Judge Grandy in Illinois rejected a chapter 13 trustee's request to require debtors to pay interest to unsecured creditors on a 100% plan if they were extending the payment over a longer term than would have been required if they paid all of their disposable income. In re Eubanks, No. 17-40227, 2018 WL 947646  (Bankr. S.D. Ill. Feb. 16, 2018).  The debtors proposed a plan with a five year repayment schedule paying 100% to the unsecured claims.  The means test, form 122C-1 and 122C-2 showed $1,443.71 disposable income, but the plan proposed to only pay $1,220/month for 60 months.  The requirements as to disposable income in chapter 13 is set forth in Section 1325(b)(1) of the Bankruptcy Code.  This reads:(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or(B) the plan provides that all of the debtor's projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.  The requirement is set forth in the disjunctive.  Debtors are requirement to meet either of the two requirements: paying 100 to unsecured creditors or paying all their projected disposable income, not both.    The trustee also argued that the debtors failed to meet the good faith requirement of §1325(a). The trustee asserted that good faith would require either (1) a guarantee payment of excess disposable income in post confirmation modifications of the plan, or (2) to accelerate payment to unsecured creditors by including all disposable income in their monthly plan payment. The debtor argued that pursuant to Matter of Smith, 848 F.2d 813 (7th Cir. 1988) that the 'totality of circumstances' test for good faith continued to apply after passage of BAPCPA. as modified by §1325(b)(1) which removed the prior requirement for a specific payment or percentage payment to unsecured creditors. The trustee countered with In re Smith, 286 F.3d 461 (7th Cir. 2002) asserting that the 7th Circuit revised and expanded the good faith analysis by incorporating the following factors into the good faith inquiry: (1) whether the debtor is really trying to pay creditors to the reasonable limit of his ability or trying to thwart them; (2) whether the plan accurately reflects the debtor's financial condition and affords substantial protection to unsecured creditors; and (3) whether the plan, taken as a whole, indicates a fundamental fairness in dealing with one's creditors. In re Smith, 286 F.3d at 466.    Judge Grandy found the earlier Smith case more on point as to the disposable income argument.  Since Congress has now dealt with the issue [of a debtor's ability to pay] in the ability-to-pay provisions, there is no longer any reason for the amount of a debtor's payments to be considered as even a part of the good faith standard.... Only where there has been a showing of serious debtor misconduct or abuse should a chapter 13 plan be found lacking in good faith.Matter of Smith, 848 F.2d at 820–21 (citing 5 Collier on Bankruptcy, ¶ 1325.04[3] at 1325–17 (15th ed. 1988)   In order to fail the good faith test of §1325(b), the trustee must cite some other issue besides failure to pay all disposable income if the plan otherwise pays 100% to unsecured creditors.  For example a debtor who deducts substantial payments on the means test for luxury items may fail the good faith test despite satisfying the technical requirements of §1325(b). The court followed the intermediate approach to good faith.  If the proposed plan payment meets the requirements of § 1325(b)(1)(A) or (B), the amount of the payment will not be considered in a good faith analysis unless other, additional facts suggest bad faith. The ultimate determination of good faith will be made on a case-by-case basis using the Seventh Circuit's “totality of circumstances” test. That test includes consideration of such factors as (1) whether the plan accurately states the secured and unsecured debts of the debtor; (2) whether the plan correctly states debtor's expenses; (3) whether the percentage of repayment of unsecured debts is correct; (4) whether inaccuracies in the plan amount to an attempt to mislead the bankruptcy court; (5) whether the proposed payments indicate a fundamental fairness in dealing with creditors; (6) whether the debtor is really trying to pay creditors to the reasonable limit of his ability or trying to thwart them; and (7) whether the plan accurately reflects the debtor's financial condition and affords substantial protection to unsecured creditors.  As the only objection raised by the trustee was as to disposable income, the objection was overruled.     The trustee also requested that the debtor commit the excess disposable income to any future plan modifications.  Even if no such requirement exists under §1325(a)(3) the trustee argues for such a requirement under §105(a) of the code.  Such a requirement was included in the case of In re Crawford, 2016 WL 4089241 (Bankr.W.D.Tx. Aug. 24, 2016).  Judge Grandy rejected that argument, finding that nothing in the Code requires Debtors to make such a pledge. Furthermore, the Court finds that it cannot use its equitable powers under § 105(a) to impose the pledge as a condition of confirmation. Doing so modifies § 1325 by adding a requirement for confirmation not otherwise found in § 1325(a) or (b). Section 1325(a) provides that the court shall confirm a plan if all provisions of that statute are satisfied. Section 1325(b) contains additional provisions that must be met if an objection to confirmation is filed. In this case, the Debtors have satisfied the provisions of both § 1325(a)and § 1325(b). Using § 105(a) to impose further confirmation requirements—thereby modifying the Code's provisions governing chapter 13 plan confirmation—is clearly prohibited by Law v. Siegel, 134 S.Ct. 1188 (2014).  Finally, the trustee argued that §1325(b)(1)(A) requires the payment of interest to unsecured creditors if all disposable income is not paid in the plan.  The Trustee focuses on the language of § 1325(b)(1)(A). As previously stated, the statute provides that if the Trustee or an unsecured creditor objects to confirmation, the court may not approve the plan “unless, as of the effective date of the plan, the value of property to be distributed under the plan on account of such claim is not less than the amount of such claim.” 11 U.S.C. § 1325(b)(1)(A) (emphasis added). According to the Trustee, a present value requirement is inherent in the statute's language.  