Consumer Bankruptcy

Court rules for some states, such as Michigan, allow for a judgment creditor to seek judgment against a garnishee for failure to answer a writ of garnishment. Grounds for liability are based on contempt of court and damages incurred by the judgment creditor due to the garnishee’s failure to respond to the garnishment. (See M.C.R. 3.101). In the context of bankruptcy, an issue has arisen in some jurisdictions as to whether enforcement of a judgment against a garnishee is a violation of the automatic stay as to a judgment debtor who files for bankruptcy.

There is a split of authority on this matter. Some jurisdictions hold that an action against the garnishee is an action against the debtor in violation of the automatic stay. However, the majority opinion is that there is no violation of the automatic stay to enforce a judgment against a garnishee that fails to respond to a writ of garnishment.

The more I look at the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the more I am beginning to think that we have all been misled by those who either did not know or did not care to know any better.  During the past 20 months, we have been bombarded with questions about whether “projected disposable income” (PDI) is an historic fact or a future prediction.  We have been puzzled and perplexed by Form B22C and disposable income (DI).  We have wondered what Congress really intended when it adopted the IRS expense standards, which the IRS created solely for determining how much a taxpayer could pay in working out offers of compromise for tax debts. Compare In re Hardacre, 338 B.R. 718 (Bankr. N.D. Tex.

The frequency with which small businesses fail gives rise to a common scenario: Former small-business owners finding themselves burdened with not only personally guaranteed trade payables, but also with significant amounts of business-related tax obligations, commonly in the form of tax penalties assessed personally against the business’ principals under 26 U.S.C. §6672.

We are very much in the early innings on issues involving 910 claims under the hanging paragraph of 11 U.S.C. §1325(a)(9). Until the relief of appellate decisions enters the game, there may not be a lot of uniformity of this bankruptcy law.

Applicability of the Till Interest Rate Analysis

It’s not what a man doesn’t know that makes him a fool, it’s what he does know that ain't so.
-Josh Billings

Disparate Effects of a Single Word
In order to gain confirmation of a chapter 13 plan if it faces objection by the trustee or the holder of an unsecured claim, a debtor must pay in full each allowed unsecured claim, 11 U.S.C. §1325(b)(1)(A), or devote to the plan all projected disposable income to be received during the applicable commitment period, 11 U.S.C. §1325(b)(1)(B). Thus confirmation rests, if allowed unsecured claims are not completely satisfied, on a qualifying amount of money paid over a qualifying span of time.

Occasionally, a debtor may place a provision in a chapter 13 plan that is contrary to the Bankruptcy Code and the plan is confirmed without objection. It has been a long-held belief that a creditor’s failure to object to the confirmation of a chapter 13 plan waives any objection to the plan once the plan is confirmed. This position is supported by the legal concept of res judicata (i.e., the binding effect of a court order), and the following language in §1327:

A(a) The provision of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.

Courts have recently been wrestling with, and finding creative ways of interpreting, the un-numbered “hanging paragraph” at the end of 11 U.S.C. §1325(a) in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This is the provision that makes 11 U.S.C. §506 inapplicable to a claim in which the creditor has a purchase-money security interest on the subject debt incurred within the 910-day period prior to the filing of the bankruptcy petition (popularly referred to as a 910 claim). One such case out of Tennessee is In re Ezell, __ B.R. ___, 2006 WL 598142 (Bankr. E.D. Tenn.) (R. Stair, Jr.).

Recent events have made me wonder, what exactly can I do for a previously filed client (previous filer) who walks into the door and wants to file a new bankruptcy case? Now, under the new law, I must initially ask: When did you previously file, when was your discharge, or did you pay 100 Percent in your prior case? The importance of these questions has grown, as the new law constrains the right to obtain a discharge for the previous filer. And because the majority of my clients really only want one thing from my offices (the discharge), I must correctly analyze my capability of providing the previous filer with the product they seek to obtain.  
           

If the trustee or an unsecured creditor objects to the debtor’s plan, the court may not approve it unless it provides that all of the debtor’s projected disposable income for either a three-or five-year period, depending on the debtor’s income level, is applied to pay unsecured creditors. (11 U.S.C. §1325(b)(1)(B)). The Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), calculates disposable income by deducting permissible personal expenses from the debtor’s current monthly income (CMI).