All posts in Chapter 13

Judge Zurzolo Recent Comments on Chapter 13 Procedures

By | August 26, 2015 | Chapter 13, Judges Corner | No comments

This is an important note from Nancy Clark, President of the cdcbaa,

Dear Members:

At Judge Zurzolo’s last Chapter 13 Confirmation hearings, he asked me to pass along a message to the debtor bar regarding preparation for the confirmation hearings.  He was disappointed by the fact that debtor attorneys had failed to timely prosecute their cases and were asking for continuances for simple things like providing tax returns to the trustee, providing documents in response to the trustee’s object, or for not filing mortgage declarations.  He stated that if attorneys do not make the effort to prosecute chapter 13 cases in a timely manner he is ready to go to a same day 341(a) Meeting of Creditors Hearing and Confirmation Hearing as is done in Riverside which may result in more dismissals.

His next Chapter 13 Confirmation calendar is on September 28, 2015.  This is a friendly reminder that if you need to file a Motion for Order Disallowing Claim you need 30 days notice.  Therefore file it now. Also, if you need to amend the plan, you should do so soon as you need to have 28 days service if the amended plan contains any material changes.  Make sure your client provides you the information needed to file the mortgage declaration.  Remember, you no longer need to attach the copies of the payments and proof of mailing to the mortgage declaration.  Now is a good time to review the trustee’s objection and make sure you have provided the documents requested and prepared your written response, if necessary.

 All the Best,

Nancy B. Clark
Borowitz & Clark, LLP

cdcbaa Program This Saturday on Chapter 13

By | July 16, 2015 | Chapter 13 | No comments

Another note from Aki:

Nancy Clark’s CDCBAA Chapter 13 “Meet the Staff Attorneys” seminar is this Saturday 7/18/15 at 11:00 a.m.  The seminar will cover various chapter 13 topics and have a question/answer session as well.  It will be attended by Beth Schneider from Rod Danielson’s Office, Masako Okuda from Nancy Curry’s Office, Jay Chien from Amrane Cohen’s Office and Angela Gill and me from Kathy Dockery’s Office.  We will be handing out a Summary Sheet for all of the chapter 13 trustees’ current policies. See you there.

I will also make available a stipulation form that you can use for OUR OFFICE ONLY to get an order ASAP to approve your RARA fees before you convert a case from 13 to 7. Please make sure that your client has some change in circumstance that has caused the decision to convert to 7.

Notes From Aki Koyama on Getting Paid in a Chapter 13 that gets Converted to Chapter 7

By | July 16, 2015 | Chapter 13 | No comments

If you are planning to convert your client’s case to chapter 7 prior to the confirmation hearing, make sure you file a fee application and have the order entered before the notice of conversion is filed if you want to be paid post petition. If you don’t, the balance on hand the trustee is holding will probably be refunded in full to your client. This is caused by the SCOTUS ruling in Harris v. Viegelahn.

The dismissal scenario is covered by LBR 3015-1 (v)(7). So long as a RARA is filed prior to dismissal of the case, any post petition fees owed pursuant to the RARA will be paid to the attorney of record.  The LBRs in this scenario would have the same force and effect as a general order. In essence, the order approving your fee pursuant to the RARA is effective as soon as you file the case should the case be dismissed. Therefore, the order would precede the dismissal of the case.

The section that governs where plan payments go after dismissal is governed by 1326(a)(2) – “A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable.  If a plan is not confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3) to the debtor, after deducting any unpaid claim allowed under section 503 (b).”

You’ll notice that this subsection specifically authorizes payment of administrative expenses which also cover your post petition attorneys fees. That’s why the combination of your RARA which is your fee application and the LBR authorizing payment pursuant to the RARA if a case is dismissed works so well.

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9th Circuit BAP Opinion Allows For Stripping Wholly Unsecured Junior Liens in a Chapter 20

By | July 10, 2015 | Cases, Chapter 13 | No comments

On June 9, 2015, the 9th Circuit Bankruptcy Appellate Panel held that a Debtor not eligible for a Chapter 13 discharge may strip off a wholly unsecured lien through a Chapter 13 Plan. You can find the case here.

This is common practice in the Central District and I am happy the BAP went the right way. I was a little worried after reading their Wages where the Court held that the anti-modification provision under §1123(b)(5) applies to any loan secured only by real property that the debtor uses as a principal residence. When the law is ambiguous, why rule in favor of the bank! You can find that case here.

Questions the author has yet to consider:

So what happens in a Chapter 11? 1111(b)(1) says nonrecourse debts become recourse debts but it starts out with “A claim secured by a lien on property of the estate…”

Social Media Passwords: Property of the Estate?

By | July 7, 2015 | Chapter 11, Chapter 13, Chapter 7, Courts | No comments

From ABI Newsroom:  Bankruptcy Gun Shop Ordered to Turn over Social Media Passwords

Debtor (a gun shop owner) had used social media to promote his gun store, but after he lost ownership of his store in bankruptcy, a judge declared the business’s Facebook and Twitter accounts property that belonged to the new owner and ordered the Debtor to turn over the passwords.   Debtor argued the accounts were personal, and refused.  He was held in contempt, and spent seven weeks in federal custody until he complied with the order.

The judge’s ruling charts new legal territory in awarding property in bankruptcy proceedings and points to the growing importance of social media accounts as business assets.   Legal experts say it also provides a lesson for all business owners active in social media about keeping separate accounts.