He compares the statute's language to that found in § 1325(a)(4) (liquidation test) and § 1325(a)(5)(B)(ii) (cramdown provision). The pertinent wording contained in those two statutes is as follows: “the value, as of the effective date of the plan, of property to be distributed under the plan.” 11 U.S.C. §§ 1325(a)(4) and 1325(a)(5)(B)(ii) (emphasis added).  Judge Grandy found that the different placement of the word value in the statute changed the resulting requirement as to interest.  The phrase “as of the effective date of the plan” in § 1325(b)(1) precedes the word “value.” In §§ 1325(a)(4) and (a)(5)(B)(ii) (and other “present value” Code provisions), however, the phrase “as of the effective date of the plan” follows and clearly modifies the word “value.” In re Stewart–Harrel, 443 B.R. 219, 222 (Bankr.N.D.Ga. 2011). As explained by the court in  In re Edward, 560 B.R. 797 (Bankr.W.D.Wa. 2016), “the phrase ‘as of the effective date of the plan’ [in § 1325(b)(1) ] is simply a reference to when the Court determines what is being paid to the allowed unsecured claims, i.e., either (A) the amount of such claim, or (B) the debtor's projected disposable income in the applicable commitment period.” In re Edward, 560 B.R. at 800 (emphasis in original). See also In re Stewart Harrel, 443 B.R. at 222 (“effective date of the plan” in § 1325(b)(1) refers to the date as of which the court is to make the determination of either (A), payment in full, or (B), payment of all projected disposable income). Collier's supports this interpretation of § 1325(b)(1)(A):[T]his subsection requires only payment of such claims in full, and not payment of property having a “value as of the effective date of the plan” equal to full payment. It does not require payment of the present value of the claim, though such payment may be independently required under the best interests of the creditors standard.... Although the words “as of the effective date of the plan” appear earlier in subsection 1325(b), their presence does not appear to indicate a requirement of plan payments having a present value equal to the full amount of unsecured claims. If this had been Congress's intent, Congress would presumably have used the same language as it used elsewhere to indicate a present value test, “value, as of the effective date of the plan....” It seems more likely that the words “as of the effective date of the plan” in subsection 1325(b) refer only to the timing of the court's analysis under that subsection.8 Collier on Bankruptcy, ¶ 1325.11[3] at 1325–57 (16th ed. 2017).   §1325(a)(4) logically would require payment of interest in that chapter 7 creditors have a right to immediate payment of their claim upon liquidation of nonexempt assets, thus interest is required in chapter 13 to put the creditors back in the position they would have been if it had been a chapter 7 case.  However creditors in chapter 13 have no such right to immediate payment of their claims.  Michael Barnett Hillsboroughbankruptcy.com

   A credit union found out the hard way that the sole fact that a debt was incurred fairly recently before filing chapter 7 does not make it nondischargeable.  In IN RE: BYRON STEWART DEBTOR LOUISIANA CENTRAL CREDIT UNION PLAINTIFF V. BYRON STEWART DEFENDANT, No. 17-11031, 2018 WL 909970 (Bankr. E.D. La. Feb. 14, 2018), a credit union sued a debtor under §727(a)(4) and (a)(5) as well as §523(a)(2)(A) and (a)(6) over a refinancing of a loan done 62 days prior to filing a chapter 7 petition.  The loan was originally taken out in 2006, and the Mr. Stewart periodically refinanced the loan with the credit union, taking out additional advances on each refinancing.  The payments on the loan were made by debits against his wages.  In February 2017 debtor sought a 6th refinancing with a $2,000 advance to pay down past due loans to three finance companies.  The credit union ran a credit report showing he was past due on the three finance company debts, but agreed to refinance the current balance of the credit union loan of $1,753.21 at 24% and provide Mr. Stewart an additional $500.  The credit union was aware this would be insufficient to bring the finance company loans current.  No financial statement was requested by the credit union for this refinancing.  In April 2017 one of the finance companies sued Mr. Stewart, resulting in a chapter 7 bankruptcy filing on 24 April 2017.  Mr. Stewart had made 9 weekly payments on the refinanced credit union loan at the time of filing, and was current on the loan.  The credit union filed a complaint objecting to the discharge under §727(a)(4) and (a)(5) and objecting to the dischargeability of their debt under §523(a)(2)(A) and (a)(6).  Section 727 provides:(a) The court shall grant the debtor a discharge, unless- ...(4) the debtor knowingly and fraudulently, in or in connection with the case-(A) made a false oath or account; ...(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities; ...  The credit union did not attend the 341 meeting, and did not seek to examine the debtor under Rule 2004 or to depose the debtor.  It did not present any evidence of a misrepresentation of assets or a loss of assets, and the counts under §727 were denied. Section 523 provides:(a) A discharge under section 727 ... does no 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, false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;...(6) for willful and malicious injury by the debtor to another entity or to the property of another entity; ...     In order to show a fraudulent representation, a creditor must show 1) the debtor made representations; (2) at the time they were made the debtor knew they were false; (3) the debtor made the representations with the intention and purpose to deceive the creditor; (4) that the creditor relied on such representations; and (5) that the creditor sustained losses as a proximate result of the representations.  Matter of Selenberg, 856 F.3d 393, 398 (5th Cir. 2017).   At the time of the refinancing, the credit union was aware Mr. Stewart wanted $2,000 to catch up the finance company loans, and had pulled a credit report showing the debts and delinquency on them, as well as that the amount provided in the refinancing would be insufficient to bring the debts current.  The evidence does not support any misrepresentation by Mr. Steward, rather shows he intended to, and in fact did pay the credit union until the lawsuit by the finance company was filed.     