A "short sale" usually involves a sale to another person with your mortgage company agreeing to satisfy its mortgage with a payment of less than the full amount due. In a short sale, the seller needs to clarify whether he is being released from the amount that is short from the full payoff of the mortgage. The short sale process is often very lengthly.
Saturday, November 30, 2013
Bankruptcy Lawyer - Short Sale
(305) 891-4055 - Miami bankruptcy lawyer Jordan E. Bublick has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. He has filed over 8,000 bankruptcy cases. www.bublicklaw.com
A "short sale" usually involves a sale to another person with your mortgage company agreeing to satisfy its mortgage with a payment of less than the full amount due. In a short sale, the seller needs to clarify whether he is being released from the amount that is short from the full payoff of the mortgage. The short sale process is often very lengthly.
A "short sale" usually involves a sale to another person with your mortgage company agreeing to satisfy its mortgage with a payment of less than the full amount due. In a short sale, the seller needs to clarify whether he is being released from the amount that is short from the full payoff of the mortgage. The short sale process is often very lengthly.
Thursday, November 14, 2013
Chapter 13 plan binds trustee
In the case of Hope v. Acorn Financial, Inc., Case No. 12-10709, 2013 U.S. App. LEXIS 19661 (11th Cir. September 26, 2013) (click here for .pdf of opinion) the Court addressed whether 11 U.S.C. §1327(a) binds the Chapter 13 Trustee to the terms of the plan, even though the Trustee is not mentioned in the statute. Section 1327(a) provides the following:
Chapter 7 case dismissed for cause, pre-petition bad faith
In In re Piazza, 719, F.3d 1253, 2013 U.S. App. LEXIS 13072 (11th Cir. 2013) (click here for opinion), the Debtor’s Chapter 7 case was dismissed for “cause” pursuant to 11 U.S.C. §707(a), based upon Debtor’s pre-petition bad faith. The Bankruptcy Court found that the filing was for the purpose of avoiding a single large judgment, the judgment was a significant part of his overall debt, he transferred significant amounts of money to relatives in the two year period before filing, he failed to make lifestyle adjustments to pay his debts, and he had sufficient resources to pay his debts. Notably, the state court judgment did not involve claims of fraud or similar misconduct, but was based on a business guarantee. The District Court affirmed the dismissal, and the Debtor appealed.
In re: Kulakowski - 11th Circuit - No. 12-15294 - case dismissed for cause, totality of circumstances, income of non-filing spouse.
Chapter 13 eligibility amounts
In re: Claro-Lopez
506 unsecured portion includes in calculation of eligibility amount
Chapter 13 plan, student loans paid direct
In re: Abaunza, 10-37575
Chapter 13 debtor, plan pays student loans outstand plan with income over projected disposable income allowed
Early payoff of plan
In re: Rhymaun, Case 10-20092-LMI - above median income debtor, may not payoff early with proceeds of exempt homestead
Issues with resulting trust in vehicle, not allowed under facts
In re: Distefano, 10-19596
506, Chapter 7, avoidance of wholly unsecured second mortgage
In McNeal v. GMAC Mortgage, LLC, et al, No. 11-11352 (11th Cir. May 11, 2012) (click here for .pdf) the issue before the Court was whether a debtor in a Chapter 7 case can strip a second priority, unsecured lien from her residence. At least in the Eleventh Circuit, a debtor can strip the unsecured second lien, at least according to the panel. It remains to be seen if the full Court will hear the case. As of now, it probably be considered persuasive, and not binding, authority.
Defalcation, definition, US Supreme Court
In a case appealed from the Eleventh Circuit Court of Appeals, the United States Supreme Court ruled on a case involving the definition of "defalcation" in 11 U.S.C. § 523(a)(4). The case, decided yesterday, May 13, 2013, is Randy Bullock v. BankChampaign NA, 2013 U.S. LEXIS 3521 (U.S. May 13, 2013) (click here for .pdf of opinion). The issue before the Court was the definition and meaning of the term "defalcation," which is not defined in the Code. The Court held that “defalcation” in the Bankruptcy Code includes a culpable state of mind requirement involving knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior.
