A Judge in North Carolina sanctioned a debtor's attorney under Rule 9011 regarding the signing and filing of a reaffirmation agreement with Ally Financial.  In re Griffin, No. 16-11017, 2017 WL 56049 (Bankr. M.D.N.C. Jan. 4, 2017).  The Court noted a number of issues.    First, was that the debtor's schedules I & J showed negative monthly income of $337.20 whereas the Debtor's Statement in S Upport of the Reaffirmation Agreement indicated expenses exactly equal to the income, with no itemization of how this mathematical result was reached.  Rather, the only explanation proffered on the cover sheet was that he would have less driving to save gas, less eating out and less shopping. The Court noted this explanation of a $337.20 reduction was inadequate given a total initial transportation expense of $139 and total food expense of $200.  The Court also complained how the reduction works out to exactly the amount of income stated.  At the hearing on the matter the Debtor testified that he reduced his television and cable bill by $47 and reduced his phone bill by $53.  Further he indicated he would be paying off two loans against his 401k in February and March 2017 saving an additional $58/month.   However, the Court appeared to expect an exact computation of the savings to reach the $337.20 reduction in expenses, which was not provided.  The Court further complained that counsel's certification on the reaffirmation averred that 1) the agreement represented a fully informed and voluntary agreement by the Debtor; 2) the agreement does not impose an undue hardship on the debtor, and 3) that he has fully advised the Debtor of the legal consequences of the agreement and any default under the agreement.  The undue hardship box was not checked.  At the hearing the Debtor testified that he had not met nor spoken with the counsel that signed the reaffirmation at any time.  The Court also found issue with the fact that the reaffirmation was made according to the original terms of the agreement with the parties, and that there was no evidence of any negotiation that occurred between Ally and Debtor's counsel.    A local rule required that any attorney that represents a debtor in a bankruptcy shall remain the responsible attorney of record for all purposes including the representation of the debtor in all matters until the case is closed or the attorney is relief from representation upon motion and court order.  This specifically includes representation in connection with reaffirmation agreements, however does not require counsel to sign the agreement if counsel cannot do so within the constraints of his judgment, the Federal Rules of Bankruptcy Procedure, and the rules of professional conduct.    The duties of counsel in connection with reaffirmations were stated by the Court to not simply advise clients of their rights and allow them to make a business decision, but rather for counsel to exercise independent judgment as to whether the agreement imposes an undue hardship on the debtor.  If so, counsel is duty bound to decline to sign the declaration attached to the agreement.  Citing In re Vargas, 257 B.R. 157, 166 (Bankr. D. N.J. 2001).  Counsel must also independently verify the creditors' current security interests, and to confirm that the liens are unavoidable.  Next counsel must apprise and advise the debtor of other options available instead of reaffirmation.  Presumably redemption through redemption funding agencies as well as surrender and replacement.  The attorney testified at the hearing that all reaffirmations are signed out of the Raleigh office of the firm (the filing having been made in the Greensboro division).  No evidence was presented that either counsel that signed the agreement, nor the attorney that filed the case has personal knowledge of the statements certified to the court.   Under Rule 9011 personal knowledge is required for any affidavit such as the reaffirmation certification.    As a consequence of this failure the Court set an order to show cause hearing for counsel to show cause why the firm and the attorney should not be sanctioned for 1) violating Rule 9011; 2) failing to have in place a procedure to ensure that declarations filed with the court are true and accurate; 3) failing to review facts in a declaration filed with the court; iv) filing a declaration with inaccurate facts; and/or v) signing a declaration to be filed with the court without personal knowledge of its content; and why the declaration in support of the reaffirmation agreement should not be stricken, and why given the finding by the court that the declaration imposes and undue hardship and that it is not in his best interest, why it should not disapprove the agreement.  The Court did rule that the debtor complied with §524(c) and 521(a)(2) thus that the automatic stay remains in effect the vehicle remains property of the estate, and any ipso facto clause in the security agreement or other document remains ineffectual so long as the debtor remains current in his payment and does not rescind the agreement.  The fact that the counsel who signed the agreement never met with the debtor, and never discussed the budget or options is what got the Court's attention.  I have not found that Ally or any of the creditors are generally willing to negotiate terms of a reaffirmation (though given the legislative history requiring negotiation this might be used as a basis to challenge creditor's insistence on reaffirmations).  It also seems somewhat problematic to insist on detailed proof of any changes of expenses to show the affordability of a reaffirmation, though it may be good practice.    It is important for counsel to make an independent analysis of the viability of the Debtor's on-going financial situation in determining whether to sign a reaffirmation.  If schedules I and J do not show money available for a reaffirmation, counsel should have a ready explanation of why the reaffirmation is not an undue hardship and be prepared to explain this to the court, and failing that should refuse to sign the declaration and, if the client insists, let the Court rule on whether the reaffirmation agreement is approved.  Counsel would need to attend such hearing and explain their reasoning for declining to sign the agreement.Michael Barhnett.  www.tampabankruptcy.com

The Automatic Stay Once your chapter 13 bankruptcy case is filed, there are a series of processes and events that take place. Each of these events are required and mandated by the United States Bankruptcy Code and assist in the smooth process of chapter 13 for all parties involved. The first thing that happens is+ Read More The post What Happens Once My Chapter 13 Bankruptcy Is Filed? appeared first on David M. Siegel.