The credit union also sought to have the debt determined nondischargeable under §523(a)(6).  This requires a showing of willful and malicious injury.   An injury is “willful and malicious” where there is either an objective substantial certainty of harm or a subjective motive to cause harm.  Mr. Stewart's repeated prior refinancing and payments of this debt show there was no  “objective substantial certainty of harm and continued payments until the bankruptcy filing in this case show that he had no “subjective motive to cause harm.”  Thus the credit union failed to meet it's burden under §523.  Mr. Stewart's counsel requested that the credit union pay his fees under Section 523(d).  This provides:If a creditor requests a determination of dischargeability of a consumer debt under subsection (a)(2) of this section, and such debt is discharged, the court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shall not award such costs and fees if special circumstances would make the award unjust.  Since the credit union filed under §523(a)(2) and the request was denied, the court is required to assess fees against it if it finds the complaint was not substantially justified.  Substantially justified” means “justified to a degree that could satisfy a reasonable person.  Pierce v. Underwood, 487 U.S. 552, 566, 108 S.Ct. 2541, 1550 (1988).    The collection manager made the decision to file the complaint because she inaccurately believed that a debt incurred within 90 days of the bankruptcy could not be discharged in the bankruptcy.  It was frivolous to file such a suit without researching the law and understanding the burden of proof.  The credit union did no investigation prior to filing, such as questioning the debtor at the 341 meeting or deposing him; and did not ask whether there was a change in circumstances such as the filing of the suit by the finance company. The great majority of the credit union loan was the refinancing of the prior loan.  The continued payments until the filing also show a lack of fraudulent intent.    The Court granted Mr. Stewart's counsel's request for fees to be taxed against the credit union.Michael Barnett hillsboroughbankruptcy.com

By Andrew Kreighbaum The Department of Education signaled Monday that it is interested in tweaking the standards used for determining whether student loan debt can be discharged in bankruptcy. That could point to an opening for potential bipartisan cooperation between the department and Democrats like Senator Elizabeth Warren, who have long sought to loosen bankruptcy law so student borrowers can discharge their debt. However, what steps the department might take in that regard, including issuing new guidance or working with Congress to change the law, are unclear. In a Federal Register notice, it requested public comments on the process for evaluating claims of “undue hardship” -- the standard student borrowers must clear to be able to discharge their loans through bankruptcy. An Education Department spokeswoman said the notice should speak for itself. The document doesn’t indicate the steps the department may take, but consumer groups that work on student loans and bankruptcy issues said it would be hard to narrow the current standards. Getting student loans discharged through bankruptcy is notoriously difficult. A 2005 federal law barred most student loan borrowers from that option unless they could demonstrate that they would suffer undue hardship from being forced to pay the loans. Congress, however, has never defined what undue hardship means and didn’t delegate to the department the ability to do so. That’s left it to the courts to establish their own standards. But debt holders and Department of Education contractors have often sought to aggressively block those undue hardship claims via litigation. “It’s a very difficult hurdle for most consumers,” said John Rao, an attorney with the National Consumer Law Center and an expert on bankruptcy issues. In 2014, the obstacles created by contractors prompted congressional Democrats, including Warren, to write to then education secretary Arne Duncan urging new federal guidance that would make clear specific minimum criteria for an undue hardship claim. Among those criteria, the Democrats wrote that receiving disability benefits under the Social Security Act or being determined to be unemployable because of a service-connected disability should qualify a borrower as having an undue hardship. Contractors should accept proof of those or other criteria from a borrower without a formal litigation discovery process, the Democrats said. The guidance released by the department the following year disappointed many Democrats and consumer advocates. Clare McCann, deputy director of higher education policy at New America and a former Obama Education Department official, said the department’s call for comments appears to signal that it wants to broaden the definition of undue hardship. She said whatever change the department or Congress makes will have to strike the proper balance. “You want to make sure it captures people who aren’t able to pay and won’t be able to pay over the long run, so you’re not wasting energy collecting debts you’ll never be able to collect on,” she said of the standards. Opening up bankruptcy standards too wide, McCann said, could mean the federal student loan program becomes much more costly. A report this month from the Department of Education’s inspector general found that the popularity of income-driven repayment plans and loan forgiveness programs could mean the federal government soon starts losing money on the student loan program. But Rao said only a small percentage of consumer borrowers file for bankruptcy now. “These are individuals who have some kind of hardship that is lasting, or they’re in a position where maybe they went to college and never got a degree,” he said. “In the case of some borrowers, they’re just not going to be able to repay the loan.” Jason Delisle, a resident fellow at the American Enterprise Institute, said after the addition of multiple income-driven repayment programs for student loans since 2005, there is less of a case to be made for widening bankruptcy standards for federal student loans than for private loans. “There are costs that go well beyond discharging loans for people who can’t pay,” he said. “There are also costs to discharge loans for people who can pay.”  Copyright 2018 Inside Higher Ed.  All rights reserved.

