Central District Consumer Bankruptcy Attorneys Association
Substantial Abuse Analysis
February 4, 2012
Speakers:
Kate Bunker, U.S. Trustee Trial Attorney, SFV
Maria Marquez, U.S. Trustee Bankruptcy Analyst, SFV
Andrew Goodman, Partner of Goodman Faith, LLP
Where:
Southwestern Law School
3050 Wilshire Boulevard
Westmoreland Building – 3rd Floor
Los Angeles, CA 90010
Parking is $8.00
EBLAST TO EXTERNAL USERS:
Pay.gov, the national electronic payment system used by the Court, will be undergoing a system upgrade that will require an interruption in the capability of CM/ECF to accept payments.
CM/ECF users will not be able to make payments for fee documents on Saturday, February 4, 2012 from 3:00 PM to approximately 5:00 PM. However, CM/ECF will be available during this period.
Payments for fee-related filings made during this interruption must be settled later in the day, or the CM/ECF user will be blocked from electronic filing in CM/ECF.
We apologize for any inconvenience this may cause. Should you have any questions, please contact the ECF Help Desk during normal business hours at (213) 894-2365.
Effective immediately, you may charge a RARA fee of $5,000.00 for business cases in the Central District of California.
I think it will apply to any cases which have not been confirmed yet. You will have to file an amended RARA. The larger problem is a practical problem – will your clients agree to the higher fee when they have already agreed to the lower fee. I think the best way to handle this is to apply the new fee to cases where you have not yet entered into a retainer agreement with the client.
Aki Koyama
Central district news and interesting tidbits from cdcbaa President Keith Higginbotham:
-The next four cdcbaa meetings will be held on 2/4/12; 3/3/12; 4/21/12; 5/19/12.
– Hon. Ellen Carrol is retiring on February 6, 2012 and Hon. Robert Kwan will move to the Los Angeles Division to fill the vacancy. Hon. Catherine Bauer will move to the Santa Ana Division and take over Judge Kwan’s calendar.
– There is a new judge in the Riverside Division, Judge Mark Houle.
– The U.S. Trustee’s Office in Downtown is moving to 915 Wilshire Blvd., Wilshire and the 110 Freeway. The move will happen in July or August of this year.
– Tip for “Lam” Motions — attach a printout from the F.D.I.C.’s website to show that you have served the correct address for the bank whose lien you are trying to “strip.”
– Judges are starting to consider sanctioning attorneys who file both the RARA and the Statement of Limited Scope in chapter 13 cases.
When I explain Chapter 13 to clients, I usually describe the amount of general unsecured claims as being the size of the clients' “bucket” and I explain that their plan payments might fill 0% to 100% of the “bucket” during the plan, before the “b
ucket” is tossed out (discharged), with certain exceptions such as student loans, for example.
Section 109(e) provides a limit on the maximum size of the “bucket” for individuals and spouses. To be eligible for Chapter 13, debtor(s) must owe “on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $360,475…” This amount was set as of April 1, 2010 and is adjusted every three years. It applies uniformly accross the country, despite the significant variations in real estate values and amounts of home loans.
In depressed (or recessed) real estate markets, like now, it is common for debtors to use Chapter 13 to avoid junior undersecured home loans pursuant to 11 U.S.C. Sections 506(a) and (d). In states with relatively high real estate values, like California, junior home loans can be hundreds of thousands of dollars. If the avoided junior home loan increases the debtors' “bucket” size, then they often become ineligible for Chapter 13. As a practical matter, middle class consumer debtors are excluded from the more complicated and expensive Chapter 11 and must therefore surrender their homes.
Persuasive statutory and public policy arguments favor not counting undersecured junior home loans subject to 11 U.S.C. Section 506, in the 109(e) unsecured debt limit. Santos v. Dockery (In re Santos), Case Number 12-55145, is now pending before the 9th Circuit Court of Appeals seeking a ruling on this important consumer debtor issue.
On January 20, 2012 Santos appealed a District Court order affirming the Bankruptcy Court's order dismissing their case upon a finding that they were inelgible to be Chapter 13 debtors due to their unsecured debts being above the 109(e) unsecured debt limit. The Debtors had secured claims against their primary residence that were subject to 522(f) and 506 which were determined to put them over the limit. The Bankruptcy Court followed Smith v. Rojas, 435 B.R. 637, 649-650 (9th Cir. BAP 2010). The District Court read 109(e) as “noncontingent, liquidated and unsecured debts” rather than “noncontingent, liquidated, unsecured debts”, a subtle and significant difference from the plain language.
United States Ninth Circuit, 01/24/2012
In the Matter of Thorpe Insulation Co.,
Insurance companies that did not reach settlements with the debtors are allowed to challenge the Chapter 11 reorganization plan where: 1) the appeal was not equitably moot; 2) the appellants met statutory, constitutional, and prudential standing requirements; 3) the appellants had standing in bankruptcy court to object to confirmation of the plan; and 4) anti-assignment provisions contained in contracts between the appellants and debtors were preempted by federal bankruptcy law.