February 2, 2017As a result of Uber’s and Lyft’s technological disruption of the transportation services market, the value of New York City taxi medallions has significantly decreased. In 2014 taxi medallions were being sold for approximately $1.3 million dollars,  Current Taxi & Limousine Commission sales reports from December 2016 and data from taxi medallion brokers indicate that the current value of taxi medallions is approximately $400,000-$600,000.  And according to a recent piece in Bloomberg News, over 80 percent of Capital One Financial Corp.’s loans for taxi medallions are at risk of default.Many entrepreneurial immigrants and other individuals pursuing the American Dream and financial security purchased taxi medallions by borrowing money from banks or finance companies. Many of these loans were at an 80% loan to value ratio, and as a result of the decline in taxi medallion value, the debt securing the taxi medallions exceeds the value of the taxi medallions, giving the medallions a negative value. To use a term from real estate financing, these taxi medallions are “underwater.” Banks and the taxi medallion financing companies require that the borrower sign a Promissory Note, a Security Agreement and a UCC–1 financing statement so that the banks or the financing companies would be a secured creditor. Additionally, the borrower would be personally liable to repay the loan to the bank or financing company, and in some instances the medallion owner may have pledged other assets that they own as collateral for the loan, such as their house.As a result of the decrease in value of taxi medallions, many medallion owners owe substantially more to the bank or financing company than the medallion is worth: a typical example would be an individual who owns a medallion subject to a loan of $1,000,000 and the medallion presently has a fair market value of $500,000 -$600,000, resulting in a deficiency or shortfall of $400,000-$500,000, which the medallion owner would have to repay to the bank or finance company if the medallion were sold. Most medallion owners don’t have sufficient assets to cover this deficiency, creating a financial catastrophe for the medallion owner.There are over 13,000 New York City taxi medallions.  The New York City Taxi & Limousine Commission sales reports indicate that six medallions were sold in December 2016. Two were estate sales (meaning that the medallion owner died and their estates sold the medallion) and four were foreclosures (meaning that the medallion owner could not repay the loan and the bank or financing company foreclosed pursuant to New York State Uniform Commercial Code law to obtain possession of the financed taxi medallion). If we assume that in an average year 5% of taxi medallions are sold or transferred, that would mean that there should be about 700 medallion sales a year or 58 per month.  But if December 2016 was a representative month, medallion sales have nearly ground to a halt!Why so few taxi medallion sales? One answer to this question may be that with the new technology of Uber and Lyft, few individuals see a viable financial future as a taxi medallion owner and driver. Another potential factor is that medallion owners may be hoping that the market will correct itself in the future and their medallions may increase in value over time, hopefully equal to or greater than the amount of the loan associated with the medallion. As we all know, “hope springs eternal” and this strategy may be the equivalent of “kicking the can down the street” – delaying or pushing off a problem that will not go away.The purpose of this article is to present medallion owners with strategies to deal with the reduced or diminished value of the taxi medallion that they own under New York State Debtor and Creditor Law and the federal Bankruptcy Code. There are five possible strategies:1.     The medallion owner can continue to make loan payments and hope that the value of the medallion increases over time and the increased value will allow for a sale of the medallion in the future, which will generate enough money to pay off the medallion loan. As discussed above, as a result of Uber, Lyft and other transportation service technologies, it is doubtful that the value of taxi medallions will ever return to its previous high valuations.The medallion owner can stop making loan payments and surrender the medallion to the bank or finance company or allow the bank or finance company to foreclose or repossess the medallion under New York State law. There are several problems with this strategy.  First, the bank or finance company will commence an action against the medallion owner to collect their debt. Second, after the foreclosure or repossession, the bank or finance company is allowed to seek a deficiency judgment (the difference between the amount due on the medallion loan and the value of the medallion at auction or its value at the time of repossession including legal fees and court costs) against the medallion owner. Under New York State law a judgment is enforceable for 20 years (statute of limitations) and the bank or finance company will be able to: (a) garnish the medallion owner’s wages; (b) place a lien and levy on any financial accounts owned by the medallion owner; and (c) docket the judgment against any real estate owned by the medallion owner. Third, the bank or finance company will report “relief of indebtedness income” to the Internal Revenue Service pursuant to section 108 of the Internal Revenue Code, and practically speaking the amount of the deficiency judgment (calculated above) would be deemed to be income to the medallion owner (unless an exclusion pursuant to this provision can be found).  