Consumer Bankruptcy

rst time that the bankruptcy court lacked jurisdiction over the claim raised in the untimely amended complaint upon which the bankruptcy court had based its decision. In denying that motion, the bankruptcy court held that Rule 4004(a)'s time bar was not jurisdictional and that the debtor had waived any untimeliness claim by failing to raise it before the court reached the merits. Both the district and circuit courts affirmed.

Compensation of debtor's counsel in consumer cases was the focus of the Consumer Committee meeting held on April 16, 2004, at the Annual Spring Meeting in Washington, D.C., and attended by approximately 50 members. The program featured a panel discussion led by the Honorable Jennie Latta of the Western District of Tennessee, Diane Livingstone, an Assistant United States Trustee from Region 7 and Marjorie Payne Britt, a bankruptcy practitioner in Houston, Texas. Topics included recent holdings by the United States Supreme Court in Lamie v. United States Trustee and the Seventh Circuit's decision in Bethea v. Adams & Associates and their implications for debtor's counsel and the provision of legal services to debtors in chapter 7 cases.

The Supreme Court, apparently without resort to a calculator, decided the cramdown interest issue by employing a formula approach.

Confronted by the difficult and arcane issue of what interest rate best satisfies the requirements of §1325(a)(5)(B)(ii) that the secured creditor receive “…the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim ….”, a plurality of the Court held that the so-called formula approach (the prime rate plus a calculated risk factor) best meets the intent of Congress and the objectives of the Bankruptcy Code.

The Supreme Court held that the discharge of a student loan debt, as an exercise of the bankruptcy court’s in rem jurisdiction, does not infringe the state’s sovereign immunity. The court did not address the underlying issue as to abrogation of the state's sovereign immunity from private suits under §106(a) of the Bankruptcy Code.

In Bethea v. Robert J. Adams and Associates, 352 F.3d 1125 (7^th Cir. 2003), the Seventh Circuit has ruled that in a chapter 7 case a pre-petition agreement for payment of legal fees creates a debt subject to discharge like any other. The court rejected arguments that §329 evinces an intent to except such fees from the scope of the discharge and that public policy, including the need to facilitate the employment of counsel for chapter 7 debtors, mandated an exception for pre-petition fees.

In Lamie v. United States Trustee, 540 U.S. ___ (2004), the Supreme Court affirmed the Fourth Circuit and held that a chapter 7 debtor’s attorney must be appointed by the trustee, and approved by the court, pursuant to 11 U.S.C. §327, in order to receive post-petition (or post-conversion) compensation. The Court held that awkwardness created by the 1994 amendment to 11 U.S.C.

Debtors in bankruptcy often retain secured collateral (such as a home or car) without redeeming the collateral or reaffirming the secured debt. In many instances, the secured creditor will allow the debtor to retain possession of the collateral and not foreclose or repossess as long as the debtor makes the monthly contract payments and meets the other obligations under the contract (e.g. insurance coverage). As such, a creditor’s continuing contact with the debtor may be necessary to maintain the debtor-creditor relationship with regard to the surviving lien. The issue is whether such contacts are proper under the Bankruptcy Code.

In the recent case of Archer v. Warner, 123 S.Ct. 1462, 155 L.Ed2d 454 (2003), the Supreme Court reversed the Fourth Circuit Court of Appeals and found that a claim based on payments due under an agreement resulting from the settlement of fraud claims can retain its status as a nondischargeable debt. The fact that the debt was reduced to a payment under a settlement agreement did not change the character of the debt for nondischargeability purposes.

ABI continues to produce high-quality resources with information of value to consumer bankruptcy practitioners. The Nuts and Bolts program conducted by ABI immediately before the Annual Spring Meeting featured presentations on the fundamentals of consumer bankruptcy law. The manual for the program, authored by Tom Yerbich, a Vice Chair of the Consumer Bankruptcy Committee, and entitled Consumer Bankruptcy – Fundamentals of Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code, will soon be published by ABI.

Absent special circumstances, an attorney representing a chapter 7 debtor may not limit the scope of representation. Once an attorney signs on to represent a debtor, he or she must represent the debtor in all aspects of the bankruptcy case, including any contested matters or adversary proceedings that involve the debtor’s interests and this obligation continues until the court grants a request for withdrawal or the debtor consents to the withdrawal…..at least in Georgia. See, In the Matter of Egwim, 291 B.R. 559 (Bankr. N.D. Ga. 2003); See also, In re Johnson, (Bankr. D. Minn. 02-60812 2003) and In re Castorena, 270 B.R. 504 ( Bankr. D. Idaho 2001).