All posts in Chapter 13

How Much is the Chapter 13 Plan Supposed to Pay? In re Schlegel

By | May 19, 2015 | Chapter 13 | No comments

The chapter 13 Plan in the Central District of California is a preprinted (and mandatory) form which states on the first page:

“The base plan amount is $___ which is estimated to pay ___% of the allowed claims of nonpriority unsecured creditors.  If that percentage is less than 100%, the Debtor will pay the Plan Payment stated in this Plan for the full term of the Plan or until the base plan amount is paid in full, and the chapter 13 trustee may increase the percentage to be paid to creditors accordingly.”  emphasis added.

In Schlegel, the debtor said $815 per month which is estimated to pay 48%.  Emphasis added again.  They paid the $815 for the five years.  The case was dismissed at the request of the trustee because the total payments did not give unsecured creditors 48%.  How can that be, you say?  A creditor filed a proof of claim during the process – late in the plan confirmation process but nevertheless timely – and the debtor basically ignored it.  What should the debtor have done you ask?  He should have amended the plan to provide for the same dollar payment but a new estimate about the percentage the unsecured creditors would receive roughly.

This makes no sense to me.  In some cases the debtor is required to pay 100%.  But otherwise, the bankruptcy code tells us fairly specifically how to compute the amount of the payment but nothing about the percentage.  It is not meaningful in my opinion except to give creditors a rough idea about how much they will get back.  Further amending the PLAN, to tell the the rough amount they will get back has changed seems to me to be form over substance big time.

STEVEN PATRICK SCHLEGEL; JOANNE MARIE SCHLEGEL

Note from Aki Koyama on Harris v. Viegelahn

By | May 18, 2015 | Chapter 13 | No comments

SCOTUS published its opinion this morning for the Harris v. Viegelahn matter. This is the case about what happens to the plan payments the chapter 13 trustee is holding when a case gets converted to chapter 7. In a short opinion, SCOTUS holds that the funds are returned to the debtor. This complicates preconfirmation conversions from 13 to 7. Can the trustee pay attorney’s fees from the plan payment balance when a RARA has been filed but the case is converted preconfirmation? The case seems to indicate no. Our Local Bankruptcy Rules are slient on the issue of what happens to the funds when a case is converted from 13 to 7 and a RARA has been filed. Time for an LBR revision or clarification on whether or not a fee application must be filed in this scenario.

Here’s the link to the opinion

A reader commented to Aki:  Very good point. Although the LBR is silent, how has your office been handling this issue up to now? (attorney fees owed during preconfirmation conversion…RARA filed.

Aki’s response:  Our office has been paying attorney’s fees if a RARA has been filed but we will have to reconsider this now.

Be Careful When Using the Owner of Property to Establish the Value in a Declaration

By | May 18, 2015 | Chapter 11, Chapter 13 | No comments

Typically the owner of property is “qualified” to express an opinion of the value.  That means that the “opinion” will not be stricken on the basis that the owner is not an expert on that particular kind of property.

Judge Vincent Zurzolo gave us some great tips on Saturday at the cdcbaa program.  A statement like, “The Debtor owns this property and believes it is worth $25,000,” is subject to being stricken for lack of foundation.  At a minimum it should be given virtually no weight even if it is not stricken.  He still has to explain the basis for his belief that that is the value.  The worst is when his belief is based on Zillow or on the Kelly Blue Book.  As an expert on his property, the declarant is permitted to rely on hearsay but the hearsay can only be part of the reason he has his opinion.  If he says I believe its worth $1,000 because that is what KBB says, he is just parroting the hearsay.

Judge Zurzolo suggested we include in the declaration comments on the description of the property, when it was purchased, what work has been done over the years, what efforts he has made to figure out the value (i.e., I looked at Zillow).  He said attaching pictures is helpful.

Family Contributions Continue to Work in Chapter 13

By | May 15, 2015 | Chapter 13 | No comments

From Aki Koyama, Staff Attorney for a Chapter 13 Trustee here in Los Angeles:

Judge Klein announced in court last Wednesday that she will not be following Judge Yun’s Memorandum Opinion In re Carolyn Deutsch (6:14-bk-21126) which is about disallowing contribution income if there is insufficient evidence of a basis for the contribution income.  Among other factors, the opinion requires a history of contributions prior to the filing of the case.  I have been told that Judge Zurzolo has also indicated he will not be following this opinion.

5/15/15 – San Fernando Valley Bar Association; The Messed Up Chapter 13 Plan and the Hunt Through the Brier Patch

By | May 12, 2015 | Chapter 13, Community, Current Events, Programs, Specialist Information | No comments

From Steve Fox:

Dear All:

Friday’s program has a little bit of everything, some fun, some serious detective work, some argument, some collaboration and something to learn.

In recent weeks, a small number of attorneys have been putting together the most flawed chapter 13 plan they can devise. Some flaws are obvious; others are subtle. Some flaws are policy issues; some flaws are red herrings. Some tweaks to the plan are meant to stir thought. The program will require all attending attorneys and judges to form into small groups and to put their heads together and develop lists of these flaws. The groups with the best lists will earn prizes. When time for the groups is up, we will reconvene as a whole and analyze the plan together.

