The 11th Circuit has just come out with a case sustaining the Bankruptcy Court's disallowance of a $495,000 commission to a real estate agent finding a conflict of interest.  In re New River Dry Dock, Inc., 2012 WL 5675911 (11th Cir. 2012).  The Realtor was employed to sell a marina owned by a chapter 11 debtor for a 4% commission.  An order authorizing employment was entered based on the Realtor's declaration that he was disinterested.  The Agent contacted an investor with whom he had a prior relationship, and submitted a stalking horse bid for $12.25 million, which was below the appraised value, and which bid was ultimately successful.     After the order authorizing employment but before the sale the buyers offered the Realtor an opportunity to manage the property after the sale or to obtain an ownership interest in the business.  This offer was not refused (though the order was not clear on whether it was formally accepted), and the buyers expected that the Realtor would be involved after the closing.  Further, the Realtor performed a number of tasks for the buyers prior to the closing.   None of the arrangements for post-sale involvement were disclosed to the court.  At the time of the sale the Realtor was overpaid $45,000.  The Realtor also paid a $37,000 'finder's fee' out of his commission to a third party which was not disclosed to the court. Subsequent to the closing the plan, which included a provision for a release against professionals, was confirmed    Two years after confirmation the court was advised of these facts and sua sponte entered an order why the Realtor should not disgorge his commission, ultimately ruling on summary judgment that both the $45,000 overpayment and the $490,000 commission must be disgorged.    The Realtor argued that the release in the confirmed plan prevented the court from requiring a refund of his fees.  The 11th Circuit ruled that the court retains jurisdiction over fees even after conclusion of a case.  As a professional employed under 11 U.S.C. §327 the Court retains authority over such fees pursuant to 11 U.S.C. §§328(c) and 330(a)(2).  The fees were approved without the Court's knowledge of the conflict, and once the Court learned of the conflict it had the right to revisit such fees.  The Realtor also objected that the ruling was made on summary judgment.  The 11th Circuit found that the undisputed facts established a conflict of interest.  The discussions of post-sale involvement gave the Realtor a reason to close the sale even if it was not in the Debtor's best interest.  The fact that there was no formal guaranty of employment does not change the result given the Realtor's strong expectation that he would work for the buyers.  While no specific harm to the estate was shown, no harm is required to require disgorgement of fees.  The issue is solely whether he could have unbiasedly made decisions in the best interest of the estate.     The 11th Circuit also rejected the Realtor's objection to a sequestration order, finding authority under §105(a) to order sequestration, and that the Florida head of household exemption does not prevent garnishment of funds from a business owner that does not pay himself a set wage or salary. 

A Chapter 13 plan often sounds like a great idea at the time you file for bankruptcy.  But three to five years is a long time, and it is not uncommon for people to lose their jobs or face other financial hardships during that time.  If you lose your job during the course of your [...]