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Are Voluntary Retirement Contributions Deductible When Computing Net Disposable Income in Chapter 13?

By | July 6, 2015 | Chapter 13, Judges Corner | No comments

Well that’s a good question.  But according to Peter Lively, the deductions are allowable in Judge Zuzolo’s courtroom from now on.  Below is the email I received today from Peter.

Judge Zurzolo announced at the confirmation hearing this morning regarding one of my clients that he will now allow voluntary retirement contributions for his cases.  He is no longer following the BAP’s In re Parks opinion.  In all fairness to Nancy Curry, she withdrew her objection prior to the ruling and the case was confirmed, but Judge Zurzolo recalled the case and said he has spent a lot of time reading the brief and considering the issue and wanted to announce his decision.

Dear Congress: Chapter 13 Could Use a Little Help

By | July 2, 2015 | Chapter 13, Programs | No comments

The Central District Consumer Bankruptcy Attorneys Assn (cdcbaa) is going to hold its second annual Jim King Program on Saturday September 19, 2015 at 11:00 a.m. The two hour Program will be titled

Dear Congress: Chapter 13 Could Use A Little Help!

The panel is

Judge Keith Lundin, Nashville Tn.
Hank Hildebrand, Chapter 13 Trustee Nashville, Tn.
Judge Meredith Jury, Riverside Division, Central District of California
Prof. Katie Porter, University of California Irvine
I will be the moderator (and mostly stay out of the way).

The program will be held either at Southwestern Law School downtown or at Loyola Law School downtown. We will let you know when the venue is finalized.

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How to Recover Attorney’s Fees in Preference Action

By | June 19, 2015 | Cases, Chapter 11, Chapter 13, Chapter 7 | 1 Comment

Defending against a preference action is challenging, especially more so when your client is an innocent bystander to such a draconian rule.   Unfortunately too, recovering attorney’s fees from a successful defense is not in your favor either.

Attorney’s fees are generally not recoverable for successfully defending against the trustee’s preference action because a preference action is based wholly in bankruptcy law, is unique to bankruptcy and not an action under contract law (which gives effect to attorney’s fees clause in contract).   Alvarado v. Walsh (In re LCO Enters., Inc.), 180 B.R. 567, 570-71 (9th Cir. BAP 1995), aff’d, 105 F.3d 665 (9th Cir. 1997).

Attorneys CAN recover fees in defending a preference action IF:  (cue suspense music)

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Secured Creditors Who Do Not File Continuation Statements Will Lose Their Secured Status, Despite a Bankruptcy

By | May 26, 2015 | Chapter 11, Chapter 13, Chapter 7 | 1 Comment

UCC-1 financing statements are effective for five years.  Before the five years has run, the creditor must renew the financing statement by filing what’s called a continuation statement.  This is essentially a UCC-1 with a check next to the box labeled “continuation statement.”  The only caveat is any continuation statement must be filed no sooner than six months before the five year period has expired.  Assuming a continuation statement is filed, the five year period is expanded by five years from when the original would have expired.  This can be done indefinitely.

What if the Debtor filed bankruptcy?

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Preemption and the Supremacy Clause

By | May 25, 2015 | Chapter 11, Chapter 13, Chapter 7, Community | 2 Comments

Twice in the last week I have had an attorney ask me a bankruptcy question and then comment that it seems to him that the answer is in the supremacy clause.  In other words, the federal law is bigger and better and more important and more powerful than state law so it wins.  This shows a lack of understanding of preemption and the supremacy clause.

It is constitutional law 101 that the federal government has the power to do only what the constitution gives it the power to do.  Everything else is reserved to the states.  Further, the states can do anything they want unless the constitution says they cannot or the federal government has passed a law, using a power given to it in the constitution, which is intended to preempt the field.  How do we know when congress “intended” to preempt the field?  When it says so right in the legislation or when the law it passed is so comprehensive that it leaves nothing left for the states to do.

In Sturges v. Crowninshield,  17 U.S. 122 (1819), the Supreme Court, Chief Justice John Marshall, ruled that states can pass bankruptcy laws!  At least until congress passes a law which it intends to preempt the field.  States cannot however grant a discharge of debts since the constitution says states cannot “impair the obligations of contracts.”

Most states including California have assignment for the benefit of creditors laws (“ABC”) which function very similar to bankruptcy laws.  Someone liquidates the assets for the debtor and distributes the proceeds to the creditors.   So obviously the bankruptcy act we have today, Title 11, is not a law which has preempted the field, at least completely.

States cannot however pass laws which “unreasonably” interfere with federal laws.  A state cannot pass a law for example that provides that persons who file bankruptcy must nevertheless pay their attorneys the amount owed prior to bankruptcy.  That would, in effect, amend the bankruptcy code.  Congress has decided who gets a discharge and for what.  States cannot interfere with that decision.  Congress could amend the code and say that each state can decide what debts will be discharged as it has done with exemptions.  But it has not so states must steer clear.  Why?  Because of the supremacy clause.

Two examples of this come to mind.  In Local Loan Co. v. Hunt,  292 U.S. 234 (1934), Illinois law provided that a lien could attach to future wages and we all know liens don’t go away in bankruptcy.  The Supreme Court struck down the law saying, “The … Illinois [law] is ‘precluded here by the clear and unmistakable policy of the Bankruptcy Act.’”   The effect of the law was to prevent discharges that congress intended to include.

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