Exemptions
Exemption of Tax Refund
In re: Uttermohlen - 13-10289 - 11th Circuit - court holds tax refund can be exempt as tenants by entireties, unpublished decision
DSO
Lump sum payment not dso
In re: Nachon-Torres, Case 11-36161-LMI - chapter 13 case, lump sum payment not DSO, marital settlement agreement, in equitable distribution section lump sum payment of $145,000 to achieve equitable distribution of marital estate, was intended as property settlement and not in nature of support
Obligation to pay second mortgage as DSO
In re: Mouhica 11-28929 - intent of parties as to second mortgage payments was for support for children, to enable them to continue to reside in marital home and attend area schools, even though in section of debts of parties instead of child support
Automatic Stay, Contempt
In re: DeSouza, 493 BR 669 (1st BAP 2013) - establish alimony not excepted from automatic stay, contempt mtn in violation of stay
Chapter 13 - 506, 1322, 1325
506, 1322(b)(2), 1325(b)(5)
In re: Gilbert, 11-28496 - issues of chapter 13 plan payment, application of regular payment and arrearage
1322(b)(2), 1325(b)(5)
In re: Elibo, 447 BR 359 - Kimball - no change interest rate and monthly payment
1322(b)(5) - no able to modify, just cure and maintain
In re: Agustin, 10-49243-JKO - cannot use 506(a)(1) and 1322(b)(2) to bifurcate, change interest rate, discharge unsecured portion and use 1322(b)(5) to extend beyond life of plan. If 1322(b)(5) must cure and maintain payment, no change interest rate and monthly payment
1322(b)(2) and 1322(b)(5)
In re: Jerrils, 2010 Bankr. Lexis 219 - PGH - can both reduce per 506 and maintain over length of original mortgage
Chapter 7 dismissal, totality of circumstances, ability to pay
In In re Witcher, No. 11-15883 (11th Cir. December 13, 2012) (click here for opinion), the issue before the Court was…
In the case of Hope v. Acorn Financial, Inc., Case No. 12-10709, 2013 U.S. App. LEXIS 19661 (11th Cir. September 26, 2013) (click here for .pdf of opinion) the Court addressed whether 11 U.S.C. §1327(a) binds the Chapter 13 Trustee to the terms of the plan, even though the Trustee is not mentioned in the statute. Section 1327(a) provides the following:
Chapter 7 case dismissed for cause, pre-petition bad faith
In In re Piazza, 719, F.3d 1253, 2013 U.S. App. LEXIS 13072 (11th Cir. 2013) (click here for opinion), the Debtor’s Chapter 7 case was dismissed for “cause” pursuant to 11 U.S.C. §707(a), based upon Debtor’s pre-petition bad faith. The Bankruptcy Court found that the filing was for the purpose of avoiding a single large judgment, the judgment was a significant part of his overall debt, he transferred significant amounts of money to relatives in the two year period before filing, he failed to make lifestyle adjustments to pay his debts, and he had sufficient resources to pay his debts. Notably, the state court judgment did not involve claims of fraud or similar misconduct, but was based on a business guarantee. The District Court affirmed the dismissal, and the Debtor appealed.
In re: Kulakowski - 11th Circuit - No. 12-15294 - case dismissed for cause, totality of circumstances, income of non-filing spouse.
Chapter 13 eligibility amounts
In re: Claro-Lopez
506 unsecured portion includes in calculation of eligibility amount
Chapter 13 plan, student loans paid direct
In re: Abaunza, 10-37575
Chapter 13 debtor, plan pays student loans outstand plan with income over projected disposable income allowed
Early payoff of plan
In re: Rhymaun, Case 10-20092-LMI - above median income debtor, may not payoff early with proceeds of exempt homestead
Issues with resulting trust in vehicle, not allowed under facts
In re: Distefano, 10-19596
506, Chapter 7, avoidance of wholly unsecured second mortgage
In McNeal v. GMAC Mortgage, LLC, et al, No. 11-11352 (11th Cir. May 11, 2012) (click here for .pdf) the issue before the Court was whether a debtor in a Chapter 7 case can strip a second priority, unsecured lien from her residence. At least in the Eleventh Circuit, a debtor can strip the unsecured second lien, at least according to the panel. It remains to be seen if the full Court will hear the case. As of now, it probably be considered persuasive, and not binding, authority.
Defalcation, definition, US Supreme Court
In a case appealed from the Eleventh Circuit Court of Appeals, the United States Supreme Court ruled on a case involving the definition of "defalcation" in 11 U.S.C. § 523(a)(4). The case, decided yesterday, May 13, 2013, is Randy Bullock v. BankChampaign NA, 2013 U.S. LEXIS 3521 (U.S. May 13, 2013) (click here for .pdf of opinion). The issue before the Court was the definition and meaning of the term "defalcation," which is not defined in the Code. The Court held that “defalcation” in the Bankruptcy Code includes a culpable state of mind requirement involving knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior.