Talk to Chuck and lose your IRA? That’s the prospect suggested by a recent bankruptcy case from ED TN  featured in the ABI Journal this month. In a nutshell, the case held that lien granting language in the standard Merrill Lynch brokerage account agreement was a prohibited transaction with respect to an IRA. Daley, 459 B.R. 270 (E.D. Tenn. 2011) The Chapter 7 trustee was successful in defeating the debtor’s  claim of exemption in the IRA, even though the brokerage house had never sought to exercise its right to a lien on the IRA. The bankruptcy court’s decision was upheld on appeal to the district court in September. The Daley case was followed in a N.D. CA district court case Yoshioka, 2011 U.S. Dist. LEXIS 147483.  Yoshioka is a class action against Charles Schwab complaining that the lien creating language in the Schwab agreement put the tax exempt status of the IRA’s at risk. Back story These cases don’t come out of the blue, if you step back far enough.  California bankruptcy cases, inevitably involving doctors, have long held that the debtor doesn’t get an exemption in funds that are nominally held in retirement accounts, but are actually used for non retirement purposes. In 2011, the 11th Circuit  affirmed a bankruptcy court that denied an exemption in a $700,000 self directed IRA based on the debtor’s use of the funds for investment and cash management outside of the IRA.  The prohibited transactions cost the IRA its tax exempt status and thus the exemption. Willis v.  Menotte.  The bankruptcy court decision is at 411 B.R. 783; the District Court opinion, adopted by the Court of Appeals, is at 2010 U.S. Dist. LEXIS 44773. Thus the principles underlying the Daley decision aren’t new;  the application to an innocent and merely facial violation of ERISA is distressing. Heads Up I haven’t decided just what my advice to clients needs to be.  I’m certainly going to look at the terms of my own Schwab brokerage account with IRA protection in mind. My gut reaction is to tell clients to move any IRA’s in  brokerage accounts to other custodians while this plays out. Given the exposure to the bankruptcy community that the Daley decision has received, this issue will be with us for a while. Image courtesy of Nemo.   Like This Article? You'll Love These! Remember the Big Stuff: Protecting Retirement and Business Assets How Much Of Your Client Are You Exposing? Here’s A Way To Rescue Your Client’s Exemptions

Can Debtors be Arrested for Not Paying Their Debts? Many debtors/clients inquire whether they can be arrested if they are unable to make payments on their debts.  Creditors sometimes threaten to come to their home and arrest them if they are unable to make their payments, even if they inform the creditor of their intent to file a bankruptcy.  Often, this threat is used to encourage payment and to frighten the debtor.  This information, however, is often incorrect and misstated.  Before a debtor can be arrested for a civil matter, such as a lawsuit for not paying a debt, there is a procedure that must be followed.  The arrest does not occur immediately.  The creditor must file a lawsuit against the debtor in the appropriate court and serve the debtor so the debtor is aware of the court proceeding and has an opportunity to appear.  The debtor can either choose to appear in court or not.  If the debtor doesn't appear, the court will issue a default judgment in favor of the creditor.  The debtor can also enter into a consent judgment and agree to a payment plan or take the case to trial and let the judgment enter a judgment.  If a judgment is entered against the debtor and the debtor refuses to pay or is unable to pay, the creditor has the ability to freeze or levy the debtor's bank account or garnish their employment up to 25 percent or 10 percent for head of household.  If the creditor is unable to garnish, the creditor can pursue a warrant for the debtor's arrest.  This is a last resort and cannot be done without first having a judgment. Therefore, the creditor cannot arrest a debtor at their home if they have not pursued a warrant through the proper court procedure. If a bankruptcy is filed, the creditor would be required to cease all contact with the debtor and would be unable to continue with pursuit of a lawsuit, judgment, or warrant against the debtor. For more information, please contact a St. Louis or St. Charles bankruptcy attorney.

Are Taxes Dischargeable Through Bankruptcy? Some taxes are dischargeable through bankruptcy, but some are not eligible for discharge due to the year the taxes are due and the timeliness of filing the taxes.  If income taxes are more than three years old, they usually can be discharged.  The three year time period is based on the due date of the taxes, which generally is April 15th unless the debtor has been granted an extension.  If the taxes would be due within three years of the filing of the bankruptcy, the taxes would not be eligible for discharge.  It is not based on the end of the tax year but the due date for filing the tax return.  Therefore, if it is November, 2012, tax years 2008 and earlier would be discharged, but 2009, 2010, and 2011 would not because their due dates would be April 15th, 2010, 2011, and 2012, which is within the three year time period before the filing of the bankruptcy. Even if the taxes are more than three years old, taxes are not dischargeable if they have been filed within the last 2 years.  If the taxes are not filed timely and less than two years before the filing of the bankruptcy, the taxes cannot be discharged through the bankruptcy.  If taxes are unable to be discharged through the bankruptcy, debtors can call the IRS or their state Department of Revenue and attempt to work out a payment plan to repay their non-dischargeable tax debt.  Sometimes debtors are able to pay the taxes over a longer period of time.  It is still important for debtors to list their tax debt in the petition regardless of the ability to discharge the debt, however, so the IRS and Department of Revenue will get notice of the bankruptcy filing. For more information, please contact a St. Louis or St. Charles bankruptcy attorney today.

