDH13, 2018 WL 1737620 (Bankr. N.D. Tex. Apr. 10, 2018) the Court found that not only was post-petition interest on prepetition domestic support obligations ('DSO's) permitted to be paid in a chapter 13 plan, but such interest was required to be paid in the plan even when other unsecured creditors were not receiving 100% of their claims.  The debtors initially scheduled the DSO claims to be paid in full plus interest, but the chapter 13 trustee objected.  When the plan was amended to omit interest, the State Attorney General's office objected,  The DSO claims totaled $47,112.26.    The Court recognized a split of authority in the 5th Circuit.  In re Hernandez, found that postpetition interest may not be paid through the Chapter 13 plan. 2007 WL 3998301 (Bankr. E.D. Tex. Nov. 15, 2007).  This case reasoned that even though the BAPCPA amendments moved DSO claims from 7th priority to 1st in §507(a)(1)(A), priority status was only granted to such claims owed as of the filing of the petition.  Since no interest was owed as of filing, it was not entitled to priority status.  Also, §507 only applies to allowed claims, and §502(b)(2) mandates disallowance of claims for unmatured interest.  Contrary conclusions were found in . In re Resendiz, 2013 WL 6152921 (Bankr. S.D. Tex. Nov. 20, 2013) and In re Lightfoot, 2015 WL 3956211 (Bankr. S.D. Tex. June 22, 2015).  These cases rely on §104(14A) which expressly includes interest accruing under nonbankruptcy law in the definition of a DSO.  As Texas Family Code § 157.265 provides for 6% interest per year on DSO claims, such interest must be includes as part of the claim in bankruptcy.  §1322(a)(2) requires that a plan provide for payment in full of all priority claims.  As to §502(b)(2), the Lightfoot case found that the more specific provision of §104(14A) superseded that rule as to DSO's.   The Court follows the reasoning of the 2nd line of cases.  It stressed though that DSO's are only entitled to interest where state law so provides, and even in Texas not all DSO obligations are entitled to interest.    Michael Barnett.  www.hillsboroughbankruptcy.com

As a bankruptcy lawyer, I see many hard working people who fall prey to these internet payday loans. And they are afraid if they stop paying the loans that somehow the consumer had done something illegal.  So I’m happy to have proof of what I tell them. In most cases it’s the internet payday loan […] The post Scott Tucker King of Indian Tribe Payday Loans Fined a Billion and Convicted by Robert Weed appeared first on Robert Weed.

Here at Shenwick & Associates, many of the people we work with have student loan debt.  This should come as no surprise, considering that Americans owe more in student loan debt than credit card debt.  We’ve written about student loan debt and how difficult it is to discharge in bankruptcy previously (mostly recently here).  This month, we wanted to tell you about a pending case that may offer hope for some student loan debtors. Let’s start by looking at the relevant provision of the Bankruptcy Code.  Section 523 governs exceptions to the discharge of debt, and § 523(a)(8) provides that: A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for-an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or an obligation to repay funds received as an educational benefit, scholarship, or stipend[.] This case (Haas v. Navient Solutions) revolves around the question of what an “educational benefit” is.  One of the co–plaintiffs (Haas) borrowed money to prepare for the Texas bar exam in 2009.  The other co–plaintiff (Shahbazi) borrowed money to attend a unaccredited technical school in Virginia in 2002.  Haas filed for bankruptcy in 2015 and Shahbazi filed for bankruptcy in 2011.  In both cases, the debtors listed the debt to Navient’s predecessors (which we will just refer to Navient, since two Navient entities are the co–defendants) as non–priority general unsecured claims instead of priority unsecured claims.  Navient was notified of the discharge, but instead of filing adversary proceedings (bankruptcy litigation) to contest the dischargeability of these debts, Navient and various collection agencies continued to try to collect on these debts, which the co–plaintiffs allege to be in violation of the discharge injunction in § 524(a)(2) of the Bankruptcy Code. So Haas and Shahbazi filed their own adversary proceeding against Navient, contending that the debts they were incurred were not “Qualified Education Loans” excepted from discharge, but instead “Consumer Education Loans” that targeted students attending unaccredited schools, and seeking class–action status.   Navient moved to dismiss the case, which was denied last month. The case is far from over, and if even if the plaintiffs and their class are successful, this would only affect a small portion of student loan debtors.  In our experience, most clients have qualified educational loans, which are very difficult to discharge in bankruptcy without undue hardship.  However, for student loan debtors who have been on the ropes since the seminal Brunnerdecision and the changes to dischargeability of educational loans in BAPCPA, this is welcome news.  For any questions about your student loan debt, please contact Jim Shenwick.

By Brandon Kochkodin (Bloomberg) -- The FBI raid on the offices of President Donald Trump’s lawyer, Michael Cohen, included one surprising aspect: taxi medallions. Agents were seeking documents on Cohen’s ownership of “numerous” New York City taxi medallions, according to CNN. That might not be as salacious as records showing payments to an adult film star or to a former Playboy Playmate, but taxi permits were once a bonanza for alternative asset investors. Prices for the permits jumped 60 percent from March 2011 to March of 2014 when they sold for $1 million each. The S&P 500’s total return in that period was 53.2 percent. But the entrance of Uber and Lyft has slashed their value. Permit prices dropped almost 80 percent by March 2017 before recovering a bit over the last year. It’s not clear when Cohen made his investment. ©2018 Bloomberg L.P.