Exemptions
Exemption of Tax Refund
In re: Uttermohlen - 13-10289 - 11th Circuit - court holds tax refund can be exempt as tenants by entireties, unpublished decision
DSO
Lump sum payment not dso
In re: Nachon-Torres, Case 11-36161-LMI - chapter 13 case, lump sum payment not DSO, marital settlement agreement, in equitable distribution section lump sum payment of $145,000 to achieve equitable distribution of marital estate, was intended as property settlement and not in nature of support
Obligation to pay second mortgage as DSO
In re: Mouhica 11-28929 - intent of parties as to second mortgage payments was for support for children, to enable them to continue to reside in marital home and attend area schools, even though in section of debts of parties instead of child support
Automatic Stay, Contempt
In re: DeSouza, 493 BR 669 (1st BAP 2013) - establish alimony not excepted from automatic stay, contempt mtn in violation of stay
Chapter 13 - 506, 1322, 1325
506, 1322(b)(2), 1325(b)(5)
In re: Gilbert, 11-28496 - issues of chapter 13 plan payment, application of regular payment and arrearage
1322(b)(2), 1325(b)(5)
In re: Elibo, 447 BR 359 - Kimball - no change interest rate and monthly payment
1322(b)(5) - no able to modify, just cure and maintain
In re: Agustin, 10-49243-JKO - cannot use 506(a)(1) and 1322(b)(2) to bifurcate, change interest rate, discharge unsecured portion and use 1322(b)(5) to extend beyond life of plan. If 1322(b)(5) must cure and maintain payment, no change interest rate and monthly payment
1322(b)(2) and 1322(b)(5)
In re: Jerrils, 2010 Bankr. Lexis 219 - PGH - can both reduce per 506 and maintain over length of original mortgage
Chapter 7 dismissal, totality of circumstances, ability to pay
In In re Witcher, No. 11-15883 (11th Cir. December 13, 2012) (click here for opinion), the issue before the Court was…
whether a court may take into account a debtor’s ability to pay his or her debts in determining whether "the totality of the circumstances . . . of the debtor’s financial situation demonstrates abuse" of chapter 7 of the Bankruptcy Code under 11 U.S.C. § 707(b)(3)(B)
Tuesday, November 12, 2013
Bankruptcy Lawyer - Constructive Trusts in Florida
(305) 891-4055 - 25 Years of Experience, Over 8,000 Cases Filed - Free Initial Consultation - 1221 Brickell Ave., Miami, Florida - Chapter 13 and 7 Bankruptcy - Miami Bankruptcy Lawyer - www.bublicklaw.com
A constructive trust is a remedy imposed by a court to return property to its rightful owner and to prevent unjust enrichment of one person at the expense of another. Equity holds that although the possessor holds "bare legal title" to the property, the beneficial interest is held by the person entitled to the property. The property may have been acquired by another by fraud or even without fraud if it is against equity that is should be retained by the person who holds it.
For the imposition of a constructive trust, there must be generally be clear and convincing evidence of
A constructive trust is a remedy imposed by a court to return property to its rightful owner and to prevent unjust enrichment of one person at the expense of another. Equity holds that although the possessor holds "bare legal title" to the property, the beneficial interest is held by the person entitled to the property. The property may have been acquired by another by fraud or even without fraud if it is against equity that is should be retained by the person who holds it.
For the imposition of a constructive trust, there must be generally be clear and convincing evidence of
- a promise, express or implied
- a transfer of property and reliance thereon
- a confidential relationship (legal, moral, social, domestic or personal)
- unjust enrichment (by fraud or benefit of the mistake of another)
Bankruptcy Cap on Homestead Exemption and Not if Held by Tenants by the Entireties
Bankruptcy section 522(p) which was added in 2005 provides a cap of $155,675.00 (originally $125,000.00 but is subject to increases) in value (equity) on homestead property acquired within 1,215 days of the petition date.
Courts though have held that this limitation only applies to the Florida homestead exemption that the debtor could claim under the Florida Constitution and not the separate exemption available for property held as tenants by the entireties.
One Court noted that while its ruling would appear to provide a way for a debtor to "end run" the $125,000 cap contained in section 522(p), that its ruling is consistent with the legislative history of new section 522(p) which was directed to close the "mansion loophole" and not against a state's common law exemption for tenancy by the entireties property.
Courts though have held that this limitation only applies to the Florida homestead exemption that the debtor could claim under the Florida Constitution and not the separate exemption available for property held as tenants by the entireties.
One Court noted that while its ruling would appear to provide a way for a debtor to "end run" the $125,000 cap contained in section 522(p), that its ruling is consistent with the legislative history of new section 522(p) which was directed to close the "mansion loophole" and not against a state's common law exemption for tenancy by the entireties property.
Thursday, November 7, 2013
Dragnet Clauses
Chapter 13 Bankruptcy - Chapter 7 Bankruptcy - Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
Dragnet clauses are agreements in lending documents that provide that the involved collateral will secure in addition to the involved debt, other pre-existing and after after acquired debt. They are often used in the consumer arena by credit unions.
Some courts in Florida have held that "dragnet clauses" are generally enforceable so long as the language of the clause is clear and unambiguous as to the parties intent to secure pre-existing and after acquired debt. Robert C. Roy Agency, Inc. v. Sun First National Bank of Palm Beach, 468 So.2d 399 (Fla. 4th DCA 1985). But the 4th District Court of Appeals has held that the dragnet clause would not be enforced against someone other than the borrower unless it specifically includes within its terms or unless it can be shown that the third party otherwise had notice that the specific pre-existing debt was to be included within the grasp of the dragnet clause. Starlines International Corp. v. Union Planters Bank, N.A., 976 So. 2d 1172 (2008).