By TAMAR LEWIN When Michele Fitzgerald and her daughter, Jenni, go out for dinner, Jenni pays. When they get haircuts, Jenni pays. When they buy groceries, Jenni pays. It has been six years since Ms. Fitzgerald — broke, unemployed and in default on the $18,000 in loans she took out for Jenni’s college education — became a boomerang mom, moving into her daughter’s townhouse apartment in Hingham, Mass. Jenni pays the rent. For Jenni, 35, the student loans and the education they bought have worked out: she has a good job in public relations and is paying down the loans in her name. But for her mother, 60, the parental debt has been disastrous. “It’s not easy,” Ms. Fitzgerald said. “Jenni feels the guilt and I feel the burden.” There are record numbers of student borrowers in financial distress, according to federal data. But millions of parents who have taken out loans to pay for their children’s college education make up a less visible generation in debt. For the most part, these parents did well enough through midlife to take on sizable loans, but some have since fallen on tough times because of the recession, health problems, job loss or lives that took a sudden hard turn. And unlike the angry students who have recently taken to the streets to protest their indebtedness, most of these parents are too ashamed to draw attention to themselves. “You don’t want your children, much less your neighbors and friends, knowing that even though you’re living in a nice house, and you’ve been able to hold onto your job, your retirement money’s gone, you can’t pay your debts,” said a woman in Connecticut who took out $57,000 in federal loans. Between tough times at work and a divorce, she is now teetering on default. In the first three months of this year, the number of borrowers of student loans age 60 and older was 2.2 million, a figure that has tripled since 2005. That makes them the fastest-growing age group for college debt. All told, those borrowers owed $43 billion, up from $8 billion seven years ago, according to the Federal Reserve Bank of New York. Almost 10 percent of the borrowers over 60 were at least 90 days delinquent on their payments during the first quarter of 2012, compared with 6 percent in 2005. And more and more of those with unpaid federal student debt are losing a portion of their Social Security benefits to the government — nearly 119,000 through September, compared with 60,000 for all of 2007 and 23,996 in 2001, according to the Treasury Department’s Financial Management Service. The federal government does not track how many of these older borrowers were taking out loans for their own education rather than for that of their children. But financial analysts say that loans for children are the likely source of almost all the debt. Even adjusted for inflation, so-called Parent PLUS loans — one piece of the pie for parents of all ages — have more than doubled to $10.4 billion since 2000. Colleges often encourage parents to get Parent PLUS loans, to make it possible for their children to enroll. But many borrow more than they can afford to pay back — and discover, too late, that the flexibility of income-based repayment is available only to student borrowers. Many families with good credit turn to private student loans, with parents co-signing for their children. But those private loans also offer little flexibility in repayment. The consequences of such debt can be dire because borrowers over 60 have less time — and fewer opportunities — than younger borrowers to get their financial lives back on track. Some, like Ms. Fitzgerald, are forced to move in with their children. Others face an unexpectedly pinched retirement. Still others have gone into bankruptcy, after using all their assets to try to pay the student debt, which is difficult to discharge under any circumstances. The anguish over college debt has put a severe strain on many family relationships. Parents and students alike say parental debt can be the uncomfortable, unmentionable elephant in the room. Many parents feel they have not fulfilled a basic obligation, while others quietly resent that their children’s education has landed the family in such difficult territory. Soon after borrowing the money for Jenni’s education, Ms. Fitzgerald divorced and lost her corporate job. She worked part-time jobs and subsisted on food stamps and public assistance. “I don’t really feel guilt, but I do know that this is all because of a loan taken out on my behalf,” said Jenni, who has a different last name and agreed to be interviewed only if it would not be disclosed. “I asked my mother to move in with me, because I couldn’t stand it that she was living in a place with no heat and a basement that kept flooding.” The unusual arrangements, and strained family dynamics, can be awkward. Like Jenni, many with student debt problems agreed to be interviewed only on the condition that they not be identified because they did not want to expose their financial troubles. “It makes you feel like a failure as a parent, to be unable to help your children and to have all your hard work end in a pile of debt,” said one New Jersey man, who took out a second mortgage of $280,000 to help cover his children’s college costs. “I sent my older kids to private colleges, and I was happy to