Fourth, the judgment will be reported to credit reporting agencies, the medallion owner’s credit report score will decrease and the medallion owner will be unable to obtain a loan from another bank or finance company while the judgment is outstanding.The medallion owner can stop making loan payments to the bank or finance company and attempt an “out-of-court workout” with the bank or finance company. Under this scenario, the medallion owner would hire an attorney to negotiate a consensual return of the medallion to the bank or the finance company and any other consideration or money negotiated between the parties. The benefits of this approach are as follows: First, this arrangement is consensual and there will be no litigation between the medallion owner or the bank and finance company.  Second, a judgment will not be entered against the medallion owner. Third, the amount of relief of indebtedness income that would be reported to the Internal Revenue Service pursuant to section 108 of the Internal Revenue Code would be minimized. Under this scenario, the bank or the finance company would ask for an Affidavit of Net Worth (a statement of assets and liabilities made under oath) from the medallion owner to determine what assets the medallion owner could use pay the deficiency to the bank or the finance company if the value of the medallion is substantially less than the value of the outstanding balance of the loan.The medallion owner can file a chapter 7 personal bankruptcy. Chapter 7 personal bankruptcy is known as a “Liquidation and Fresh Start”. The medallion owner would hire a bankruptcy attorney, provide financial information to the attorney, who would then prepare a bankruptcy petition for the medallion owner and file the bankruptcy petition with the bankruptcy court. The medallion owner would go to court for a meeting of creditors with the bankruptcy attorney and then obtain a Discharge from the bankruptcy court, discharging or eliminating the loan or monies due to the bank or financing company. Under this scenario, the chapter 7 bankruptcy trustee could attempt to sell the taxi medallion or it would be surrendered to the bank or the financing company. The good news for the medallion owner is that if a debtor files under chapter 7, there is no relief of indebtedness income to the medallion owner. Additionally, with guidance from an experienced attorney, the medallion owner will be able to repair their credit in approximately a year to 18 months. However, if the medallion owner owns other valuable property or assets (such as a house, co-op, condominium or vacation property), the bankruptcy trustee has the right to sell or liquidate those assets to repay creditors. With respect to the family house, co-op or condominium unit, the medallion owner would be able to claim a homestead exemption (in the New York metropolitan area) of $165,550 for himself or herself and $165,550 for their spouse (if they are married and both parties reside in the house, co-op or condominium). Additionally, the chapter 7 bankruptcy filing would negatively impact the debtor’s credit report score. A medallion owner should consult with an experienced bankruptcy attorney before going down the path of a chapter 7 personal bankruptcy filing.Finally, the medallion owner can file a chapter 13 personal bankruptcy. Chapter 13 bankruptcy is a form of personal bankruptcy for individuals who own valuable property that they want to keep at the conclusion of the bankruptcy case, and requires that the debtor to make three to five years of payments out of their disposable income (future income minus necessary living expenses) to the bankruptcy trustee, who then makes distributions to the creditors in the case. The chapter 13 bankruptcy filing could be used by a medallion owner who wants to keep the medallion and continue to make payments to the bank or financing company, or it could be used to return the medallion to the bank or financing company and allow the debtor/medallion owner to keep the other assets or property that they own, provided that they make all of the payments scheduled in their chapter 13 plan. A chapter 13 bankruptcy filing is more favorable for credit reporting purposes then chapter 7 bankruptcy.As you can see, there are many strategies under New York State law and federal bankruptcy law that can be utilized by a medallion owner who owns a medallion that’s underwater. Just as there is no such thing as “a one sized shoe that fits all,” each potential strategy discussed above must be reviewed and evaluated by an experienced bankruptcy and workout attorney who has reviewed the medallion owner’s financial situation and understands the medallion owner’s desired outcome. At Shenwick & Associates, we have represented medallion owners and other debtors, and are extremely experienced at doing workouts and bankruptcy filings for both individuals and companies. Those interested in setting up a meeting with Jim Shenwick can call him at (212) 541-6224 or email him at jshenwick at gmail dot com.© 2017 James Shenwick.  All rights reserved.

