All posts in Chapter 7

Facebook – Property of the Estate?

I was at a meeting last week of the Commission I sit on for the State Bar which administers the bankruptcy specialist program.  A couple of the attorneys from the San Diego area were commenting that a trustee in San Diego is insisting that chapter 7 debtors give him their Facebook password.  That generated discussion about whether that demand needed to be complied with.  One of the attorneys, a very talented guy, commented “Well, clearly Facebook is propertry of the estate.”  I have been thinking about that since.

Property, of course, is about as expansive a concept as there is.  If it’s a right the debtor has, the right is probably property of the estate.  And “clearly” (I hate that word), if the Facebook page could be sold or otherwise has value, that value has to go to creditors.  But some rights that have “value,” cannot be sold – my law license, my rights to see my grandkids.  Since the Facebook page cannot be sold, does not have value other than to me, there is a place to argue that it is not property of the estate.

If the trustee can demand the password, where does that stop?  The trustee says “there MIGHT be information on FB that leads him to assets.”  Well, I’ll give him that but there are also rights to privacy (Scalia don’t listen to this part).  How about access to a private community bulletin board?  The consumer bankruptcy attorneys in the central district have a Yahoo group with access limited to members.  I guess I MIGHT be posting on that listserve stuff that MIGHT help the trustee.

I’m just bringing this up to counteract the knee-jerk comment that FB is clearly property of the estate.  These things have to be thought through.

More importantly for me at least, is it has added to my awareness of asking clients about websites, blogs, commuinity bulletin boards etc., to make sure we have covered all the bases when completing the schedules.

More Info on Pro Per Filings in the Central District

The 9th Circuit has prepared a nice overview on the pro per filings issues in the Central District.  You can access it here.  About a quarter of all filings in the Central District are pro per and, of that amount, 39% of the chapter 7s will be dismissed and 99% of the chapter 13s will fail to successfully complete the plan.

The chapter 7 number is a little strange since chapter 7s are rarely dismissed (I thought).  I assume the dismissal must be based on the failure of the debtor to appear at the meeting of creditors.  That tells me that the filing was solely to stop an eviction or foreclosure and give the debtor a little more time to move.   The filing was probably by a BPP or “notario” in the hispanic community.  A lot of the pro pers are not aware they filed.

As to chapter 13s, it’s a sad state of events to know that the paperwork is so complicated that virtually no one can do it themselves.  I assume most pro per chapter 13s are filed by people who are trying to save property they cannot afford and thus the failure from the start.  But conceptually, chapter 13s are not that complicated – its the paperwork that is difficult although Congress could help by making the basic rules a little more easy to understand and banks could help by doing something other than filing a mindless objection to the plan at the last minute, then sending an appearance attorney to the hearing.

Bankruptcy Basics and Review Program

Hosted by University of West Los Angeles School of Law

Bankruptcy Basics and Review

MCLE Specialization Bankruptcy Credit (approved for 12 MCLE credits)

Professor M. Jonathan Hayes, Senior Adjunct Professor of Law UWLA and Certified Bankruptcy Specialist

James T. King, Certified Bankruptcy Specialist

June 1-2, 2012; 9:30 a.m – 4:30pm

This two day program will focus on Chapter 7, 11, and 13. The program is for attorneys who have some basic knowledge of bankruptcy and are interested in learning more.  Paralegals and staff are welcome.  The first day will focus on consumer bankruptcy, Chapter 7 and 13 and the second day will focus on Chapter 11, corporate and individual cases.  You can sign up for one day or both.

See the flyer here.

Hope to see you there!

9th Circuit BAP Affirms that Bankruptcy Judges May Enter Final Monetary Judgments in Non-Dischargeability Cases

Dietz v. Ford (In re Deitz), — B.R. — (9th Cir. BAP April, 2012)

Issue:   May the bankruptcy court enter a final judgment for money in a non-dischargeability action given Stern v. Marshall?  Did the bankruptcy court properly find fraud on these facts?

Holding:   Yes on both    Judge Richard Ford, Eastern District of CA

Pappas, Dunn, Markell

Opinion by Pappas, concurring opinion by Markell

The debtor, a contractor, agreed to do work on Fords’ home.  His license was suspended at the time and, in any event, he collected 25% more than the contract price and ultimately did only about 65% of the work.  At trial, the bankruptcy court found fraud under 523(a)(2) as well as under 523(a)(4) and willful and malicious injury under 523(a)(6).  He entered judgment against the debtor for $368,000.  On appeal, the debtor argues that under Stern v. Marshall, the bankruptcy court cannot enter a final judgment either as to the dischargeability of the debt or the amount of the debt.

The BAP affirmed.  As to the court’s power to enter final judgment, the BAP said that non-dischargeability “claims arose under the Bankruptcy Code, subject matter jurisdiction existed in the district court, and by its referral, in the bankruptcy court, as well.  Moreover, “determinations as to the dischargeability of particular debts . . .” are expressly included in the statutory list of core proceedings. 28 U.S.C. § 157(b)(2)(I).  As a result, Congress has provided that the bankruptcy court may enter a final judgment on exception to discharge claims, subject only to appellate review. 28 U.S.C. § 157(b)(2)(I).  Indeed, since 1970, the bankruptcy court, via the reference from the district court, has had the exclusive authority to determine the dischargeability of debts under § 523(a)(2), (4) and (6). See § 523(c)”

As to entry of a monetary judgment, the BAP said, “The Ninth Circuit has also expressly held, pre-Stern, that a bankruptcy court may enter a monetary judgment on a disputed state law fraud claim in the course of determining that the debt is nondischargeable. Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015 (9th Cir. 1997).”  It comments that it must follow the 9th circuit unless the Supreme Court unless it is “clearly irreconcilable.” As to the finding of fraud, the BAP said the court’s findings were not clearly erroneous.