do it because it’s how you help them get started off. But I can’t do it for the youngest, and I haven’t even been able to start the conversation with him.” Ms. Fitzgerald said she had little hope of a comfortable old age. She has no health insurance. She knows that the odds of finding a good job in her 60s, with no college degree, are slim — and she knows that the government will take part of her Social Security, in payment of her debt, which she said had now ballooned to about $40,000 because of penalties for nonpayment. At one point, she said, the Internal Revenue Service seized a $2.43 tax refund. Jenni has volunteered to take on her mother’s debt, but Ms. Fitzgerald has refused, saying it is her legal and moral obligation, and anyway, Jenni has her own loans to pay off — about $220 a month — and not much discretionary income. The very suggestion that Jenni might take on her debt annoys her. “Don’t you think she is doing enough for me now by supporting me a hundred percent, financially, by my living with her and her extending her resources?” Ms. Fitzgerald asked. “The whole idea was for her to get a college education so she can succeed in life; it is hard enough just to do that without being burdened with her mother’s welfare, like I was her child.” Jenni occasionally jumped in with explanations or clarifications, as she and her mother sat in the living room discussing their situation. When Ms. Fitzgerald talked of being depressed last year, so overwhelmed by the cartons of documents and dunning letters that she threw them all out, Jenni said gently, in an almost maternal tone, “But you’re doing much better now.” Many young people live with deep guilt that their education has pushed their parents into debt, and perhaps ruined their credit rating. Even those who do not know exactly how much money their parents have, or how much they owe, worry about how their debt will affect their parents’ lives. One 27-year-old man from East Texas, who earned a bachelor’s degree in California, is now nearing graduation with another bachelor’s degree, in Russian literature, from Columbia University. He said he did not know how much debt he and his mother had accumulated in the course of his educational wanderings, sounding almost paralyzed by the prospect of talking to her about it. “I should know how much I owe, and it’s sad that I don’t,” he said. “I feel like I’m standing on the train track and I can hear the rumble of the train coming, and I don’t know how hard the train will slam into me.” In one extreme case, student debt, and the constant creditor calls, were mentioned in a suicide note by the stepfather of a young law school graduate. The guilt has been crushing for the graduate. Teresa Tosh, 56, a mother of five who works for the county government in Tulsa, Okla., had co-signed large graduate and law school loans for one of her sons, Jacob, who has a different last name. In total, he owes more than $200,000 on his federal loans, in addition to more than $100,000 on the private student loans his mother co-signed. But like many recent law graduates, Jacob had trouble finding a job, and when he finally found one, an hour from home, the salary was nowhere near enough to cover loan payments. Creditor calls to both Jacob and to his mother became more and more frequent. Jacob talked to the collectors when they called, and tried to work out payments as best he could. But shortly after one call ended, he and his mother said, the phone would ring again: another collection agent, in another part of the country. Ms. Tosh’s husband, George, a Vietnam veteran who worked from home, concluded that Jacob was lying about trying to work things out, deceiving Ms. Tosh, ruining her credit and leaving her holding the bag. The household tension grew intense, and in July 2010, Mr. Tosh shot himself, leaving a note saying that he could no longer stand the incessant calls from Sallie Mae, one of the lenders. “Jake has destroyed us. You can’t tell me that sally mae is getting paid when they keep calling all day, every day,” he said in a note to his wife. “I can’t even answer the phone in my own home no more. I can’t live like this no more.” Ms. Tosh said she was “not naïve enough to think the Sallie Mae calls were the only reason” that her husband killed himself. “But they were adding a lot of stress,” she said. “They’d never stop calling.” A few months after the suicide, Jacob moved to Dallas and got a document-review job. The pay is not enough to meet his loan payments — or even full interest — but his creditors agreed to let him make partial-interest-only payments for two years. While his balance continues to grow, that arrangement protected his mother from payment demands for two years. “It’s made my life so much more stressful and guilt-filled because I know that it affects her,” Jacob said. “I barely have enough money to pay the bills, but if I miss by a day, they call her.” Jacob pays about $1,200 a month toward the debt, more than he pays for rent. He and his mother are carefully rebuilding their relationship, after a period of great tension. Ms. Tosh traveled to Dallas for his birthday. “She’s been really good about it,” Jacob said. “It’s always there, but she doesn’t bring it up.” Copyright 2012 The New York Times Company.  All rights reserved.