The March 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are James Shenwick’s comments about those sales results.1. The volume of sales continues to remain low. In March, there were only 29 taxi medallion sales (excluding stock transfers).2. 14 of the 29 sales (almost half) were foreclosure or estate sales, which means that either: (1) the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion or; (2) the medallion owner died, and the estate was selling the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).  An additional transfer was from an individual to an LLC for no consideration, which we have also excluded from our analysis.3. The 14 regular sales they ranged from a low of $163,333 (four medallions), to six medallions at $180,000, to two medallions at $225,000, and two medallions at the higher end of the price scale at $300,000 and $350,000.4. The low sales volume seems to indicate that at this stage of the market, not many parties are involved in selling or buying medallions, possibly due to the fear that medallion prices may further decrease.5. The median of March’s sales was $180,000, a $17,500 (9 %) decrease from February’s median sales of $197,500.6. However, politicians have spoken recently about capping the number of ride–share app drivers and/or instituting congestion pricing in Manhattan – either of these measures would stabilize or increase the price of medallions.Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at [email protected].

By Danielle D'OnfroNestled among several potential blockbuster cases in the court’s penultimate week of argument this term, there’s a quiet personal bankruptcy case. The case, Lamar, Archer & Cofrin, LLP v. Appling, ostensibly concerns the breadth of the word “respecting” in the Bankruptcy Code. But in simpler terms, the case is about how the Bankruptcy Code treats dishonest debtors. The goal of consumer bankruptcy is giving debtors a “fresh start” so that they can get on with their lives despite past financial missteps. The Bankruptcy Code does this by discharging debtors’ personal responsibility to repay many, but not all, obligations incurred before they filed their bankruptcy petitions. Of course, relieving debtors of their obligations necessitates that their creditors bear losses.And that result, in turn, has its own ripple effects throughout the economy — from increasing the cost of credit for everyone to further bankruptcies when a creditor cannot itself absorb the loss. The Bankruptcy Code thus balances the competing goals of providing individuals the relief they need and minimizing unfairness to creditors. One way the Bankruptcy Code does this is by limiting bankruptcy’s discharge to “honest but unfortunate debtors.” Debtors remain personally liable for any non-dischargeable debt even after the conclusion of their cases, meaning that they can face wage garnishment and any other method of collection authorized under state law. This case arises from a dispute between Lamar, Archer & Cofrin, LLP, an Atlanta law firm, and one of its former clients, R. Scott Appling. Like many bankruptcy disputes, this one involves questionable financial and strategic choices by both parties. In 2004, Appling hired Lamar and another firm to represent him in a dispute against the former owner of his business. By March 2005, Appling’s bill had grown to $60,000, which he could not (or would not) pay at the time. He allegedly induced Lamar to continue working on the case by explaining that he was expecting a tax refund of approximately $100,000 that would enable him to pay the outstanding bill. Appling contends that he never promised that the refund would be that large, but merely represented his accountant’s best estimate. In fact, Appling received a far smaller tax refund in October 2005 and promptly spent the money on business expenses. According to Lamar, in November 2005 Appling claimed to still be waiting for his tax refund; Lamar thus kept working for Appling until June 2006, when the firm learned the truth. The firm sued and won a judgment for $104,179 in Georgia state court in October 2012. Three months later, Appling filed for Chapter 7 bankruptcy and Lamar filed an adversary proceeding in the Middle District of Georgia, seeking a determination that Appling’s $104,000 outstanding bill was non-dischargeable under 11 U.S.C. § 523(a)(2)(A) because it was “obtained by fraud.” That case went to trial in September 2014, in order to resolve the parties’ competing accounts of two conversations that had occurred nearly a decade earlier. The provision at issue is 11 U.S.C. §523(a)(2), which states: “A discharge … does not discharge an individual debtor from any debt … for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.”  Then, §523(a)(2)(B) says: “(B) use of a statement in writing—(i) that is materially false; (ii) respecting the debtor’s or an insider’s financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive.”  Whether one should read an “or” between §523(a)(2)(A) and §523(a)(2)(B) is one of the issues in this case. The provision at issue is 11 U.S.C. §523(a)(2), which states: (a) A discharge … does not discharge an individual debtor from any debt— … (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by— (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition; (B) use of a statement in writing— (i) that is materially false;(ii) respecting the debtor’s or an insider’s financial condition;(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and(iv) that the debtor caused to be made or published with intent to deceive.Whether one should read an “or” between §523(a)(2)(A) and §523(a)(2)(B) is one of the issues in this case. Appling filed a motion to dismiss, arguing that his debt did not fall within the exception under Section 523(a)(2)(A) because the alleged misrepresentation was a “statement respecting [his] financial condition.” The bankruptcy court denied the motion, reasoning that the term “statement respecting the debtor’s . . . financial condition” covers only statements