The fourth quarter of 2017 was another slow period for Fifth Circuit opinions dealing with bankruptcy.  There was only one published opinion and there were several opinions that I found on the Fifth Circuit's page but were not in LEXIS.  Nevertheless, here they are for your consideration.   The cases cover mootness, standing, and verbal statements about financial condition.  Dick v. Colo Hous. Enters., LLC, 872 F.3d 709 (5th Cir. 10/4/17)Debtor sought to prevent a foreclosure sale including filing several bankruptcies.  Two years after the last bankruptcy was dismissed, the substitute trustee posted the property for foreclosure.   The Debtor obtained a TRO in state court.  The Defendants removed the case to federal court.  The U.S. District Judge denied the request for a preliminary injunction.   The Debtor appealed and requested a stay pending appeal in the Fifth Circuit.   The stay was requested the day before the foreclosure sale and was approved the next day.  However, by this time, the substitute trustee had already conducted the foreclosure sale and sold the property to the lender.The lender moved to the dismiss the appeal as moot.    The Debtor argued that the Court could still grant relief since it could order the lender to rescind the foreclosure.   The Debtor relied on an unpublished opinion.   However, there was a published opinion stating that "[i]f the debtor fails to obtain a stay, and if the property is sold in the interim, the district court will ordinarily be unable to grant any relief."   Matter of Sullivan Central Plaza I, Ltd., 914 F.2d 731, 732 (5th Cir. 1991).   Based on the rule of orderliness, the Fifth Circuit declined to extend its prior unpublished opinion.   The Court dismissed the appeal as moot, stating, "this court simply cannot enjoin that which has already taken place."Khan v. Xenon Health, LLC (In re Xenon Anesthesia of Texas, PLLC), 698 Fed. Appx. 793 (5th Cir. 10/16/17)(unpublished)Xenon Anesthesia of Texas, PLLC ("Xenon Texas") filed chapter 7 bankruptcy.   Khan and Xenon Health, LLC ("Xenon Health") each filed claims.   Khan objected to Xenon Health's proof of claim.  Khan was previously a member of Xenon Texas.   However, he was compelled to transfer his interest to another party in state court proceedings.   After he was compelled to transfer his membership interest, he withdrew his proof of claim.The Bankruptcy Court found that because Khan was not an owner of the Debtor and had withdrawn his proof of claim, he was not a party in interest who was entitled to object to a claim.   The Fifth Circuit affirmed.     Tow v. Bulmahn (Matter of ATP Oil & Gas Corp.),  Case No. 17-30077 (5th Cir. 10/27/17)(unpublished)Trustee brought claims against Debtor's officers and directors for approving preferred stock dividends on the eve of bankruptcy and approving certain bonuses.    The District Court dismissed.   The Fifth Circuit affirmed.    It was not enough to say that directors collectively approved dividends.  It was necessary to show which ones voted in favor.  Additionally, it was not sufficient to allege that dividends harmed the company's long term viability without additional explanation.   Bonus claims were also dismissed due to failure to adequately allege why bonuses were excessive.The Fifth Circuit also affirmed the ruling dismissing claims against the officers and directors who received the bonuses.  It quoted a New Hampshire Bankruptcy Court decision which stated that "Bad business decisions without more cannot form the basis for a fraudulent conveyance action seeking recovery of compensation paid to an officer or a director."    The Fifth Circuit also affirmed the dismissal of related conspiracy claims and denial of leave to amend after the Second and Third Amended Complaints.Garner v. Pillar Life Settlement Fund I, LP (Matter of Life Partners, Inc.),  Case No. 16-11436  (5th Cir. 11/29/17)(unpublished)Life Partners, Inc. sold undivided interests in life insurance policies that were found to be securities.  The company filed chapter 11 and a trustee was appointed.   Two different groups of investors filed adversary proceedings seeking class action status.   The class actions were consolidated and the reference was withdrawn to the District Court.   The Trustee and the named Plaintiffs  sought to certify a class for settlement purposes.   The District Court referred the matter to the Bankruptcy Court which conducted a hearing and recommended approval of the settlement.  The District Court approved the settlement.   A group of investors appealed approval of the class action settlement.   Meanwhile, Life Partners confirmed a plan which incorporated the settlement.     The objecting investors did not appeal plan confirmation and the plan was substantially consummated.    The Fifth Circuit found that it could not grant any effectual relief based on appeal of only the Settlement Agreement.   As a result, it dismissed the appeal as moot.Haler v. Boyington Capital Group, LLC (In re Haler), 2017 U.S. App. LEXIS 27034 (5th Cir. 12/29/17)(unpublished)The Debtor, Randall Lee Haler, was Executive Vice-President of McKinney Aerospace, L.P., a company that repaired and refurbished business jets.  Haler told Boyington, a customer of McKinney Aerospace, that McKinney was in "very fine legally financial shape" and had plenty of cash.  Apparently the company was not in very fine financial shape because when Boyington cancelled the contract, the company was unable to refund the unused portion of the funds obtained.   Boyington sued in state court and obtained a fraud judgment against Haler for $258,000.    When Haler filed for chapter 7 bankruptcy, Boyington sued to obtain a non-dischargeable judgment under 11 U.S.C. Sec. 523(a)(2)(A).  The Bankruptcy Court granted summary judgment based on the state court judgment and the District Court affirmed.  The Fifth Circuit reversed.  A non-dischargeable judgment under 11 U.S.C. Sec. 523(a)(2)(A) cannot be based on a statement respecting the debtor or an insider's "financial condition."   Under 11 U.S.C. Sec. 523(a)(2)(B), a non-dischargeable debt can be based on a written statement of financial condition.   The intersection of these two subsections means that oral statements of financial condition can never result in a non-dischargeable debt.The Fifth Circuit found that Haler's statements were made concerning McKinney's financial condition and therefore could not result in a non-dischargeable judgment.   The Fifth Circuit reversed the lower courts.