One benefit of attending conferences is that sometimes you get something unexpected.   That happened at the Commercial Law League’s New York meeting when the discussion turned to venue.   The CLLA has staked out a position in favor of venue reform.   You can read the testimony of Peter Califano on behalf of the League here.   However, the discussion raised the question of whether more radical reforms are appropriate to address the problem of venue in cases of national interest.While the Commercial Law League represents the interest of creditors in general, it has a special focus on the rights of smaller unsecured creditors.   The fact is that it is more expensive and more inconvenient for smaller creditors to appear in New York or Delaware.   There is also a personal economic interest for some league lawyers.   Speaking only for myself, I cringe when I see a case with strong Texas ties, such as Enron or American Airlines, filed on the East Coast.   However, venue abuse cuts both ways.    One of the largest cases to file in Austin recently was based in North Carolina.    Corpus Christi, Texas has become a magnet for significant cases despite the fact that it is just a small city on the Texas coast.    It is not an unreasonable proposition to argue that that the venue laws in bankruptcy cases have become so porous that debtors and their lenders are relatively free to choose whichever forum they prefer, or, to put it more directly, we have a system of rampant forum shopping.However, this discussion presumes that for each debtor, there is a “right” forum instead of Delaware or New York.   In many cases, there will be a “right” forum.   Enron was a Houston-based company whose failure had a disproportionate impact upon Texas.   It is telling that the criminal trials arising from Enron all took place in Houston.   (I remember this well because we had to get past all of the TV trucks to make it to bankruptcy court).    However, where a network of companies has operations in multiple states and the case is of national importance, there may be more than one “right” forum.   When a company’s case will impact multiple states, which should get to decide where the case will come to rest?   Once a case has been filed and hearings have been held, the forces of inertia are likely to keep it where it landed initially.  One suggestion raised at the Commercial Law League meeting was to treat multi-state cases similarly to Multi-District Litigation in federal court.   Under 28 U.S.C. Sec. 1407, the Judicial Panel on Multidistrict Litigation has the authority to decide whether to consolidate cases under MDL and to transfer them for purposes of pretrial proceedings and discovery.   If not resolved prior to trial, the cases are sent back to the original forum for trial.Another possibility would be to take a cue from Chapter 15.  Under chapter 15, courts look for the Center of Main Interest, which refers to where a company’s main economic activity is.  A “main” case filed in another forum can seek recognition in this country.   By analogy, when a company such as American Airlines filed bankruptcy, there would be a procedure to determine its Center of Main Interest.   Once that was determined, that district would be the lead district.   However, ancillary proceedings could be opened in other states.    Under either one of these options, there would be a procedure for judges to determine which district had the most significant interest in the case rather than allowing the parties to simply pick a venue.    The Enron case is a good example.   It filed its petition in the Southern District of New York because it had a minor subsidiary there.   Under the procedure described here, upon filing in New York, there would immediately be a hearing set to determine where the case would proceed.   It would not be necessary for a party, such as the Texas Attorney General, to move for transfer of venue and wait for a hearing.   Upon a finding that Texas was the Center of Main Interest, the case would immediately be transferred to Texas or, in the alternative, and a main proceeding could be established in Texas and an ancillary proceeding in New York.   