This continues a series on the bankruptcy opinions of Neil Gorsuch, President Trump's nominee for the Supreme Court seat vacated by the death of Antonin Scalia.   One point which is clear is that Judge Gorsuch strongly believes that rules should be followed and is not sympathetic to arguments that procedural failures may be excused.No case illustrates Judge Gorsuch's tendency to strictly enforce the rules better than Blausey v. United States Trustee, 552 F.3d 1124 (10th Cir. 2009).    In that case, he dissented from a majority opinion where he stated "I admire and agree with the court's thoughtful treatment of the merits of the case."  He dissented because he would have dismissed the appeal rather than affirming the rulings of the lower courts.   While the result would be the same, he felt that the procedural deadlines needed to be respected.What was the heinous failure that doomed the court's jurisdiction?   In taking a direct appeal from the bankruptcy court, the debtors obtained a certification from the bankruptcy court but forgot to file a petition requesting permission to appeal with the court of appeals.    The majority ignored this failure and moved to the merits, but not Judge Gorsuch,  Finding that the debtors had conceded that they failed to file the petition, he stated "That concession should end this appeal."   The case involved whether private disability payments should be included in the means test.   The lower courts ruled that they did count and that the debtors' case should be dismissed as an abuse.  Rather than accepting a result he admired and agreed with, he dissented.  It takes a true believer to dissent from a result he agrees with.In five out of ten majority opinions that I read, Judge Gorsuch relied at least in part on failure to properly raise an issue in the appellate process.    This sometimes led to unusual result.   In Loveridge v. Hall (In re Renewable Energy Dev. Corp.), 792 F.3d 1274 (10th Cir. 2015), Judge Gorsuch found that the District Court could refer a case that was filed based on diversity jurisdiction to the bankruptcy court for a report and recommendation.   While this seems contrary to the referral power of 28 U.S.C. Sec. 157, Judge Gorsuch found that the appellant had waived the argument by failing to raise it below.    In LTF Real Estate Co. v. Expert S. Tulsa, LLC (In re Expert S. Tulsa, LLC), 619 Fed.Appx. 779 (10th Cir. 2015)(unreported), he was asked to rule on whether funds in an escrow account were property of the estate. The debtor argued that the funds were fully property of the estate on the petition date.   Judge Gorsuch ruled that the funds were subject to conditions so that they were not fully property of the estate on the petition date.   He reached this result by rejecting "the one argument Expert South has fairly presented in this case."    Having made this ruling, he then went on to explain all the things that the court had not decided, including whether the estate had a contingent interest in escrow funds that could "mature into a current right to possession if the escrow agreement's contingencies are satisfied after the bankruptcy begins."    It is not entirely clear to me why he couldn't have ruled that the estate had some interest in the funds but that it was governed by the terms of the escrow agreement.   Going against this trend, Judge Gorsuch had two opinions in which he showed creativity in ruling upon a dispute.   In a case which presaged Bullard v. Blue Hills Bank, 135 S.Ct. 1686 (2015), Judge Gorsuch considered whether the court had jurisdiction to entertain an appeal from an order denying confirmation of a plan. Woolsey v. Citibank, N.A. (In re Woolsey), 696 F.3d 1266 (10th Cir. 2012).   Judge Gorsuch found, as the Supreme Court would later conclude, that an order denying confirmation of a plan was not a final, appealable order.  However, in this case, Judge Gorsuch found that an order confirming an amended plan had been approved while the appeal was pending.   Thus, there was a final order that could be appealed and the earlier appeal that had been filed prior to the confirmation order was merely premature.   This was a creative way to avoid dismissing the appeal for lack of jurisdiction.   In TW Telecom Holdings, Inc. v. Carolina Internet, Ltd., 661 F.3d 495 (10th Cir. 2011), Judge Gorsuch used a panel opinion to reverse a long-standing Tenth Circuit precedent.   The Tenth Circuit had ruled that the automatic stay did not appeal to an appeal by a debtor of a judgment against it.   Its original ruling was based on Collier on Bankruptcy.   Meanwhile, nine circuits reached the contrary result, finding that an appeal of a judgment against the debtor was a continuation of a proceeding against the debtor and subject to the stay.   Additionally, Collier on Bankruptcy changed its position on the appeal.   