Other Florida courts though hold that dragnet clauses are unenforceable to secure pre-existing debt unless the pre-existing debt is specifically identified in the dragnet clause of the mortgage and possibly also in the note. United National Bank v. Tellam, 644 So. 2d 97 (Fla. 3d DCA 1994).
Dragnet clauses are agreements in lending documents that provide that the involved collateral will secure in addition to the involved debt, other pre-existing and after after acquired debt. They are often used in the consumer arena by credit unions.
Some courts in Florida have held that "dragnet clauses" are generally enforceable so long as the language of the clause is clear and unambiguous as to the parties intent to secure pre-existing and after acquired debt. Robert C. Roy Agency, Inc. v. Sun First National Bank of Palm Beach, 468 So.2d 399 (Fla. 4th DCA 1985). But the 4th District Court of Appeals has held that the dragnet clause would not be enforced against someone other than the borrower unless it specifically includes within its terms or unless it can be shown that the third party otherwise had notice that the specific pre-existing debt was to be included within the grasp of the dragnet clause. Starlines International Corp. v. Union Planters Bank, N.A., 976 So. 2d 1172 (2008).
Other Florida courts though hold that dragnet clauses are unenforceable to secure pre-existing debt unless the pre-existing debt is specifically identified in the dragnet clause of the mortgage and possibly also in the note. United National Bank v. Tellam, 644 So. 2d 97 (Fla. 3d DCA 1994).
Saturday, November 2, 2013
Federal District Court Dismisses Fourteen Deutsche Bank Foreclosure Complaints on Securitized Mortgages Due to Lack of Standing
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
On October 31, 2007, the U.S. District Court of the Northern District of Ohio, Eastern Division issued a very important decision in In re Foreclosure Cases, 2007 WL 3232430(N.D.Ohio October 31, 2007)(Boyko, J.) which was a decision issued in fourteen cases combined for decision. The issue involved is extremely important in today's environment involving the foreclosure of securitized mortgages. The importance of the decision is demonstrated by the fact that it received a long write-up in today's New York Times. In the foreclosure cases at bar, the court found that the named plaintiff, Deutsche Bank, lacking standing and dismissed the foreclosure cases without prejudice. Prior to this dismissal, the court had issued an order requiring the plaintiff to file a copy of executed assignments demonstrating that it was the holder and owner of the notes and mortgages as of the date of the filing of the foreclosure complaints.
The court discussed that a party seeking to bring a case in federal court bears the burden of establishing diversity jurisdiction and standing. To satisfy the requirement of Article III, the plaintiff must show that it has personally suffered some actual injury.
In these cases, the plaintiff alleged in its complaints that it was the holder and owner of the notes and mortgages, but the attached notes and mortgages indentified the original lending institution. The exhibits attached to the complaint did not reference the plaintiff in the recorded chain of title or interest. The affidavits sumitted in these cases averred that the plaintiff is the owner of the note and mortgage but did not mention any assignment, trust or successor interest. The court found that the plaintiff did not satisfy its burden of demontrating standing at the time of the filing of the complaints.
The court found that none of the assignments showed the plaintiff to be the owner of the mortgages and notes as of the date of the foreclosure complaints. The court noted that the assignments submitted only expressed a present intent to convey all rights, title, and interest in the mortgages and notes to the plaintiff upon receipt of sufficient consideration on the date of the assignment. The court stated that these documents belied the plaintiff's asserted that it owned the notes and mortgages by means of a purchase that pre-dated the complaint.
The court stressed its independent obligation to preserve the judicial integrity of the federal court and to guard federal jurisdiction. The court stressed that "[n]either the fluidity of the secondary mortgage market, nor monetary or economic considerations of the parties, nor the convenience of the litigants supersede those obligations."
The foreclosure complaints were dismissed without prejudice so it is expected that the plaintiff or the correct parties will refile the foreclosure once they have their documentation in order.
On October 31, 2007, the U.S. District Court of the Northern District of Ohio, Eastern Division issued a very important decision in In re Foreclosure Cases, 2007 WL 3232430(N.D.Ohio October 31, 2007)(Boyko, J.) which was a decision issued in fourteen cases combined for decision. The issue involved is extremely important in today's environment involving the foreclosure of securitized mortgages. The importance of the decision is demonstrated by the fact that it received a long write-up in today's New York Times. In the foreclosure cases at bar, the court found that the named plaintiff, Deutsche Bank, lacking standing and dismissed the foreclosure cases without prejudice. Prior to this dismissal, the court had issued an order requiring the plaintiff to file a copy of executed assignments demonstrating that it was the holder and owner of the notes and mortgages as of the date of the filing of the foreclosure complaints.
