AMERICAN BANKRUPTCY INSTITUTE CONSUMER BANKRUPTCY SEMINAR NOVEMBER 11, 2015 Case Law Update Honorable John Gustafson United States Bankruptcy Court Northern.

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AMERICAN BANKRUPTCY INSTITUTECONSUMER BANKRUPTCY SEMINAR

NOVEMBER 11, 2015

Case Law UpdateHonorable John GustafsonUnited States Bankruptcy CourtNorthern District of OhioThomas DeCarlo, EsquireStaff Attorney Office of David Wm. Ruskin

Page 9 Section 3.37

Moore v. Caliber Home Loans, Inc., 2015 WL 5162482 (S.D. Ohio 2015) Complaint stated cause of action for violation of stay where lender received payments from debtor under confirmed plan but failed to apply payments to debtors loan account as required by Plan terms; and lender demanded mortgage payments higher than amount set out in agreed order without explanation or justification.

Page 9 Section 3.81

Weary v. Poteat, 2015 WL 4747883 (E.D. Tn. 2015), affd 2015 WL 5712191 (6th Cir. 2015) Creditor does not violate stay by filing police report, speaking with prosecutors or otherwise asking government to commence criminal prosecution, regardless of creditors motive for doing so. However, creditor violates stay when creditor threatens to file criminal charges unless debtor pays, or does so in a way that is designed to coerce payment from debtor. Page 11 Section 3.109

In re Phillips, 2015 WL 4256641 (Bankr. E.D. Tn. 2015) Debtor has duty to mitigate damages before seeking sanctions for alleged violation of stay.

Schang v. Muller, Muller, Richmond, Harms & Myers, P.C., 2015 WL 3441178 (E.D. Mi. 2015) Debtor has duty to mitigate harm before seeking sanctions for creditors violation of stay.

Page 12 Section 3.114

Americas Servicing Co. v. Schwartz-Tallard, Case No. 12-60052 (9th Cir. 2015) Sanctions for violation of stay include attorney fees incurred in prosecution of action for damages for stay relief. Court rejected prior decisions that limited to fees necessary to end the stay violation but not to prosecute action for violation of stay.

Page 14 Section 4.19

In re Acevedo, 2015 WL 3373030 (Bankr. W.D. Mi. 2015) - Attorney must amend Rule 2016 statement to disclose additional compensation paid directly by debtor or attorney comes into possession of property or funds of debtor that are to be used to pay attorney fees.

In re Sorter, Case No. 08-57829 (Bankr. E.D. Mi. 2015) Attorney who seeks compensation for services in bankruptcy case must have fees approved by bankruptcy court even if fees are to be paid directly.

Page 23 Section 5.52

In re Hall, Case No. 15-30749 (Bankr. E.D. Mi. 2015) Debtor is not required to include Social Security in calculating disposable income or plan payment. Plan must still be in good faith. Retained income must not result in extravagant lifestyle.

In re Mihal, 2015 WL 2265790 (Bankr. E.D. Mi. 2015) Social Security income received by debtor is excluded in calculation of Current Monthly Income. Debtors Chapter 13 Plan did not lack good faith where plan payment excluded debtors social security income.Page 27 Section 6.37

The Gladys Ragsdale Trust v. Tostige, 2015 WL 5449997 (Bankr. E.D. Mi. 2015) Debtor had interest as beneficiary in revocable trust which had not been revoked as of petition date. Interest was vested and became property of estate where trust had not been revoked.

Page 27 - Section 6.38

Kohut v. Lewiston, 2015 WL 3894609 (Bankr. E.D. Mi. 2015), affd, 2015 WL 4771285 (E.D. Mi. 2015) Spendthrift clause in trust is unenforceable where beneficiary of trust is also a settlor.

Page 28 - Section 6.47

In re Colcord, 2015 WL 5461543 (Bankr. E.D. Mi. 2015) Michigan Law invalidates any assignment of rents in apartment building with less than 6 units.

Page 28 Section 6.47

In re Town Center Flats, LLC, 2015 WL 2265842 (Bankr. E.D. Mi. 2015) Under Michigan law, upon perfection of assignment, creditor acquires perfected security interest in rents but does not acquire ownership of rents or divest debtor of interest in rents.

In re Madison Heights Group, Inc., 2013 WL 8059810 (Bankr. E.D. Mi. 2013), rehg denied, 2014 WL 1075809 (Bankr. E.D. Mi. 2014) Properly implemented assignment of rents is absolute and transfers ownership of rents to mortgagee, such that there is no cash collateral for debtor to use.