In the face of overwhelming opposition to the Tenth Circuit's position, Judge Gorsuch wrote, "Accordingly we overrule this circuit's prior interpretation of Sec. 362(a)(1) . . . ."   Just how did Judge Gorsuch get the authority to overrule his circuit's precedent?   He included a footnote stating that he had circulated the opinion to the en banc court which had unanimously agreed to overrule the precedent.    Thus, rather than mechanically following the prior wrong precedent and waiting for the en banc court to act, he took the initiative to get the whole court on board and fix the erroneous ruling.What do these cases show us?   On the one hand, he has a Scalia-like tendency to accept a bad result when Congress or the litigants messed up.   On the other hand, he can be creative and avoid a bad result when he wants to.    Based on this limited sample of cases, I would recommend that litigants be ultra-careful about preserving error and making the right arguments below.   While Judge Gorsuch may do something surprising, you can't count on it.

Newly minted Supreme Court nominee Neil Gorsuch sat on the Tenth Circuit for ten years.  During that time, he signed on to eleven opinions regarding bankruptcy, which means that he wrote about bankruptcy around once a year.    None of his opinions are particularly well-known.  (In contrast, fellow finalist Thomas Hardiman authored the opinion in Official Committee of Unsecured Creditors vs. CIT Group/Business Credit, Inc. (In re Jevic Holding Corp.), 787 F.3d 173 (3rd Cir. 2015) which is currently before the Supreme Court).    However, these opinions demonstrate his crisp writing style and offer some insights into his judicial thinking.   I am going to look at one of his opinions in depth and follow up with a separate post on his remaining decisions.A Deep Dive Into Renewable Energy DevelopmentIn Loveridge v. Hall (In re Renewable Energy Development Corp.), 792 F.3d 1274 (10th Cir. 2015), Judge Gorsuch lectured a District Judge on the meaning of Stern v. Marshall and its progeny. He wrote:This case has but little to do with bankruptcy. Neither the debtor nor the creditors, not even the bankruptcy trustee, are parties to it. True, the plaintiffs once enjoyed an attorney-client relationship with a former bankruptcy trustee. True, they now allege the former trustee breached professional duties due them because of conflicting obligations he owed the bankruptcy estate. But the plaintiffs seek recovery only under state law and none of their claims will be necessarily resolved in the bankruptcy claims allowance process. And to know that much is to know this case cannot be resolved in bankruptcy court. The bankruptcy court may offer a report and recommendation. It may even decide the dispute if the parties consent. But the parties are entitled by the Constitution to have an Article III judge make the final call. So the district court's ruling otherwise — its decision to send the dispute to an Article I bankruptcy court for final resolution without their consent — violates the Constitution's commands and must be corrected.792 F.3d at 1276-77.    In one paragraph, the judge succeeded in summarizing the facts of the case and the legal reasoning supporting the court's decision.    The case involved a bankruptcy trustee (Mr. Hoffman) who consulted one of his clients (Summit Wind Power, LLC) about leases held by the bankruptcy estate.   He initially concluded that the leases were of no value to the estate and encouraged his client to negotiate its own leases with the non-bankrupt counterparties.  The trustee then realized that he had made a mistake.  As Judge Gorsuch explained:Things got so testy that Mr. Hofmann, yes, brought an adversarial proceeding in bankruptcy court against one client (Summit) on behalf of another (the REDCO estate). Unsurprisingly, Summit responded with state law claims against Mr. Hofmann and his law firm, alleging legal malpractice, breaches of fiduciary duties, and a good many other things besides. Mr. Hofmann, by now irredeemably conflicted, was removed from his post as trustee.How do these unfortunate but hardly uncommon facts yield a dispute of constitutional magnitude? Summit filed suit in federal court against Mr. Hofmann alleging diversity jurisdiction and the right to have the case resolved in an Article III court. Mr. Hofmann replied that the case belonged in and should be resolved by an Article I bankruptcy court. Ultimately, the district court sided with Mr. Hofmann even as it acknowledged some uncertainty about this much and certified its decision for an immediate appeal.792 F.3d at 1277-78.    