Category Archives: cir 9

Ransom v. FIA Card Services (U.S. S.Ct.)

Ransom v. FIA Card Services, N.A., f/k/a MBNA America Bank, N.A.
Certiorari from the U.S. Court of Appeals for the 9th Cir., Case 09–907
Argued October 4, 2010—Decided January 11, 2011

The Issue: Here the question was whether a Chapter 13 debtor could deduct the allowable auto payment from his monthly budget even though he did not have a car payment (i.e the vehicle was paid for). Put another way, is it fair for all debtors to be entitled to the maximum allowable deduction from their monthly disposable income, or must debtors establish what they actually pay?

The Answer: The Court ruled 8 to 1 (Scalia J. dissenting) that if a debtor makes more than the median income for his State then he must establish that he incurrs the amounts deducted from his monthly living expenses. No more automatic deductions if debtor cannot prove what he pays.

The Gist: To determine “disposable income” BAPCPA gave us the Means Test, which starts with gross monthly income then deducts living expenses – i.e. “amounts reasonably necessary for maintenance or support” of the debtor. In a Chapter 13 case the expenses considered “reasonably necessary” are identified in 11 U.S.C. §1325(b)(2)(A)(i) and include “applicable monthly expense amounts” as specified in National and Local IRS standards. Since BAPCPA was adopted, it has become common practice to include expenses at the maximum allowable level even if the debtor does not have, or pay for, that type of asset. This case appears to say that the party is over for Chapter 13 debtors.

See Also: this post from Chicago Attorney Steve Jacobowski on the Bankruptcy Litigation Blog regarding the Scalia dissent.



Westlaw Case Updates


Reed v. City of Arlington (Sep.17) (Cir. 5)

In a Chapter 7 case in which debtors omitted a pending $1 Million+ judgment from sworn statements and filings, district court’s order discharging debts and allowing the Trustee to collect on behalf of the Estate is reversed to protect the integrity of the judicial processes.

Deutsche Bank v. Tucker (Sep. 15) (Cr. 6)

Chapter 13 Debtor claims that she need only cure the amount of her mortgage default that is secured, and that all additional fees and expenses should be treated as unsecured. The bankruptcy court agreed, but the district court vacated and remanded. Following remand the bankruptcy court held that bank fees and advances allowed under the Note, Mortgage, and applicable State law, should be included in the cure amount set forth in the Chapter 13 Plan.

In re: Gebhart (Sept. 14) (Cir. 9)

Court may have property sold and any non-exempt equity distributed even if the property only rose in value after the filing date. In this case the value of debtors’ home increased during his Chapter 7 and the bankruptcy court’s order approving appointment of a broker was affirmed on appeal. The fact that the value of the debtor’s homestead exemption, plus encumbrances, had been equal to the market value of the residence at the time of filing did not prevent the trustee from taking advantage of the windfall.

Case Updates from

Cir. 5

Reed v. City of Arlington (Sept. 17)

In a Chapter 7 bankruptcy case in which debtors omitted a pending $1 million-plus judgment from their sworn statements and bankruptcy filings, the district court’s order discharging debtors’ debts is reversed where, to protect the integrity of judicial processes, judicial estoppel barred the trustee from collecting the judgment.

Deutsche Bank Nat’l Trust v. Tucker (Sept. 15)

In Chapter 13 proceedings, bankruptcy court’s judgment sustaining the debtor’s claim that she need only cure the amount of default that is secured and that the fees and expenses in connection with her underlying mortgage should be treated as unsecured amounts is vacated and remanded as the bank’s fees and advances, which were allowed under the parties’ agreement and applicable nonbankruptcy law, must be included in the cure amount.

Cir. 9

In re: Gebhart (Sept. 14)

In consolidated Chapter 7 bankruptcy petitions in which the value of debtors’ homes increased so that they had equity in excess of the homestead exemptions, the bankruptcy court’s order approving the appointment of a real estate broker to sell the home for the benefit of the estate is affirmed where the fact that the value of the claimed exemption plus the amount of the encumbrances on the debtor’s residence was, in each case, equal to the market value of the residence at the time of filing the petition did not remove the entire asset from the estate.