The court discussed that a party seeking to bring a case in federal court bears the burden of establishing diversity jurisdiction and standing. To satisfy the requirement of Article III, the plaintiff must show that it has personally suffered some actual injury.
In these cases, the plaintiff alleged in its complaints that it was the holder and owner of the notes and mortgages, but the attached notes and mortgages indentified the original lending institution. The exhibits attached to the complaint did not reference the plaintiff in the recorded chain of title or interest. The affidavits sumitted in these cases averred that the plaintiff is the owner of the note and mortgage but did not mention any assignment, trust or successor interest. The court found that the plaintiff did not satisfy its burden of demontrating standing at the time of the filing of the complaints.
The court found that none of the assignments showed the plaintiff to be the owner of the mortgages and notes as of the date of the foreclosure complaints. The court noted that the assignments submitted only expressed a present intent to convey all rights, title, and interest in the mortgages and notes to the plaintiff upon receipt of sufficient consideration on the date of the assignment. The court stated that these documents belied the plaintiff's asserted that it owned the notes and mortgages by means of a purchase that pre-dated the complaint.
The court stressed its independent obligation to preserve the judicial integrity of the federal court and to guard federal jurisdiction. The court stressed that "[n]either the fluidity of the secondary mortgage market, nor monetary or economic considerations of the parties, nor the convenience of the litigants supersede those obligations."
The foreclosure complaints were dismissed without prejudice so it is expected that the plaintiff or the correct parties will refile the foreclosure once they have their documentation in order.
Friday, November 1, 2013
The Nonfiling Spouse and Chapter 7's Section 707(b)(3) "Totality of the Circumstances" Test - Nonfiling Spouse's Income Taken Into Consideration
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
The court in In re Adams, 2007 WL 3091583 (Bkrtcy.D.Md. October 18, 2007)(Schneider, J.) dismissed the debtor's chapter 7 case as an "abuse" under section 707(b)(1) based on the "totality of the circumstances" test of section 707(b)(3). Section 707(b)(3)'s totality of the circumstances test applies even if the presumption of abuse pursuant to section 707(b)(2) does not arise or is rebutted.
The court applied the test adopted by the Fourth Circuit in Green v. Staples (In re Green), 934 F.2d 568(4th Cir.1991) to determine whether the "totality of the circumstances" demonstrates abuse. The court noted that in Green it was held that in the finding of abuse, the court should consider 1. the debtor's ability to repay his debts, 2. whether the bankruptcy was due to sudden illness, calamity, disability, or unemployment, 3. whether the debtor incurred cash advances and made consumer purchases far in excess of his ability to repay, 4, whether the debtor's proposed family budget is excessive or unreasonable, 5., whether the debtor's schedules I and J of income and expenses reasonably reflect the true financial condition, and 6, whether the petition was filed in good faith.
The court found that five out of the six factors of In re Green applied in this case. The court found that the debtor, despite her lack of income, did have the ability to repay her debts based on the income of her non-filing spouse. The court found that the reported cases agree that if the debtor herself has no income, the court must take into account the income of the debtor's nonfiling spouse when the spouse receives significant income. See In re Travis, 353 B.R. 520, 530 (Bankr.E.D.Mich.2006)(the court should consider a non-filing spouse's income when it is "substantial enough to significantly raise the debtor's standard of living and generate total household income in excess of the reasonable costs of food, clothing, shelter, and other necessities"), In re Welch, 347 B.R. 247(W.D.Mich.2006), In re Staub, 256 B.R. 567, 571 (Bankr.M.D.Pa.2000)(considering nonfiling spouse's income when it was so great that it could pay off the entirety of debtor's unsecured debt in a matter of months). Contra, In re Baldino, 369 B.R. 858 (M.D. Pa. June 14, 2007)(nonfiling spouse's income considered only to the extent it contributes to household expenses of the debtor or his dependents and Bankruptcy Code does not mandate a non-filing spouse to live modestly or to devote hi income to the repayment of the filing spouse's debt). The court found that the debtor could repay her debtor if she made a reasonable budget. The court further found that it was not reasonable to pay $6,581 a month in mortgage payments and $1,884 a month in car payment with a household monthly net income of $7,740.
The court further found that the case was not filed due to a sudden illness, calamity, disability or unemployment. The court noted that the debtor's inability to sell their real property was not a "calamity" which contemplates a catastrophic event and not the mere inability to sell real property. The next factor the court found met was that the debtor incurred consumer expenses beyond her ability to repay at least under her present budget. Another factor the court found met was that the debtor's proposed budget was excessive and unreasonable.
Lastly, the court found that the case was not filed in good faith. The court found that the debtor and her husband engaged in acts designed to hinder, delay, and defraud creditors. The court noted that they built up debts in the debtor's name in order to invest in exempt assets or to reduce her nonfiling spouse's debts. The court pointed to the use of the debtor's credit cards to pay off the couple's jointly held exempt residence. The court also found that the couple lived a lavish lifestyle up to and during the bankruptcy case.