Judge Gorsuch followed with a very conventional (and correct) reading of Stern v. Marshall and demolished the ex-Trustee's argument that proceedings which are "factually intertwined" with a bankruptcy case could be finally resolved by an Article I judge.In this way, the Court did suggest the source of law generating a claim may inform its categorization as involving a public or private right. But the Court nowhere suggested that any claim "factually intertwined" with bankruptcy may be sent to bankruptcy court for final resolution without consent.We confess we're glad of this. Asking what source of law generated the claim at issue may well raise some questions around the edges — like what about claims pursuing fraudulent conveyances, which find a home in a federal statute but surely implicate longstanding common law rights? ... Still, questions like these aren't a patch on what would be involved if in each case we had to ask whether the plaintiff's claims are "factually intertwined" with a bankruptcy proceeding. If, as Mr. Hofmann submits, our case is "factually intertwined" enough with bankruptcy to warrant its resolution in bankruptcy court — just because a trustee in the bankruptcy happened to generate a conflict of interest with a client outside the bankruptcy — what wouldn't be? What if a trustee and creditor came to blows in the courthouse parking lot over the terms of a proposed reorganization plan? What if a trustee stole from a third person and gave the money to the bankruptcy estate? Couldn't someone plausibly describe disputes like these as at least as "factually intertwined" with bankruptcy as our own?792 F.3d at 1280.    However, just as he has ruled against the ex-Trustee, the judge slapped down the appellant as well.Still, that's not the end of our encounter with this appeal. It isn't because saying (as we do) that a bankruptcy court may not decide this case without the parties' consent under Stern doesn't necessarily mean it cannot hear the case and offer a report and recommendation about its disposition to a district court. Indeed, as the Supreme Court has recently explained, where (as here) we are faced with a "Stern claim"— a claim the bankruptcy court is statutorily but not constitutionally authorized to decide and for which it has not received the parties' consent to proceed — it's still possible under 28 U.S.C. § 157(c)(1) and consistent with Article III for a bankruptcy court to "hear the proceeding and submit proposed findings of fact and conclusions of law to the district court for de novo review and entry of judgment." Arkison, 134 S. Ct. at 2173. In cases like this, the bankruptcy court may act as a sort of magistrate or special master, an adjunct to the decisionmaker, not the decisionmaker itself — and in this way honor both statutory and constitutional commands. Id. So while Summit is right and the district court erred in sending Mr. Hofmann's case to bankruptcy court for final decision, the district court remains free on remand to refer the case to a bankruptcy court for a report and recommendation.Summit resists this result, fighting even a temporary trip to bankruptcy court for a report and recommendation. For a bankruptcy court to hear a claim as a matter of statutory law, Summit notes, 28 U.S.C. § 157(a) instructs that the claim must "aris[e] under title 11 or aris[e] in or relate[] to a case under title 11," the federal bankruptcy code. And Summit says this requirement isn't met in this case because the parties' fight is so far removed from bankruptcy that it can't be said to "aris[e] under title 11 or aris[e] in or relate[] to a case under title 11." But whatever other problems might attend this line of argument one is by now familiar: it wasn't made before the district court and is therefore another one we may and do decline to resolve in this appeal. See Waldman, 698 F.3d at 917.Not ready to give up quite so easily on its effort to avoid even a short detour from district court, Summit suggests we cannot ignore and must resolve its argument because it implicates the subject matter jurisdiction of the federal courts. But that much it does not — quite — do. The statute Summit invokes, 28 U.S.C. § 157, involves only the allocation of responsibility between the bankruptcy and district court; it does not "implicate questions of subject matter jurisdiction." Stern, 131 S. Ct. at 2607. We acknowledge that § 157(a) shares similar language with 28 U.S.C. § 1334(b) — and we readily accept that statute is jurisdictional: quite expressly it provides district courts with "jurisdiction" over "all civil proceedings arising under title 11, or arising in or related to cases under title 11." So maybe Summit's § 157(a) argument could be transferred to § 1334(b), and maybe the argument could present a successful jurisdictional challenge there. But if it did, it wouldn't be just the bankruptcy court that would lack jurisdiction to hear and report on this case. The district court itself would have no authority to hear the case either for § 1334(b) expressly governs its jurisdiction too.Anxious to remain in federal court — just not ever visit bankruptcy court — Summit shirks from acknowledging this, the full consequences of its