Cir. 10

In re: Dittmar (Sept. 14)

In bankruptcy trustees’ appeal from the judgment of the bankruptcy appellate panel holding that debtors’ stock appreciation rights (SARs) were not part of debtors’ bankruptcy estates under 11 U.S.C. section 541, the order is reversed where: 1) while the value of the SARs before any payment event occurred may have been de minimis, that did not mean that debtors did not have a property interest in the SARs; and 2) the SARs created by the collective bargaining agreement at issue were more akin to contingent pre-petition property rights than mere expectancies based on discretionary bonuses.

Q+A: Are 401(K) Loans Secured Debts?

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First Case Roundup of Fall

7th Cir

Freeland Enodis Corp., 06-4178 [Sep. 2, 2008]
In ruling on multiple appeals arising out of bankruptcy Court holds that plaintiff trustee may avoid certain transfers by the debtor as fraudulent, but further findings are required with respect to the solvency of the debtor afterward (i.e. did the transfers render the debtor insolvent). Accordingly, summary judgment for trustee on the 547 and 548 claims is reversed and the matter is remanded for further findings on the trustee’s claims that the transferee entity was merely an ‘alter ego’ of the debtor.

8th Cir

Milavetz, Gallop & Milavetz v. US, 07-2405 [Sep. 4, 2008]
In a case challenging application of the BAPCPA, summary judgment for the plaintiff is affirmed in part and reversed in part where the Court found that while attorneys providing bankruptcy assistance are “debt relief agencies” under the BAPCPA,  526(a)(4) is unconstitutional as applied to them; nonetheless 528(a)(4) and (b)(2) are constitutional so the result is to restore the effect of the amended law (at least in part).

9th Cir

Burkhart v. Coleman, 06-15411 [Sep. 4, 2008]
In an action to quiet title, rulings that federal bankruptcy law does not preempt California protection of bona fide purchasers and that unauthorized post-bankruptcy sale of real property causes title to rest with the purchaser, not the bankruptcy estate, are affirmed where: 1) the bankruptcy estate failed to record title in the property; and 2) a bona fide purchaser bought and recorded title in the property.

filings head back up! up! up!

Almost a million bankruptcy cases were filed since last June according to UST statistics.

The Highlights

Consumer +28.4%

Business +41.6%

Ch. 7 +36.7%

Ch. 13 +16.9%

Ch. 11 +30.6%

Case Roundup

cir 3

In re: Carco Elec., 07-1009 [July 29, 2008]

In a dispute between competing bidders in the acquisition of debtor’s production facilities during bankruptcy proceedings, an appeal from a protective order limiting the disclosure of the bidders’ respective trade secrets during discovery is dismissed for lack of appellate jurisdiction where the order was neither final nor appealable under the limited scope of the collateral order doctrine.

In re: Mullarkey, 05-4081, 05-4651 [July 31, 2008]

In a suit alleging fraud in a bankruptcy proceeding by co-owners of debtor’s property, dismissal of claims is reversed where the bankruptcy court had subject-matter jurisdiction over the complaint, but erred in dismissing plaintiff-debtor’s claims on various theories of preclusion.

cir 4

Sartin v. Macik, 071464 [July 28, 2008]

A state default judgment, entered as a penalty for a party’s failure to comply with a North Carolina court’s discovery order, does not have collateral estoppel effect in subsequent litigation in bankruptcy court.

cir 9

In the Matter of: Coleman, 06-16477 [August 01, 2008]

“[U]ndue hardship” determinations, whereby bankruptcy courts decide whether student loans qualify for discharge, can be ripe in a Chapter 13 case substantially in advance of plan completion.

cir 10

In re: Paul, 07-1395 [July 28, 2008]

In an adversary proceeding brought by former debtors after a bankruptcy discharge claiming that defendant violated a discharge injunction via a state court action, an order sanctioning defendant and enjoining her from pursuing the state court litigation is reversed where neither the bankruptcy court’s findings, nor the facts of record on which they are based, demonstrated that defendant’s facially permissible actions violated the discharge injunction.

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