Further Cases:
In re Sharp, No. 07-72222, 2008 Bankr. LEXIS 2861 (Bankr. C.D. Ill. Aug. 21, 2008), found that “the portion of such spouse’s income which is not used on a regular basis for the household expenses of a debtor or debtor’s dependents may be subtracted” from current monthly income.
In re Coup, No. 07-34195, 2008 Bankr. LEXIS 1792 (Bankr. N.D. Ohio June 6, 2008), finds it appropriate for a nonfiling spouse to contribute income to at least some of the household expenses.
In re Grubbs, No. 07-32822, 2007 Bankr. LEXIS 4282 (Bankr. E.D. Va. Dec. 14, 2007), holds that a nonfiling spouse’s income is “considered only to extent that the income is regularly contributed to the household expenses of the debtor.”
In re Barnes, 378 B.R. 774 (Bankr. D. S.C. 2007), include a nonfiling spouse’s bonus income in current monthly income “if it is paid on a regular basis for debtor’s household expenses”
In re Lightsey, 2007 WL 2363025 (Bkrtcy. S.D. Ga.)
The court in In re Adams, 2007 WL 3091583 (Bkrtcy.D.Md. October 18, 2007)(Schneider, J.) dismissed the debtor's chapter 7 case as an "abuse" under section 707(b)(1) based on the "totality of the circumstances" test of section 707(b)(3). Section 707(b)(3)'s totality of the circumstances test applies even if the presumption of abuse pursuant to section 707(b)(2) does not arise or is rebutted.
The court applied the test adopted by the Fourth Circuit in Green v. Staples (In re Green), 934 F.2d 568(4th Cir.1991) to determine whether the "totality of the circumstances" demonstrates abuse. The court noted that in Green it was held that in the finding of abuse, the court should consider 1. the debtor's ability to repay his debts, 2. whether the bankruptcy was due to sudden illness, calamity, disability, or unemployment, 3. whether the debtor incurred cash advances and made consumer purchases far in excess of his ability to repay, 4, whether the debtor's proposed family budget is excessive or unreasonable, 5., whether the debtor's schedules I and J of income and expenses reasonably reflect the true financial condition, and 6, whether the petition was filed in good faith.
The court found that five out of the six factors of In re Green applied in this case. The court found that the debtor, despite her lack of income, did have the ability to repay her debts based on the income of her non-filing spouse. The court found that the reported cases agree that if the debtor herself has no income, the court must take into account the income of the debtor's nonfiling spouse when the spouse receives significant income. See In re Travis, 353 B.R. 520, 530 (Bankr.E.D.Mich.2006)(the court should consider a non-filing spouse's income when it is "substantial enough to significantly raise the debtor's standard of living and generate total household income in excess of the reasonable costs of food, clothing, shelter, and other necessities"), In re Welch, 347 B.R. 247(W.D.Mich.2006), In re Staub, 256 B.R. 567, 571 (Bankr.M.D.Pa.2000)(considering nonfiling spouse's income when it was so great that it could pay off the entirety of debtor's unsecured debt in a matter of months). Contra, In re Baldino, 369 B.R. 858 (M.D. Pa. June 14, 2007)(nonfiling spouse's income considered only to the extent it contributes to household expenses of the debtor or his dependents and Bankruptcy Code does not mandate a non-filing spouse to live modestly or to devote hi income to the repayment of the filing spouse's debt). The court found that the debtor could repay her debtor if she made a reasonable budget. The court further found that it was not reasonable to pay $6,581 a month in mortgage payments and $1,884 a month in car payment with a household monthly net income of $7,740.
The court further found that the case was not filed due to a sudden illness, calamity, disability or unemployment. The court noted that the debtor's inability to sell their real property was not a "calamity" which contemplates a catastrophic event and not the mere inability to sell real property. The next factor the court found met was that the debtor incurred consumer expenses beyond her ability to repay at least under her present budget. Another factor the court found met was that the debtor's proposed budget was excessive and unreasonable.
Lastly, the court found that the case was not filed in good faith. The court found that the debtor and her husband engaged in acts designed to hinder, delay, and defraud creditors. The court noted that they built up debts in the debtor's name in order to invest in exempt assets or to reduce her nonfiling spouse's debts. The court pointed to the use of the debtor's credit cards to pay off the couple's jointly held exempt residence. The court also found that the couple lived a lavish lifestyle up to and during the bankruptcy case.
Further Cases:
In re Sharp, No. 07-72222, 2008 Bankr. LEXIS 2861 (Bankr. C.D. Ill. Aug. 21, 2008), found that “the portion of such spouse’s income which is not used on a regular basis for the household expenses of a debtor or debtor’s dependents may be subtracted” from current monthly income.