As reported by the New York Times and the New York Post, on February 5th, a taxi driver drove up to the steps of City Hall and took his own life.  Douglas Schifter posted on Facebook that morning that he had worked 100-120 consecutive hours almost every week for more than 14 years. Despite his grueling work schedule, he was no longer able to afford health insurance or vehicle maintenance and repairs and had maxed out his credit cards.  He blamed Governor Cuomo, Mayor de Blasio and former Mayor Bloomberg for increasing the number of livery cars and taxis on the streets of NYC.We feel for Mr. Schifter and other taxi drivers and medallion owners; his story and other stories we have heard are modern-day tragedies. By way of background, for those who aren’t familiar with the taxi industry in New York City, taxi drivers either own their own medallion or lease the use of a medallion to drive in the city. Our taxi driver clients indicate that on average they are working 30% longer each week and regrettably earning 30 to 40% less money each week. Their competition from Uber, Via, Lyft and black cars has increased tremendously, along with the costs associated with driving a cab.For those drivers that purchased their medallion in the last three years, the situation is equally bleak. Three years ago, taxi medallions were selling for approximately $1,300,000 per medallion. Last month’s sales based on data from the TLC indicate that the average medallion is now selling for approximately $186,000 – a drop in value of approximately 86%. Moreover, many of our clients have refinanced their medallions through banks or credit unions, and with the drop in the value of taxi medallions, those taxi medallions are also “underwater” (the value of the medallion is exceeded by the debt secured by it). Additionally, our clients tell us that the costs associated with owning a taxi medallion, such as the TLC mandated costs and expenses, have increased as well.Unfortunately, for taxi drivers, there are no easy solutions, other than to stop driving and consider another occupation or job. Fortunately for owners of taxi medallions, relief may be found in filing for personal bankruptcy or doing asset protection planning and a workout with the bank or credit union that holds their taxi medallion loan.If you’re an overburdened taxi medallion owner struggling with an underwater medallion or other debt, please don’t despair–we can help you.  Please contact Jim Shenwick.

The third quarter of 2017 had one blockbuster opinion reaffirming the finality of exemptions in Chapter 7 and several less remarkable decisions.   It was a slow quarter for bankruptcy.Rosbottom v. Schiff (Matter of Rosbottom), 701 Fex. Appx. 330(5th Cir. 7/17/17)(unpublished) The Debtor and his spouse conveyed their interests in a Louisiana residence to trusts.   They then sold the residence for $1,850,000 and each deposited half the money in their own account.   In 2005, Rosbottom divorced his spouse.  He purchased a condominium in Dallas using his share of the proceeds from the Louisiana residence.  He then conveyed the condo to his trust.   Rosbottom filed for bankruptcy in 2009.   He was convicted of bankruptcy fraud and a Chapter 11 trustee was appointed.   After the Trustee confirmed a plan, the Trustee and the ex-spouse brought a declaratory judgment action seeking to determine that the Dallas condo was property of the estate.The Bankruptcy Court found that the trust created by Rosbottom was invalid under Louisiana law because it violated Louisiana law prohibiting the conveyance of an undivided interest in community property.    The Fifth Circuit affirmed.    Because the creation of the trust was a nullity under Louisiana law, it never gained title to the Louisiana property.  When that property was sold and a new residence was purchased, that property belonged to the Debtor and was property of the estate.Cowin v. Countrywide Home Loans, Inc. (In re Cowin), 864 F.3d 344 (5th Cir. 7/18/17)This was a dischargeability case under 11 U.S.C. Sec. 523(a)(4) and (a)(6).    The Debtor entered into a scheme to purchase properties being foreclosed for unpaid condominium assessments.   The properties were subject to mortgage liens which were not extinguished by the sales.   The Debtor then arranged for a related party to purchase the ad valorem tax liens against the property and conduct a second sale.   The tax lien sale extinguished the mortgage liens.  However, the excess proceeds should have been paid to the mortgage lenders.  Instead, they were diverted to a company controlled by the Debtor.   This happened four separate times.Several lenders, including Bank of America and Countrywide, filed suit.   The Debtor filed two chapter 11 proceedings which were dismissed.   After the second bankruptcy was dismissed, the bankruptcy court retained jurisdiction over the adversary proceedings.  The Debtor entered into an agreed judgment with Bank of America.  After the Countrywide case was tried but before the Bankruptcy Court entered findings and conclusions, the Debtor filed a chapter 7 proceeding.   However, the Debtor did not file a suggestion of bankruptcy until after the Bankruptcy Court ruled that the debt was nondischargeable.   The Bankruptcy Court entered judgment in favor of Countrywide after it learned of the second bankruptcy filing.   Bank of America sued for a nondischargeable judgment in the second case.On appeal, the Debtor argued that the agreed judgment with Bank of America was a new debt which could be discharged and that the Bankruptcy Court violated the automatic stay by entering judgment in the Countrywide adversary.  The Debtor argued that the Bankruptcy Court erred in imputing his co-conspirator's actions to him.   The Fifth Circuit found that  he participated sufficiently in the conspiracy to have personal liability and that actions of a co-conspirator could be imputed to him.   Thus, the Court found that Cowin's actions constituted larceny and were nondischargeable under 11 U.S.C. Sec. 523(a)(4).    The Fifth Circuit found that it did have a clear precedent on whether the automatic stay prevented the Bankruptcy Court in one case from entering a judgment after a second case was filed.   The closest precedent the court had was that filing a proof of claim in a bankruptcy case did not violate the stay.   However, the Court found that any error was harmless because the Bankruptcy Court could have simply lifted the automatic stay to enter the judgment.   The Court did not directly address the claim that the Bank of America judgment extinguished any possible claim for nondischargeability.   