about a debtor’s “overall financial condition or net worth.” Because Appling allegedly lied about a single asset — his tax refund — he did not lie about his overall financial condition. The court did not grapple with Section 523(a)(2)(B). The U.S. Court of Appeals for the 11th Circuit reversed, joining the U.S. Court of Appeals for the 4th Circuit in holding that a statement about a single asset could be a statement respecting the debtor’s financial condition. It went on to find that Lamar could not bring a claim because Section 523(a)(2)(B) provides that misrepresentations about the debtor’s financial condition are only non-dischargeable if made in writing. The Supreme Court granted certiorari on the question of “whether (and, if so, when) a statement concerning a specific asset can be a ‘statement respecting the debtor’s … financial condition’ within Section 523(a)(2).” In their briefing, the parties offer strikingly different interpretations of Section 523(a)(2). Lamar argues that the Supreme Court should follow the U.S. Courts of Appeals for the 8th, 10th and 5th Circuits and hold that statements about a single asset are not statements respecting the debtor’s financial condition. Under this view, only misrepresentations about the debtor’s overall personal balance sheet fall within Section 523(a)(2)(A)’s exception (really, the exception to the exception, because dischargeability is the norm). Appling, for his part, contends that whatever statements he may have made about the tax refund were statements respecting his overall financial condition and therefore fell within the exception. He rests his argument on the ample precedent interpreting terms like “respecting” and “relating to” broadly. A group of law professors, represented by the Institute of Bankruptcy Policy, make a third, and perhaps more appealing, argument in an amicus brief supporting Appling. They maintain that this case need not test the boundaries of “respecting” because Appling actually intended to talk about his financial condition — his ability to pay his bills as they came due — when he spoke about his tax return. Although the current Bankruptcy Code dates only to 1978, Congress built the code on nearly a century of prior bankruptcy practice. Both parties argue that this historical practice militates in favor of their desired reading of the statute, but Appling’s amici have the more sophisticated argument.They argue that Section 523(a)(2)(A) in the 1978 Code merely re-enacted provisions from the Bankruptcy Act of 1898, as amended in 1903, 1926 and 1960. The 1903 and 1926 amendments to the code codified the discharge exception, they argue, but limited it to cases in which the debtor made a written misrepresentation. Consumer lenders, being a creative lot, realized that their debt would be non-dischargeable if the debtor lied in the origination process, and so they began requiring debtors to sign forms misrepresenting their assets in the origination process. Congress attempted to fix this problem in 1960 when it provided that false written financial statements regarding a debtor’s financial condition were not a basis for denying a discharge unless the lender actually relied on the falsehood. Before Congress replaced these provisions with Section 523(a)(2) in 1978, the weight of the case law held that a statement about any one of a debtor’s assets could be a statement about the debtor’s financial condition. If Congress meant to incorporate this case law, then, many statements about a debtor’s assets would qualify under the exception to non-dischargeability. This interpretation is appealing in practical terms: If a homeowner says “my house is in foreclosure,” the listener knows something about that homeowner’s overall financial condition, just as she does if the same homeowner says “my net worth is a million dollars.” Lamar responds, though, that this approach stretches the word “respecting” too far, arguing that it “takes a sledgehammer” to the well-established principle that debt obtained by fraud is non-dischargeable. Depending on how it resolves the main issue in the case, the court may also need to decide how Section 523(a)(2)(B)’s “use of a statement in writing” language fits with Section 523(a)(2)(A)’s exception to non-dischargeability. Appling and the 11th Circuit treat this provision as an exception to the exception to the exception: Written fraudulent statements about the debtor’s financial condition on which the creditor relies render a debt non-dischargeable. In its opinion, the 11th Circuit explained that this rule “may seem harsh after the fact, especially in the case of fraud,” but “it gives creditors an incentive to create writings before the fact, which provide the court with reliable evidence upon which to make a decision.” The 11th Circuit’s reading seems like the most plausible interpretation of the statutory text. At the same time, though, it raises some difficulties. Lamar argues that this reading involves the court substituting its own policy preferences for those of Congress. Indeed, the 11th Circuit’s view is somewhat difficult to square with the very problem that the 1960 amendment sought to fix: shady lenders encouraging borrowers to falsify documents to render their debts non-dischargeable. Moreover, Lamar’s amicus, the National Federation of Independent Business Small Business Legal Center, raises additional states’ rights concerns, calling this reading an encroachment on the states’ prerogative to create their own statutes of frauds. Frankly, it is surprising that the Supreme Court even chose to hear this case. Although the case largely turns on a legal question, the parties still seem to be fighting about factual premises, arguing about who said what to whom 10 years before the trial. That said, it is good to see the court willing to tolerate a slightly messy vehicle to bring much-needed clarity to the Bankruptcy Code, especially because, as I’ve observed before, messy vehicles are the norm in the bankruptcy world.© 2018 SCOTU Sblog