argument, and nowhere mentions § 1334(b) in its opening brief or how its argument might apply to that statute. And, happily for everyone, we don't have to address the question on our own motion either, even though it does implicate subject matter jurisdiction. We don't because, whether or not the district court has jurisdiction to decide this case under § 1334(b), everyone acknowledges it clearly has jurisdiction to do just that under § 1332(a) given that the complaint alleges complete diversity of citizenship and a sufficient amount in controversy. See, e.g., Penteco Corp. Ltd. P'ship—1985A v. Union Gas Sys., Inc., 929 F.2d 1519, 1521 (10th Cir. 1991).At the end of the day, then, we are confident that the district court possesses subject matter jurisdiction to hear this case at least under the diversity statute, that Summit is entitled under Stern to have an Article III district court resolve its claims, and that the district court may refer the case to an Article I bankruptcy court for a report and recommendation. Many other questions remain for tomorrow. But resolving this much is enough work for today. The case is remanded to the district court for further proceedings consistent with this opinion. 792 F.3d at 1282-84.  What just happened here?    Judge Gorsuch found that the District Court may refer a Stern claim to the bankruptcy court for a report and recommendation.   That is pretty clear.   However, the Court ducked the question of whether this actually is a Stern claim because the appellant didn't raise that issue before the District Court.   In response to the appellant's claim that subject matter jurisdiction cannot be waived, the Court found that (1) 28 U.S.C. Sec. 157 involves the allocation of authority rather than a grant of jurisdiction and (2) the District Court had diversity jurisdiction.    What Does the Opinion Mean?  If I am reading this opinion correctly, the judge undermined his own ruling.   On the one hand, he properly ruled that Stern v. Marshall  does not allow the Bankruptcy Court to enter a final judgment on a claim that is merely "factually intertwined" with the bankruptcy case absent consent.   However, he then found that a "factually intertwined" case could be referred to the Bankruptcy Court for a report and recommendation because the appellant failed to raise the Sec. 157 issue in the District Court.   He very coyly points out that 28 U.S.C. Sec. 157 and 1334 (b) contain similar language but serve different purposes.   However, the very nature of a Stern claim is that Congress has statutorily authorized the Bankruptcy Court to hear the case but the Bankruptcy Court lacks constitutional authority to enter a final judgment absent consent.   28 U.S.C. Sec. 157 is the statutory authority.  In my opinion, it is extremely disingenuous to say that a claim is a Stern claim which may be referred to the Bankruptcy Court under Sec. 157 solely because the other party failed to argue the scope of Sec. 157 in the Court below.   What the Court should have done is to remand the case to the District Court and left open the question of whether the case could be referred to the Bankruptcy Court.   However, by stating that the District Court may refer the case to the Bankruptcy Court, the Court of Appeals has effectively found that the District Court has the authority to refer cases arising under diversity jurisdiction to the Bankruptcy Court regardless of whether Sec. 157 allows that referral. What Does the Opinion Say About Judge Gorsuch? What can we learn from this opinion?   Judge Gorsuch is a lively writer.  He authored a 22-page opinion without any headings or subheadings which flowed naturally without these guideposts.  I included long segments from the opinion when I could have summarized them simply because I enjoyed reading his prose.   He has the ability to distill the essence of a case very quickly.   His writing is entertaining to read because he can turn a phrase as well as any jurist.   He takes delight in skewering litigants who take indefensible positions.   In fact, he lectured both parties on their arguments. However, I am troubled by the fact that when he got to the bottom line, he skipped over an important issue and gave the District Court more authority to refer than was conferred by Congress.   Granted, he did say that the District Court "may" refer the case which implies that the District Court might say no.   However, to say that the Court "may" do something, you must say that it is permissible.   What was he thinking?   Did he get to the end of an opinion and lose focus?   Was he trying to expand the authority of the District Court to unload matters onto the Bankruptcy Court?  Or was he just being too clever?   Given my brief review, I won't try to answer those questions.   However, I wanted to throw them out there for discussion.This is just one opinion.   I will be back with more later.