However, the Supreme Court decision in Archer v. Warner, 123 S.Ct. 1462 (2003) seems to foreclose this argument.Hawk v. Engelhart (In re Hawk), 864 F.3d 364 (5th Cir. 7/19/17), vacated, 871 F.3d 287 (5th Cir. 9/5/17)A debtor filed a petition under chapter 7 and claimed an IRA account as exempt.  No party objected to the exemption.    Later it turned out that the Debtor had withdrawn the IRA funds and had not re-invested them within 60 days as required by the exemption statute.   The Trustee sued for turnover and prevailed in the Bankruptcy Court.   Initially, the Fifth Circuit ruled in the Trustee's favor, finding that exempt property must retain its exempt status throughout the case.  On petition for rehearing, the Fifth Circuit withdrew its opinion and distinguished its prior Frost opinion.   It held that in a Chapter 13 proceeding, property that was exempt could come into the estate once it lost its exempt status because of 11 U.S.C. Sec. 1306(a)(1).   I was one of the amici who sought to overturn the original decision.I have written about the opinion in depth at "Fifth Circuit Walks Back on the Disappearing Exemption Case," XXXVII ABI Journal 1, 38-39, 89-90, January 2018.Bynane v. The Bank of New York Mellon. 866 F.3d 351 (5th Cir. 8/3/17)Plaintiff bought a home.   Mortgage was assigned to a securitization trust.  Bank of New York Mellon was the trustee for the trust.    Property was sold at foreclosure to Guzman.   Plaintiff filed suit in state court which was removed to federal court.    Plaintiff sought to remand based on incomplete diversity.    District Court denied the motion and dismissed plaintiff's claims.    Court found that citizenship of trust was based on citizenship of trustee.   Because Bank of New York was domiciled in New York it did not defeat diversity.    Court declined to hold that trust was a citizen of each of the domiciles of its shareholders.    Plaintiff also sought to establish that Guzman transferred property to a Texas resident who should be considered the real party in interest.   Court said that it would determine diversity based on the actual parties not a non-party with a potential interest in the case.Court also rejected argument that Bank of New York did not hold good title because assignment to it was forged or was not authorized.   Court ruled that obligor could not defend itself on a ground that rendered the assignment voidable but not void.    The without authority ground would only make the assignment voidable.   While a forged assignment would be void, the Plaintiff did not meet the pleading requirements of Fed.R.Civ.P. 9 to establish fraud.Court also rejected promissory estoppel claim based on alleged promise from Bank of America to sign a modification agreement.    However, Plaintiff did not plead what the terms of the alleged modification were so that claim failed.Dorsey v. U.S. Department of Education (Matter of Dorsey), 870 F.3d 359 (5th Cir. 9/1/17)Debtor sought a hardship discharge under 11 U.S.C. Sec. 523(a)(8).    After his creditors successfully moved to re-open the bankruptcy case to file proofs of claim, the Debtor filed a notice of appeal in the main case.    Thereafter, the Court conducted a trial on the adversary proceeding at which the Debtor failed to appear.    The  Debtor then sought to amend his statement of issues and record in the District Court to include matters relating to the adversary proceeding.   The District Court found that because there was not a notice of appeal in the adversary proceeding, it lacked jurisdiction over the attempt to appeal from the adversary proceeding.   The Fifth Circuit affirmed.

By WINNIE HU In Chicago, a 15-cent fee on Uber, Lyft and other ride-hailing services is helping to pay for track, signal and electrical upgrades to make the city’s trains run faster and smoother.Ride-hailing trips in Philadelphia are expected to raise $2.6 million this year for the city’s public schools through a 1.4 percent tax that will also generate more than a million dollars for enforcement and regulation of the ride-hailing industry itself. In South Carolina, a 1 percent ride-hailing fee has yielded more than a million dollars for municipalities and counties to spend as they choose.And Massachusetts began collecting 20 cents for every ride-hailing trip this month, earmarking the revenue to improve roads and bridges, fill a state transportation fund and even help a rival — the struggling taxi industry — adapt with new technologies and job training.As ride-hailing services become a dominant force across the country, they have increased congestion, threatened taxi industries and posed political and legal challenges for cities and states struggling to regulate the high-tech newcomers. But they are also proving to be an unexpected boon for municipalities that are increasingly latching onto their success — and being rewarded with millions in revenue to pay not only for transportation and infrastructure needs, but also a host of programs and services that have nothing to do with the ride-hailing apps.Now New York is seeking to join this growing wave with a new surcharge on ride-hailing and taxi trips that could become a central piece of an ambitious congestion pricing plan for Manhattan. A state task force has proposed fees of $2 to $5 per ride that would be among the highest in the nation — and could generate up to $605 million a year for the city’s failing subway system.“We used to have yellow cabs, we now have yellow cabs and black cars and green cars and every color in the rainbow and they cruise downtown Manhattan to pick up fares,” Gov. Andrew M. Cuomo has said. “That is one of the first places I would look to reduce congestion and to raise money.”Even as President Trump promotes a plan to rebuild the country’s tattered infrastructure, many local governments are not waiting to see what, if any, help Washington provides and are finding novel ways to pay for transportation and other public works projects.Across the nation, more than a dozen states and municipalities have imposed fees or taxes on ride-hailing companies or their passengers, or sometimes both, and many more are considering such measures, according to transportation and tax experts. Advocates for the charges contend that the ride-hailing cars should pay for using public streets and resources, contributing to gridlock and pollution, and siphoning passengers and fares from public transit.“If they want to share the pie, then they have to pay the price,” said Fayez Khozindar, the executive director of the United Taxidrivers Community Council, an advocacy group for taxi drivers in Chicago. “It’s fair because we know the city is short on funds and they want to fill the hole.”But some drivers and passengers for the ride-hailing companies say they have been unfairly singled out — in many places the new fees do not apply to taxis.