Read more…

Warren Sapp Chapter 7 with $45,000 per Month of Current Income? – Stay Tuned

Here is a great article on the status of the Warren Sapp chapter 7 in Florida.  The article says he gets $45,000 of income from a tv program and other sources but they are taking the position that the debts are not primarily consumer debts.  He owes something near a million in domestic support obligations and nearly another million more or less in taxes.  The taxes are apparently dischargeable.  The meeting of creditors is May 8 so we won’t see a UST motion to dismiss for a while if its coming.

New Median Income Numbers and IRS Charts Starting May 1, 2012

There will be new median income figures beginning May 1, 2012.  The median income for the debtor’s household size determines whether he has to even do the means test in a chapter 7 and determines whether the chapter 13 plan has to be 3 years or 5 years.  Starting May 1, the median income in California is 49,188 for a one person household; 63,481 for two; 68,135 for three; 77,167 for four; and $7,500 for each person after that.  You can find the amounts for all states here.  Also, the new IRS tables are effective May 1, 2012.  They can be found here.

Class Action Suit Against Wells Fargo for Freezing Accounts in Every Case

On January 21, 2011 Christopher P. Burke, Esq. and Scott C. Borison, Esq. attorneys for Eric Mwangi and Pauline Mwicharo [Plaintiffs] filed case no. 11-01022-bam in U.S. Bankruptcy Court for the District Court of Nevada this Adversary, a class action.

Thanks to Christine Wilton for this news.  I will check the docket and update shortly.

Well, I’ve checked the docket.  Pretty interesting.  The case was before Judge Bruce Markell.  The complaint asked for $5 billion (with a “b”) in damages.  WFB filed two Motions to Dismiss, the second of which was granted with prejudice in September, 2011.  The debtors appealed to the BAP.  WFB transferred to district court (shocker there) since the BAP ruled that Wells violated stay.  The parties are waiting for the district court to rule.  Email for counsel for the debtor is  atty@cburke.lvcoxmail.com.

Judge Ted Albert Tentative on Abuse, 707(b) Motions

The Central District Insider thanks Christina Wilton for this tentative ruling and hopes she lets us know what happened.  (I think Judge Albert got it right by the way.  There has to be something more than the UST thinks the house payment is too high).

Tentative Ruling

This is the motion of creditor for dismissal under 11 U.S.C. §707(b)(3)(A) or (B). This requires the court to evaluate alternatively whether the filing of this bankruptcy was in good faith, or if in the totality of the circumstances abuse is demonstrated. The standard is not as the debtor has argued. Just because under the “means test” a presumption of abuse does not arise, the converse is not necessarily true, i.e. a case where the presumption is not triggered may still be determined under all of the circumstances to have been in bad faith or an abuse. Otherwise subsection (b)(3) would be superfluous. See e.g. In re Reed, 422 B.R. 214, 215, 230 (Dist. C.D. Cal. 2009). The real question is whether under these circumstances the various expenses claimed by the debtor make this case abusive. There are several expenses which have provoked comment. For example, the debtor pays for both his home mortgage and for an RV for another $2,745 per Read more…

Prof. Katie Porter’s Analysis of the Financial Management Program

I have been as big a critic as anyone about the silliness of the pre and postpetition counseling requirements.    The prepetition counseling is completed 99% of the time after the decision to file bankruptcy has been made and is usually done immediately prior to the actual filing.  A study by Prof. Katie Porter however has turned my eye a little about the postpetition financial management course.  You can find her analysis on the blog Credit Slips.  Here is a portion of the post.

Evaluating Mandatory Financial Education in Bankruptcy

posted by Katie Porter
Dr. Deborah Thorne and I have a new study that looks at how debtors themselves feel about the mandatory financial education course. It is a chapter in this book, Consumer Knowledge and Financial Decisions (ed. Douglas Lamdin, Springer, 2012) and available to read here. In the 2007 Consumer Bankruptcy Project, we asked debtors whether they believed that the information from the financial education class 1)would what they learned in the financial education class have helped them avoid bankruptcy originally, and 2) would help them avoid financial trouble in the future. While only 33% thought a financial instruction course similar to the one required of bankruptcy debtors could have helped them avoid filing, 72% thought it would help them avoid future financial trouble.  As we report in detail in the chapter, some demographic groups were much more positive about the value of financial education than others.
About half (48.7%) of minority persons who filed bankruptcy, for example, thought the course would have helped them avoid bankruptcy; for whites, the response was 27.6%, a little more than half.  Similarly, there significant differences in the perceived value of financial education–both to have helped prevent their bankruptcy and to help them keep out of future financial trouble.  Those without a college degree, those aged under 25 years or 65 years or over, and those who less familiar with their household finances believed the course had more value.  Note that the point is not that the course actually would have or will help debtors; the measure here is debtor’s perception of value, which I think is well worth evaluating in a system that is designed to rehabilitate debtors.