Page 35 - Section 8.1

Mediofactoring v. McDermott, 2015 WL 5515229 (6th Cir. 2015) Creditors who make substantial contribution to estate in Chapter 7 proceedings are entitled to administrative expense claim for attorney fees and costs incurred by creditor. Page 35 - Section 8.6.1

HSBC Bank v. Blendheim, 2015 WL 5730015 (9th Cir. 2015) Disallowance of claim for reasons other than the failure to file a claim or that claim was late filed or Section 502(b)(5) as unmatured debt or Section 502(e) where the claim is based on contribution voids associated lien under Section 506(d).

Page 40 - Section 8.78

Matteson v. Bank of America, NA, 2015 WL 4719556 (6th Cir. BAP 2015) Secured creditor is not required to file proof of claim even where Chapter 13 Plan contemplates payments to the creditor on long term debt. Failure to file proof of claim does not affect validity, priority or extent of lien. Page 47 Section 8.147

Husky International v. Ritz, 787 F.3d 312 (5th Cir. 2015), cert granted, 2015 WL 4600346 (2015) Supreme court to consider standard for actual fraud under Section 523.

Page 52 Section 8.162

Michigan Unemployment Insurance Agency v. Andrews, 2015 WL 5813418 (Bankr. E.D. Mi. 2015) Penalties owed to governmental agency, normally made non-dischargeable in Chapter 7 under Section 523(a)(7) are not listed in Section 1328 as debts that are excluded from discharge. Page 52 Section 8.162

Branch v. 30th District Court, 2015 WL 515391 (Bankr. E.D. Mi. 2015) 11 USC Section 523(a)(7) excepts from discharge any fines, penalties or forfeitures payable to and for the benefit of a governmental unit that is not compensation for any actual pecuniary loss. Traffic tickets issued pre-petition are fines and penalties for the benefit of the governmental unit and are not compensation for actual pecuniary loss.

Page 33 - Section 7.47.1

In re Kizer, 2015 WL 6437435 (Bankr. E.D. Mi. 2015) Debtors interest in former spouses retirement account, acquired by debtor through QDRO entered in prior domestic proceeding, was not exempt as retirement account under Section 522(d)(12).

In re West, 507 B.R. 252 (Bankr. N.D. Ill. 2014) Transfer of IRA pursuant to QDRO expressly preserved retirement nature of the plan such that spouses interest remained exempt in her Chapter 7 case.

In re Swarup, 521 B.R. 382 (Bankr. M.D. Fla. 2014) Florida statutory exemption for retirement accounts encompassed debtors interest in ex-spouses retirement account received as part of division of marital assets.

DOWN WITH BRUNNERBRUNNER IS UNFAIR!!BRUNNER STINKS!!!!Pages 52 - Section 8.163Tetzlaff v. Educational Credit Management Corp., 2015 WL 4461845 (7th Cir. 2015), cert pending, Case no. 15-485 (2015) Whether undue hardship standard is unconstitutionally vague, and whether Supreme Court should reconcile split among the circuits regarding whether Brunner is correct standard or lesser totality of circumstances standard adopted by 8th Circuit.

Murphy v. US Department of Education, Case No. 14-1691 (1st Cir. 2015) Student Loans and undue hardship. First Circuit considering whether Brunner test for undue hardship is obsolete.

Page 54 Section 8.175

Jenkins v. Schmank, 2015 WL 4555582 (Bankr. E.D. Tn. 2015) Attorney fees can be awarded in action under Section 523 if underlying state law supports award.

Page 54 - Section 8.176

Jackson v. Spencer, 2015 WL 6162945 (Bankr. W.D. Mi. 2015) State court award of treble damages was not discharged where underlying conduct created non-dischargeable debt.

Page 54 Section 8.176.1 - Jenkins v. Schmank, 2015 WL 4555582 (Bankr. E.D. Tn. 2015) Punitive damages can be awarded as part of non-dischargeability action under Section 523(a)(6) where there is clear and convincing evidence that debtor acted intentionally, fraudulently, maliciously or recklessly.

Page 75 Section 11.56

Jordahl v. Burrell, Case no. 15-6009 (8th Cir. BAP 2015) Debtors plan proposed to treat one student loan as cure and maintain direct payments unfairly discriminated in violation of Section 1322(b)(1) by proposing to pay one unsecured claim in full via cure and maintain while paying all other unsecured claims including other student loans at a far lower rate and would result in one student loan creditor receiving payments of principal and interest while other unsecured creditors received less than full payment in violation of Section 1322(b)(10).