“Uber and Lyft have always been an easy target for cities looking for new streams of revenue,” said Harry Campbell, a driver for Uber and Lyft in California who writes a popular blog, The Rideshare Guy.In New York and Chicago, Uber and Lyft have said they see their services as complementing the public transit systems and providing another option for riders, especially in transit deserts with few bus routes and train lines. Uber supports a congestion plan for Manhattan — even running an ad campaign backing the idea —as long as it does not single out for-hire vehicles.“A comprehensive congestion pricing plan that is applied to all vehicles in the central business district is the best way to fully fund mass transit, reduce congestion and improve transportation for outer borough New Yorkers,” an Uber spokeswoman, Alix Anfang, said. “A surcharge alone will not accomplish these goals.”Last year, New York State approved a 4 percent assessment on ride-hailing trips that begin outside New York City (rides in the city are already subject to state and local taxes). It is expected to raise $24 million a year for the state’s general fund though one state legislator, Senator John E. Brooks, a Democrat from Long Island, has proposed legislation to direct that revenue to local bus and commuter rail services. “We need to think creatively and outside of the box in order to improvefunding for local transit,” he said.The new fees and taxes are often part of broader regulatory measures as states and localities scramble to update tax codes and laws that have not kept up with the proliferation of app-based ride services. For instance, a Georgia state tax applies to rides in taxis but not ride-hailing cars even though they essentially do the same thing, said Carl Davis, research director for the Institute on Taxation and Economic Policy in Washington.“A lot of tax codes weren’t set up to take them into account,” Mr. Davis said.“They’re so new they didn’t even exist a decade ago. It’s an emerging tax issue, and states and localities are playing catch up.”South Carolina added a 1 percent fee to ride-hailing trips in 2015, in part to establish a single regulatory framework and block local efforts to charge prohibitively high fees to keep them out, state officials said. Now that fee has become a source of extra cash. The city of North Charleston, for instance, receives more than $30,000 annually and uses it for municipal operations.In Oregon, Portland officials initially barred Uber but eventually agreed to allow it and Lyft to operate through pilot programs. In 2016, the city sought to create a single standard for taxis and ride-hailing cars and assessed a 50-cent ride fee on both of them, which is paid by passengers.The 50-cent fee has added up to more than $8 million to help pay for city enforcement efforts, including spot inspections of cars and incentives to companies and drivers to choose wheelchair accessible cars. The fee “hasn’t been a barrier to the riders at all as the ride-hailing services have continued to expand,’’ said Dave Benson, a senior manager for the Portland Bureau of Transportation. “We haven’t seen the top yet.’’Still, many Portland taxi owners and drivers say the fee has hurt them more than their rivals. Noah Ernst, a superintendent for Radio Cab, said many taxi drivers feel the 50-cent fee means a smaller tip because passengers lump everything together when they pay. Taxi companies also face the headache of trying to collect the fee from drivers.He added that taxis continued to face more stringent safety, equipment and insurance requirements, and were targeted more often for inspections because their cars were easily identified by company colors and logos.“It’s not an equal playing field at all and we were trying to tell them this the entire time they were rewriting the code,” he said.As a result, he said, taxi companies are struggling and at least two have gone out of business. His company, Radio Cab, has lost more than a third of its business since 2015.Chicago officials have calculated that ride-hailing companies have cost the city about $40 million a year in lost revenue from transit fares, parking fees, licenses and permits. In 2014, the city imposed a 20-cent fee on ride-hailing trips in response to concerns that taxis were being undercut. Two years later, that fee went up to 50 cents, with an additional two-cent fee paid by the ride-hailing companies themselves. And now, the new 15-cent fee for the transit system brings the total to 65 cents for passengers.The city also assessed a separate $5 fee on passengers who were picked up or dropped off by ride-hailing cars at the major airports, the convention center and the Navy Pier, a popular tourist destination.The ride-hailing fees produced nearly $39 million for the city’s general fund in 2016, up from about $100,000 in 2014, according to city estimates. Last year’s revenue, which is still being collected, is expected to reach $72 million.“It’s a fairly new industry and once they actually got settled in the city we saw a lot of growth,” the Chicago budget director, Samantha Fields, said.Mayor Rahm Emanuel of Chicago, who has made modernizing the L a priority, said the new 15-cent fee was the first of its kind to raise money solely for public transit from those who might not even use it because they could afford the ridehailing cars. “I think it’s a progressive transportation tax,” Mr. Emanuel said. “It will make public transportation competitive with the rideshare industry.”In effect, Mr. Emanuel said, it will serve as a “backdoor approach” to fighting congestion created by the ride-hailing cars by helping shift more people — by their own choice — to the transit system. “There’s a congestion fee and I would just say the rideshare fee is kind of parallel parking into the same position,” he said.The 15-cent fee is projected to bring in $16 million this year, which will be turned over to the Chicago Transit Authority. The money will be used to secure additional funding through bond sales to pay for a total of $179 million in capital improvements, according to city officials.Kyle Whitehead, the government relations director for Active Transportation Alliance, a Chicago advocacy group for biking, walking and transit, said that the transit system contributes to the health of the city by getting more people out of cars, increasing exercise levels and reducing pollution — and it is now in dire need of money.“The public transit system benefits everyone who lives and works in the city, he said, “regardless of whether they’re using it.”Copyright 2018 The New York Times Company.  All rights reserved.