If you do not do chapter 13 work, you still want to attend the program. One, creditor attorneys will enjoy finding the flaws and issues. Second, you will learn a lot about plan drafting and that learning can transfer over to chapter 11 plans. Third, most MCLE programs could be a lot more interesting; this one will be.

Read more…

My Prediction on Bullard v. Hyde Park Savings Bank was Right Thank You

By | May 11, 2015 | Chapter 13, Supreme Court | No comments

On December 21, 2014, I wrote for the NACTT Academy:

“This seems like a no-brainer to me.  Bankruptcy courts, at least in the Central District of California, deny chapter 13 plans all day giving debtors a chance to sharpen their pencils.  If every one of those could be appealed, the system would certainly go tilt.  Plus, the appeals would often become moot when a new plan is confirmed assuming the bankruptcy court would not allow the case to sit during the pendency of the appeal.  If the case is ultimately dismissed during the appeal, there would be new facts to put before the court of appeals which would be in the middle of reviewing the old facts.  A conundrum for sure.”

I’ll tell you more about the 9-0 ruling this afternoon.

ABI’s Proposed Changes for Small and Mid-Size Businesses

By | January 18, 2015 | Chapter 11, Chapter 13, Chapter 7, Court Clerk Information, Courts | No comments

Below is a great article discussing the American Bankruptcy Institute’s proposal to help small business debtors.  The article first apppeared in the WSJ’s DealB%k by Prof. Michelle M. Harner.

When small and middle-market companies fail, families and founders often lose a business to which they have devoted not only most of their time but also most of their life savings, and most of the time the reason why these business fail is because they don’t know what is lead generation, which at the end is a fact that could have prevented the situation. Others lose as well: employees, suppliers, communities and lenders. Consequently, a federal bankruptcy system that effectively and efficiently rehabilitates distressed small and middle-market companies is essential.

Read more…

Supreme Court Oral Arguments Today in Wellness International Ltd. v. Sharif

By | January 14, 2015 | Appeals, Cases, Chapter 11, Chapter 13, Chapter 7, Courts, Supreme Court | No comments

Today, January 14, 2015, the Supreme Court is scheduled to hear oral arguments in the latest case before the Court regarding the bankruptcy court’s jurisdictional powers — Wellness International Network, Limited v. Sharif.  The Court was not too interested in delving into this issue since the case was on the list of cases to be considered by the Justices at five separate conferences.  Regardless, the Court finally granted certiorari to the Seventh Circuit’s decision on July 1, 2014.

The Court will address the following two issues:

(1) Whether the presence of a subsidiary state property law issue in an 11 U.S.C. § 541 action brought against a debtor to determine whether property in the debtor’s possession is property of the bankruptcy estate means that such action does not “stem[] from the bankruptcy itself” and therefore, that a bankruptcy court does not have the constitutional authority to enter a final order deciding that action; and

(2) whether Article III permits the exercise of the judicial powers of the U.S. by the bankruptcy courts on the basis of litigant consent, and if so, whether implied consent based on a litigant’s conduct is sufficient to satisfy Article III.

For more information:  www.scotusblog.com/case-files/cases/wellness-international-network-limited-v-sharif/

B.A.P. Holds Judge Does Not Have Authority To Prevent Debtor From Adding An Exemption to the Schedules (In re Gray et al., 9th Cir. B.A.P. 2014)

By | December 16, 2014 | Appeals, Cases, Chapter 13, Chapter 7, Uncategorized | No comments

The 9th Circuit B.A.P. recently held that a bankruptcy judge does not have the authority to prevent a debtor from adding an exemption to his or her court papers based solely on the judge’s finding they had acted in bad faith.  The Panel intricately cites U.S. Supreme Court’s decision in Law v. Siegel in reaching its conclusion.

Summary holding:  Bankruptcy courts have no discretion under federal law to deny debtors leave to amend their exemptions absent express statutory authority.  The panel reversed a ruling to disallow an amended exemption.   In re Gray et al.; Gray et al. v. Warfield, No. 13-1502, 2014 WL 6972522 (B.A.P. 9th Cir. Dec. 9, 2014).

When Appealing, First Seek a Stay (In re Mortgages)

By | November 19, 2014 | Appeals, Chapter 11, Chapter 13, Chapter 7 | No comments

When appealing an order, remember to put on your checklist to first seek a stay of the challenged order.  If not, the appellate court will regrettably inform you “there is nothing we can do for you now”.   That is what happened in In re Mortgages Ltd., — F.3d — (9th Cir. 2014).

In a recently published Ninth Circuit Opinion, the Court held that an appeal by a group of creditors was equitably moot because they never sought a stay of the order that they were appealing from.  The debtor had already acted, and other third parties would be unfairly harmed if the panel were to side with the creditor-appellants.  The Court said, “clawing back money from those investors who already paid their full allocation would be either impossible or inequitable.”

As such, the panel dismissed the appeal citing In re Thorpe, which held that appeals can be dismissed based on mootness when a “comprehensive change of circumstances” has occurred that makes it inequitable for a court to consider the appeal’s merits.  In re Thorpe Insulation Co., 677 F.3d 869 (9th Cir. 2012).

Full Opinion Here: http://cdn.ca9.uscourts.gov/datastore/opinions/2014/11/12/12-15234.pdf

← Older Entries
Newer Entries →