The judges in Texas and New York could cooperate to ensure that Texas-centric issues were decided in Texas and New York-based issues were based in New York.To facilitate a scheme such as this, it might be necessary to establish “Super Judges” (who would wear tights and a cape) in each state or circuit who would be qualified to handle cases of national importance.   In Texas, Barbara Houser would be a logical candidate.    By creating a “National Case Panel” it would be possible to both ensure that there was a cadre of qualified judges, but also have judges who would regularly confer with their brethren in other states and circuits to be prepare to handle cases with multi-state impact.Another thought-provoking issue raised was whether circuit splits were contributing to forum shopping.   It was suggested that Sixth Circuit precedent is unusually favorable to successor liability claims.    With such precedent out there, a company such as Chrysler or GM might be deterred from filing in the Sixth Circuit.   The Ninth Circuit has In re Catapult Entertainment, Inc., 165 F.3d 747 (9th Cir. 1999), which might deter companies with intellectual property issues from filing in the Ninth Circuit.   As noted by Judge Guy Cole at the NCBJ conference, circuit judges spend most of their time hearing criminal cases and prisoner appeals, while very little of their time is spent on bankruptcy.   As bankruptcy courts become our national commerce courts, it might be desirable to have a single court of appeals with jurisdiction over issues of pure bankruptcy law.   For example, patent appeals go before the Federal Circuit.   Is it unreasonable to suggest that bankruptcy appeals should similarly go to a specialized appellate court?   This would not be workable for many bankruptcy appeals which depend on the vagaries of state law.   However, it might be desirable to create a panel of circuit judges with expertise in bankruptcy matters to whom important bankruptcy cases could be referred in order to create a national rule short of involving the Supreme Court (which only hears a few bankruptcy cases a year).These thoughts (which may not reflect the ideas of the original speaker) may be impractical, unworkable and unrealistic.   However, I think it is worth discussing whether it is time to develop Bankruptcy 3.0 for cases and issues of national importance.   As a practitioner, I get frustrated with our current ad hocsystem of venue.   Legislation fixing where to file may not be enough to solve the problem if it is too easy to bypass the legislative criteria.   I would prefer to see some judicial supervision of where big cases get filed as opposed to letting big debtors and their banks decide who gets to have all the fun.

Adequate protection in operation seems to stump new bankruptcy lawyers. How does the adequate protection payment relate to the claim as a whole? How do you figure it? Who gets adequate protection? The knottiest question I took at Amelia Island (and the least satisfying answer)  came in the Chapter 13 plan class about adequate protection. So, let’s take a stab at working through “adequate protection”. Adequate protection is value provided to a secured creditor during a bankruptcy case that prevents the value of the secured claim from decreasing. In our illustration, if you image the bartender pumping more beer (instead of air)  into the barrel as he draws beer out, the beer pumped in is adequate protection.  It keeps the level of beer in the barrel (or value in the secured claim) steady despite the debtor’s use. It’s part and parcel of the greater status accorded a creditor with a security interest in the debtor’s goods. Adequate protection in action The classic situation for adequate protection in a consumer case involves the debtor’s encumbered car in a Chapter 13 case. Absent a court order or the changes to the Bankruptcy Code in 2005,  the debtor continues to drive the car before the stream of payments under the plan are actually disbursed.  Assume the secured claim was $1000 at filing. But the passage of time and the miles driven reduce the value of the car.  The secured portion of the claim is reduced with the loss of value in the collateral. The Code thus provides in §361 the ways in which the value of the  secured claim can be maintained.  