In Ohio and throughout the country, bankruptcy is identified by its chapters, most commonly Chapter 7 and Chapter 13 for consumers, and Chapter 11 for businesses. In fact, the chapters of bankruptcy have become ingrained in our culture, with people saying a struggling business may need to “file Chapter 11”. If you are struggling to make ends meet or feeling crushed under the weight of large debts such as credit card bills, you may be considering bankruptcy as an option. For most people in your situation, bankruptcy can help provide a fresh start within a number of months or years and, in the short-term, put a stop to creditor harassment, wage garnishment and other indignities. Before you take action to speak with an experienced Springfield, Ohio, bankruptcy attorney, take a few moments to learn about the types of bankruptcy that may be available to you as a consumer. Chapter 7 Bankruptcy This form of bankruptcy is the most direct route available to consumers who wish to wipe out unsecured debts such as credit card debt, medical bills, or deficiency balances due to auto repossession. For this reason it is often referred to as “straight bankruptcy”. In Chapter 7, non-exempt property (exempt property includes your home, a car, etc.) is converted into cash via liquidation. Then, a bankruptcy trustee will repay some of your outstanding debt and discharge remaining debts after 3-5 months.  Chapter 13 Bankruptcy Commonly referred to as “reorganization”, Chapter 13 is great for consumers who wish to get on solid footing without losing their assets. It can allow you the breathing room you need to refinance loans and create payment plans that work for you. After a three-five year repayment plan is complete, you will be free from your debts and have the opportunity to rebuild your credit. Ready for a fresh start? Contact us anytime for a free initial consultation. The post Ask A Springfield, Ohio Bankruptcy Attorney: What Chapter Is Right For Me? appeared first on Chris Wesner Law Office.

Chapter 13 Many financial hardships manifest themselves in neglected bills, including income taxes, child support, monthly mortgage payments, among others. Chapter 13 Bankruptcy establishes payment plans so individuals from all walks of life retain financial control. In summary, Chapter 13 Bankruptcy halts foreclosures, delays repossession of one’s home, and keeps the IRS from making contact regarding unpaid taxes. Ultimately, Chapter 13 Bankruptcy provides flexible, practical opportunities for clients to address existing debts. After three to five years of compliance with the conditions set by a payment plan, discharge of debt or complete debt forgiveness may occur, disposable income and other factors considered. Such factors assist in calculating the debt one must repay. Often, people seek Chapter 13 Bankruptcy as an option to prevent home foreclosures, make up for unpaid automobile bills, and pay back accumulating taxes. Chapter 13 Bankruptcy presents itself as more of a reorganization, rather than a formidable liquidation process. It’s a feasible option for individuals who aim to keep their secured assets, such as housing. When state bankruptcy exemptions cannot shield these assets, Chapter 13 Bankruptcy warrants consideration. Frequently, people wanting to secure their nonexempt property of considerably high value elect to file for Chapter 13 Bankruptcy. Life brings countless unforeseen circumstances, including expenses that seem overbearing and steep. One should not feel embarrassment while filing for bankruptcy, and an experienced, qualified attorney can facilitate the process, helping individuals reach their long-term financial goals. Located in Troy, Ohio, Chris Wesner gives each case a thorough and practical evaluation. Call Chris Wesner Law Office, LLC to discuss alternative payment plans under Chapter 13 Bankruptcy. The post Consult a Troy, Ohio Bankruptcy Attorney for Chapter 13 Needs appeared first on Chris Wesner Law Office.

Getting pulled over in Ohio and getting arrested for an OVI (operating a vehicle while intoxicated) is a serious offense. Even if it is the first time that you have ever been pulled over, you should consult a lawyer for your case. Here are some reasons why you need a lawyer for an OVI in Ohio. Usually prosecutors will offer a plea offer, especially for first time offenders. If you want a better deal than what they are offering, you should consult with a lawyer. However, if you were involved in an accident or injured someone else, the law is not as forgiving. You will need a lawyer to help you through a trial if you have caused injuries to someone else or done damage to property. They will discuss possible defenses in order to dismiss your case or lessen your crime. If it is not your first offense, your lawyer will work with you to get the best deal possible. The law is not generally as kind to those who have already been convicted of an OVI. You will need an experienced lawyer to weaken their case against you. By hiring an experienced lawyer, you will spend less time in court. A good lawyer will have your case all prepared and he or she will be ready to fight for you. There may even be times when you won’t have to show up in court because your lawyer will be able to handle it. If you are arrested for an OVI, don’t hesitate to contact us for all of your legal needs. We would be happy to talk to you about your case to see how we can help you. We will do everything that we can so that one mistake won’t change the rest of your life. The post Why You Need a Lawyer For a OVI in Ohio appeared first on Chris Wesner Law Office.