In re Coup, No. 07-34195, 2008 Bankr. LEXIS 1792 (Bankr. N.D. Ohio June 6, 2008), finds it appropriate for a nonfiling spouse to contribute income to at least some of the household expenses.
In re Grubbs, No. 07-32822, 2007 Bankr. LEXIS 4282 (Bankr. E.D. Va. Dec. 14, 2007), holds that a nonfiling spouse’s income is “considered only to extent that the income is regularly contributed to the household expenses of the debtor.”
In re Barnes, 378 B.R. 774 (Bankr. D. S.C. 2007), include a nonfiling spouse’s bonus income in current monthly income “if it is paid on a regular basis for debtor’s household expenses”
In re Lightsey, 2007 WL 2363025 (Bkrtcy. S.D. Ga.)
707(b) Means Test Does Not Preclude Consideration of Income/Expenses in 707(a) Motion to Dismiss
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
In the case of Perlin v. Hitachi Capital America Corp., ___ F.3d ___, 2007 WL 2215602 (3rd Cir. 2007), the Court held that the newly-added provisions of section 707(b), which create a presumption of abuse against consumer debtors who have an ability to repay (ie. the "means test"), do not impliedly prohibit a bankruptcy court from considering a debtor's income and expenses in adjudicating a motion to dismiss "for cause" under section 707(a). The Court further held that a bankruptcy court may consider a debtor's income and expense together with other factors in assessing dismissal for lack of good faith under section 707(a). In this case, the Court of Appeals found that the debtors' substantial income (debtor/husband was a radiologist) and comfortable lifestyle were insufficient to demonstrate bad faith and upheld the Bankruptcy Court's denial of the creditor's motion to dismiss the case.
In the proceedings below, the Bankruptcy Court denied the creditor's motion to dismiss the debtors' chapter 7 case on the ground that the case was filed in bad faith. In considering the motion to dismiss, the Bankruptcy Court refused to consider the debtors' substantial income and expenses as evidence of bad faith. The Bankruptcy Court reasoned that the negative implication of section 707(b) as amended by BAPCPA is that a bankruptcy court is precluded from considering a debtor's income and expenses in deciding a motion to dismiss under section 707(a). The Bankruptcy Court opined that the newly-created presumption of abuse under section 707(b), which arises when a consumer debtor meets a specified income/expense test, excludes the possibility that a debtor's ability to repay may be considered under a motion to dismiss under section 707(a). The appeal was certified directly to the Court of Appeals pursuant to 28 U.S.C. section 158(d)(2)(B).
The Court of Appeals reviewed that section 707(a) governs the dismissal of all bankruptcy filing where "cause" is shown and section 707(b) governs the dismissal only of bankruptcy filings involving primarily consumer debts where the granting of relief would be an "abuse". The Court noted that a debtor's lack of good faith in filing a bankruptcy petition is proper cause for dismissal under section 707(a).
The Court discussed that the principle of negative implication applies only when the expressed and unmentioned items are part of a commonly associated group or series that justifies the inference that items not mentioned were excluded by deliberate choice, not inadvertence. United States v. Vonn, 535 U.S. 55 (2002), Barnhart v. Peabody Coal Co., 537 U.S. 149 (2003). The Court held that this principle of negative implication does not apply herein as Congress has not treated consumer filings under section 707(b) and consumer non-filings under 707(a) as part of a commonly associated group or series. The Court noted that subsection (a) governs the dismissal of consumer and non-consumer bankruptcy filings where adequate "cause" has been shown and subsection (b) governs dismissal of only those bankruptcy filings involving primarily consumer debts when the granting of relief would be an "abuse" of Chapter 7. The Court further found that from a historical perspective in the enactments of subsection (a) and (b), Congress treated consumer filings under section 707(b) and consumer/non-consumer filings under section 707(a) differently and not as part of a package or "commonly associated group or series."
The Court also concluded that the legislative history of section 707(b) does not indicate that the modifications to section 707(b) imply anything about dismissal under section 707(a). The Court noted that the amendments to section 707(b) effectively tighten the dismissal procedures for consumer filing and there is no indication that Congress intended to restrict a bankruptcy court's discretion in deciding motions to dismiss under section 707(a).
The Court further held that in deciding a motion to dismiss "for cause" under section 707(a), a bankruptcy court may consider a debtor's substantial income and expenses together and ability to repay his debts together with other factors in assessing good faith. The Court noted that the consideration of income and expense factors is "consonant" with section 707(a) itself, as informed by precedent and the legislative history of section 707(a). The Court rejected the debtors' argument that the legislative history to section 707(a) indicates that the bankruptcy court may not consider a debtor's ability to repay his debts in deciding a motion to dismiss "for cause" under section 707(a). The Court concluded that although the legislative history of section 707(a) establishes that a debtor's ability to repay is an invalid cause for dismissal, it does not indicate that a bankruptcy court must ignore the economic reality of a debtor's financial situation in determining whether a valid "cause" for dismissal is present. The Court stated that an assessment of a debtor's good faith requires the consideration of all the facts and circumstances surrounding the debtor's filing for bankruptcy.