Page 63 - Section 9.54

In re Jackson, 2015 WL 5677317 (Bankr. N.D. Ohio 2015) Creditor violated discharge injunction by scheduling property for foreclosure sale post-discharge where amount owed on superior mortgage far exceeded value of property, leaving there no possibility that sale of property would produce funds to creditor. Page 73 - Section 11.24

In re Maike, 2015 WL 5776007 (Bankr. E.D. Mi. 2015) Attorney fees can be paid ahead of mortgage even if doing so delays ongoing payments to mortgage holder.

In re Hammon, 2015 WL 4462179 (Bankr. W.D. Mi. 2015) Attorney fee cannot be paid ahead of mortgage if doing so delays ongoing payments to mortgage holder.

Page 74 - Section 11.49

In re Reyes, Case no. 15-45618 (Bankr. E.D. Mi. 2015) Debtor is not permitted to deduct voluntary retirement contributions in calculating disposable income over objection of creditor or Trustee.

In re Rogers, Case No. 12-32558 (Bankr. E.D. Mi. 2012) Debtors cannot exclude post-petition voluntary retirement contributions in calculating disposable income.

Properties

Page 74 Section 11.42

In re Sagendorph, 2015 WL 3867955 (Bankr. C.D. Mass. 2015) Debtor can propose to treat secured creditor by vesting property in creditor at confirmation in satisfaction of the claim.

In re Zair, Case No. 14-74456 (Bankr. E.D. N.Y. 2015) Section 1322(b)(9) allows debtor to vest title in secured creditor and provide that confirmation operates as deed of conveyance. Secured creditor must retain right to file deficiency claim.

Page 74 Section 11.42

Bank of New York v. Watt, 2015 WL 1879680 (D. Ore. 2015) Section 1325 does not permit confirmation of plan over objection of secured creditor where plan proposes to vest title to property in creditor.

In re Davis, Case No. 14-60616 (Bankr. S.D. Ga. 2015) Plan that proposed to vest property in secured lender did not comply with Section 1325. Vesting involves immediate and non-consensual transfer of title, which is not the equivalent of surrender for purposes of Section 1325(a)(5).

Page 79 - Section 11.129

In re Davis, 2015 WL 3484561 (Bankr. E.D. Mi. 2015) Section 1328(f) precludes entry of discharge where debtor received discharge in Chapter 7 case filed less than four years prior to commencement of Chapter 13 case. Court can enter order determining that debtor is not entitled to discharge even in absence of motion filed by creditor.

Page 82 Section 11.181

In re Kirk, 2015 WL 5097741 (Bankr. N.D. Ohio 2015) Harris does not apply to case dismissed before confirmation. Section 1326 provides that after dismissal, the trustee is to pay allowed administrative expenses and any payments due to creditors, and to refund any remaining amount to debtor. page 82 section 11.182

In re Edwards, 2015 WL 5601577 (Bankr. S.D. Ill. 2015) Funds on hand with Trustee when case is dismissed post-confirmation must be returned to the debtor.

page 82 section 11.187

In re Brandon, Case no. 14-23735 (Bankr. D. Md. 2015) In case converted prior to confirmation, Trustee has lingering duty to complete administration of case. Section 1326 that requires payment of attorney fees and other administrative expenses prior to refunding balance to debtor.

In re Zulinsky, Case no. 15-47315 (Bankr. E.D. Mi. 2015) Funds on hand with chapter 13 trustee when case converts prior to confirmation must be refunded to debtor.

page 83 Section 11.188

In re Spraggins, 2015 WL 5227836 (Bankr. D.N.J. 2015) Funds on hand in case converted after confirmation must be returned to debtor.

In re Beauregard, 533 BR 826 (Bankr. D.N. Mex. 2015) Funds on hand with Chapter 13 Trustee when case is converted after confirmation must be refunded to debtor without offset for payment of administrative expenses.

Page 23 - Section 5.49

In re Currie, 2015 WL 5474475 (Bankr. C.D. Ill. 2015) Debtor who does not have mortgage or rent expense but who pays taxes and insurance is entitled to full housing expense.

Page 74 - Section 11.40

In re Ware, 2015 WL 4389688 (Bankr. N.D. Il. 2015) Debtor can surrender property where debtor is unable to deliver physical possession through no fault of debtor.

In re Prior, 2014 WL 585284 (Bankr. S.D. Ga. 2014) Debtor cannot surrender collateral if debtor is not able to deliver possession or control of collateral. Surrender requires an affirmative act beyond merely abandoning of interest.

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