United States Ninth Circuit, 01/27/2012
Matter of Meruelo Maddux Properties, Inc.,
Debtor is a single asset case where: 1) the debtor existed solely to operate a 92-unit apartment complex; 2) the Code gives no basis for a “whole business enterprise” exception to single asset real estate debtor status that would allow the court to consider parent corporation and sister subsidiaries; and 3) relief from the automatic stay appropriate even though questions left about whether the debtor took timely corrective action to the bankruptcy court in the first instance.
California Court of Appeal, 01/25/2012
Flores v. Kmart Corp.,
In a wrongful death action brought against a corporation that had filed for Chapter 11 bankruptcy and confirmed a Plan, demurrer not appropriate where on the limited record of bankruptcy proceedings provided by the corporation, and consistent with due process principles, the corporation failed to demonstrate, at the demurrer stage, that the approval of the reorganization plan barred all of the plaintiffs’ claims.
Thanks to Findlaw.com
STATE OF THE CIRCUIT/DISTRICT
April 05, 2012 Time: 11:30 a.m. Registration 12 noon Lunch Registration: 11:30 a.m.
Featuring: Chief Judge Alex Kozinski United States Court of Appeals; 9th Circuit Chief Judge Audrey B. Collins United States District Court, Central District; Judge Peter H. Carroll United States Bankruptcy Court, Central District
Location: Kyoto Grand Hotel 120 S. Los Angeles St., Los Angeles, CA 90012
Cost: FBA Members $75 – Government Employees/Students $50 – Table of 9 $650 Non-Members $90 Non-Member Table of 9 $775 Please RSVP by March 29th. Reservations after that time will only be accepted on a space available basis and an additional $25 late fee will apply. Click here for registration flyer and additional information.
The absolute priority rule is one of the foundations of bankruptcy. The debtor receives a discharge if he turns over all property that the creditors have the right to seize anyway. The debtor can keep property as long as he pays the value of the property to his creditors. Another way of saying this is that the plan must be “fair and equitable” to creditors. Of course, this is “unless otherwise agreed,” meaning that the rule does not apply if the unsecured class votes for the plan.
BAPCPA apparently changed this basic rule in sction 1129(b)(2)(B) which provides that the debtor may keep “property included in the estate under section 1115.” Property included in section 1115 is all property under section 541 and wages earned postpetition.
The argument that new 1129(b)(2)(B) did not change the apr is that apr is so foundational that if Congress is going to get rid of it, Congress should say so clearly. The argument that it is gone is that the new language says the individual debtor can keep his stuff and anyway, Congress tried to make individual chapter 11s work like chapter 13s and there is certainly no apr in chapter 13.
Court opinions are all over the place on the issue. In the 9th Circuit, the BAP is considering the issue in In re Friedman, No. 11-1149 (9th Cir. BAP) argued on January 18, in Phoenix. Other cases addressing this issue that are currently in the courts include: In re Maharaj, 2011 WL 1753795 (Bankr. E.D. Va. May 9, 2011)(No. 11-217 (4th Cir.)); In re Kamell, 2011 WL 1760282 (Bankr. C.D. Cal. May 4, 2011)(No. 11-1246 (9th Cir. BAP)); In re Stephens, No. 11-29 (10th Cir. BAP); and In re Cobb, No. 09-25620 (Bankr. C.D. Cal.); SPCP Group LLC v. Biggins et al., 2011 WL 4389841 (M.D. Fla., Tampa Div. Sept. 21, 2011)(apr is gone); In re Gelin, 437 B.R. 435 (Bankr. M.D. Fla. 2010)(apr still applies).
ATTENTION ALL ATTORNEYS RE: Reaffirmation Hearing MCLE Program
Attorney training regarding Reaffirmation Agreements will be held from 10:00 a.m. to 11:00 a.m. on Monday, February 27, 2012 at the Roybal Building, Assembly Room 1268.
Please review attached flyer for additional information.
Best regards,
ECF Help Desk (213) 894-2365
Panel: Judge Zurzolo, Peter Lively, and Maggie Bordeaux
Two hour pro bono commitment required prior to program!
Reswick or Rinard? It looks like we have some direction on this issue from the Los Angeles Chapter 13 Judges: Judge Zurzolo – Rinard: there is a stay for the bankruptcy estate in the 2nd filing;
Judge Klein – Reswick: there is no stay for the bankruptcy estate in the 2nd filing if no order extending the stay is entered;
Judge Bason – leaning heavily toward Reswick and he will probably decide the issue for himself at the special hearing on 1/31/12;
Judge Brand – unknown. Does anyone have any information on Judge Brand’s position?
Aki Koyama