For cars, it’s always cash payments coupled with insurance. The concept is that the interim payment should at least equal the amount by which the collateral is losing value. So if our $1000 car loses value at $10 a month, adequate protection requires a monthly, preconfirmation payment of at least $10. At the end of the first month of the case (assuming that adequate protection payments began immediately), the secured creditor has a secured claim of $990, and $10 in cash.  That’s  the same value as the creditor had at the beginning of the case. How much provides protection? The rule of thumb I have been taught is that a car depreciates 1% of its value a month.  I have no idea where that formula came from (anyone?) or how it stacks up in the real world. Notice that it’s a percentage of the value of the collateral, not the value of the claim.  It’s the loss of the collateral’s value that we’re trying to mitigate. BAPCPA brought us the requirement that the debtor pay adequate protection on purchase money claims starting 30 days from the commencement of the case and that plan payments on secured claims be equal.  § 1325(a)(5)(B).   Whether adequate protection is paid by the debtor or the trustee seems to be a matter of local practice. Image courtesy of stans_pat_pix. December 8, Jay Fleischman and I are unpacking  the Essential Online Marketing Toolkit for consumer bankruptcy lawyers.  Check it out: an intense day of immediately useful information about Google, pandas, penguins, and profitability. Like This Article? You'll Love These! Struggling with “adequate protection” The Chapter 13 Plan Light Bulb Moment The Mystery Of The Disappearing Means Test Deduction

         What happens when the collateral securing a claim being crammed down in a confirmed chapter 13 is destroyed and insurance pays on the collateral?            Where vehicle subject to cramdown in confirmed plan was totaled, debtor could seek to use proceeds to purchase another vehicle with lien transferring; or if not so used creditor retains lien on surplus of insurance proceeds over balance of secured claim until discharge if no adequate protection is offered, but surplus proceeds do not go to creditor.  In re Kelley, 2012 WL 5457331 (Bankr. E.D. Ky, 2012).  The confirmed plan provided for paying in full the claim of Tidewater Finance on a 2008 Equinox reducing the interest rate from the contractual 20.95% to 4.25%.  Subsequently the vehicle was totaled in an accident resulting in a cash collateral motion by the Debtors to use the proceeds to purchase another vehicle giving Tidewater a lien on such replacement vehicle.  Tidewater alleged that this would be an improper modification of the confirmed plan.  The Court rejected that argument finding that motion does not seek to alter the payment terms to Tidewater on the secured claim, but solely that the lien was transferred to the new collateral, ie the insurance proceeds or vehicle purchased with such proceeds.  Prior to the hearing on the cash collateral motion, the Debtor withdrew the motion to use cash collateral as a friend gave them a replacement vehicle.  Tidewater then filed a motion for turnover of all the insurance proceeds and amended its claim adding additional postpetition charges.  The trustee objected to the amended claim and the request for turnover.    Tidewater alleged that the hanging paragraph of §1325(a) applied to the debt, as the vehicle was purchased within 910 days of the filing of the petition, the statute prohibited valuation of its claim, and its claim must be determined under non-bankruptcy law as payment under nonbankruptcy law would occur earlier than discharge in the case.  The Court ruled that this argument ignored the preclusive effect of the order confirming plan, which reduced the interest rate on the claim to 4.25%.  The Court cited Judge Lundin’s treatise to the effect that the lien retention rights are limited by the power to modify under §1325(a)(5)(B)(i).  While the lien on the surplus proceeds continues until the discharge, upon entry of the discharge the lien is eliminated upon compliance with the confirmed plan.     See further analysis of means test at Tampabankruptcy.com

For years, healthcare has been a major subject of discussion in the United States.  Costs are ever-increasing, and many claim there is no clear solution, while others propose very different solutions to the problem.  But it should come as no surprise that medical debt has become a larger and larger factor leading to bankruptcy, according [...]