Holly Gets Hired After Bankruptcy and Gets a New Company Credit Card Holly was at the end of her rope. She’d been out of work for two years; she kept getting interviews but no offers; and she was feeding partial payments to her creditors, to try to keep them off her back. She believed she was […] The post Holly Gets Hired after Bankruptcy and Gets a New Credit Card by Robert Weed appeared first on Robert Weed.

Holly Gets Hired After Bankruptcy and Gets a New Company Credit Card Holly was at the end of her rope. She’d been out of work for two years; she kept getting interviews but no offers; and she was feeding partial payments to her creditors, to try to keep them off her back. She believed she was […]The post Holly Gets Hired after Bankruptcy and Gets a New Credit Card by Robert Weed appeared first on Robert Weed.

Here at Shenwick & Associates, it is our experience that student loan debt is the fastest growing debt many people are burdened with. As of September 2016, outstanding student loan balances were $1.279 trillion and counting. This month, we're going to take another look at student loan debt, its dischargeability in bankruptcy and other potential tactics debtors can use to cope with it. Earlier this month, the New York Times reportedon an effort by former students of ITT Tech to intervene in its bankruptcy to be recognized as creditors and to resolve their claims against ITT Tech for loan cancellation. As many of our readers are aware, defaulted student loans are generally not dischargeable in bankruptcy except in special circumstances. The debtor must show that: (1) he or she cannot maintain, based on current income and expenses, a minimal standard of living for the debtor and dependents if forced to pay off the student loan; (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 loan; and (3) that the he or she has made good faith efforts to repay the loans. That was the holding in Brunner v. New York State Higher Education Services Corp., 831 F.2d. 395 (2nd Cir. 1987), the leading case on student loans and bankruptcy, and its reasoning has been adopted by most federal appellate courts.However, non-bankruptcy remedies are available under federal and state law for student loan debtors, including loan consolidation, deferment, forbearance or a workout. These solutions may be better for many student loan debtors than bankruptcy. Loan consolidation. Most federal student loans (except private loans) are eligible to be consolidated. However, if your loans are in default, you must meet certain requirements before you can consolidate your loans. Loan consolidation greatly simplify loan repayment by centralizing your loans to one bill and can lower monthly payments by giving you up to 30 years to repay your loans. You might also have access to alternative repayment plans you would not have had before, and you'll be able to switch your variable interest rate loans to a fixed interest rate.Deferment. Deferment is a period during which repayment of the principal balance of your loan is temporarily delayed. Also, depending on the type of loan you have, the federal government may pay the interest on your loan during a period of deferment. The government does not pay the interest on your unsubsidized loans (or on any PLUS loans).Forbearance. If you can't make your scheduled loan payments, but don't qualify for a deferment, your loan servicer may be able to grant you a forbearance. With forbearance, you may be able to stop making payments or reduce your monthly payment for up to 12 months. Interest will continue to accrue on your subsidized and unsubsidized loans (including all PLUS loans).Workout. With the encouragement of federal banking regulatory agencies, some financial institutions that make private student loans offer workouts and loan modification programs. Your lender or servicer should be able to tell you the options available, general eligibility criteria and the process for requesting a workout or modification.For more information about possible solutions to coping with your student loan debts, please contact Jim Shenwick

Nobody sets out with the goal of wanting to file for bankruptcy relief. However, things happen in one’s financial life which can lead to that eventuality. For many, there is an unwillingness to jump in and do what makes financial sense. Many people put off filing with the hope that somehow, someway, either their ship+ Read More The post Hesitating To File Bankruptcy Can Cost You Thousands Of Dollars appeared first on David M. Siegel.

Short sale tax forgiveness has expired. If your house is “under water” you need to read this. The general rule of tax law is that debt forgiveness is income—if I lend you $1,000 and then say you don’t have to pay me back, you’ve made $1,000. And you’re subject to tax on that. That matters […]The post Short sale tax forgiveness has expired by Robert Weed appeared first on Robert Weed.