The Court though noted that a finding of lack of good faith should not be lightly inferred and that dismissal should be utilized only in egregious cases that entail concealed or misrepresented assets and/or sources of income, lavish lifestyles, and intention to avoid a large single debt based upon conduct akin to fraud, misconduct, or gross negligence. In re Zick, 931 F.2d 1124, 1129 (6th Cir.1991). The Court held that to avoid undercutting congressional intent, a bankruptcy court's ultimate finding of bad faith may not be based exclusively or primarily on a debtor's substantial financial means as otherwise dismissal would essentially be based upon a debtor's mere ability to repay which is expressly prohibited by the legislative history of section 707(a).
In this case, the Court stated that there was no evidence that the debtors' schemed to conceal or misrepresent income, inflated their expenses to hide income, filed misleading statements or schedules in an effort to defraud their creditors, unduly interfered with the judicial process, or engaged in any other misconduct. On the contrary, the Bankruptcy Court found that the debtors were straightforward in their schedules, with the Court, and their creditors and that the debtors did not time the filing of the case to shield a future source of income. Also the debt was accrued from a company which had a business plan with income projections that were not unreasonable. The Court of Appeals found that the debtors' substantial income and comfortable lifestyle were insufficient to demonstrate bad faith.
The Court of Appeals therefore upheld the Bankruptcy Court's denial of the motion to dismiss for lack of good faith under section 707(a).
In the case of Perlin v. Hitachi Capital America Corp., ___ F.3d ___, 2007 WL 2215602 (3rd Cir. 2007), the Court held that the newly-added provisions of section 707(b), which create a presumption of abuse against consumer debtors who have an ability to repay (ie. the "means test"), do not impliedly prohibit a bankruptcy court from considering a debtor's income and expenses in adjudicating a motion to dismiss "for cause" under section 707(a). The Court further held that a bankruptcy court may consider a debtor's income and expense together with other factors in assessing dismissal for lack of good faith under section 707(a). In this case, the Court of Appeals found that the debtors' substantial income (debtor/husband was a radiologist) and comfortable lifestyle were insufficient to demonstrate bad faith and upheld the Bankruptcy Court's denial of the creditor's motion to dismiss the case.
In the proceedings below, the Bankruptcy Court denied the creditor's motion to dismiss the debtors' chapter 7 case on the ground that the case was filed in bad faith. In considering the motion to dismiss, the Bankruptcy Court refused to consider the debtors' substantial income and expenses as evidence of bad faith. The Bankruptcy Court reasoned that the negative implication of section 707(b) as amended by BAPCPA is that a bankruptcy court is precluded from considering a debtor's income and expenses in deciding a motion to dismiss under section 707(a). The Bankruptcy Court opined that the newly-created presumption of abuse under section 707(b), which arises when a consumer debtor meets a specified income/expense test, excludes the possibility that a debtor's ability to repay may be considered under a motion to dismiss under section 707(a). The appeal was certified directly to the Court of Appeals pursuant to 28 U.S.C. section 158(d)(2)(B).
The Court of Appeals reviewed that section 707(a) governs the dismissal of all bankruptcy filing where "cause" is shown and section 707(b) governs the dismissal only of bankruptcy filings involving primarily consumer debts where the granting of relief would be an "abuse". The Court noted that a debtor's lack of good faith in filing a bankruptcy petition is proper cause for dismissal under section 707(a).
The Court discussed that the principle of negative implication applies only when the expressed and unmentioned items are part of a commonly associated group or series that justifies the inference that items not mentioned were excluded by deliberate choice, not inadvertence. United States v. Vonn, 535 U.S. 55 (2002), Barnhart v. Peabody Coal Co., 537 U.S. 149 (2003). The Court held that this principle of negative implication does not apply herein as Congress has not treated consumer filings under section 707(b) and consumer non-filings under 707(a) as part of a commonly associated group or series. The Court noted that subsection (a) governs the dismissal of consumer and non-consumer bankruptcy filings where adequate "cause" has been shown and subsection (b) governs dismissal of only those bankruptcy filings involving primarily consumer debts when the granting of relief would be an "abuse" of Chapter 7. The Court further found that from a historical perspective in the enactments of subsection (a) and (b), Congress treated consumer filings under section 707(b) and consumer/non-consumer filings under section 707(a) differently and not as part of a package or "commonly associated group or series."
The Court also concluded that the legislative history of section 707(b) does not indicate that the modifications to section 707(b) imply anything about dismissal under section 707(a). The Court noted that the amendments to section 707(b) effectively tighten the dismissal procedures for consumer filing and there is no indication that Congress intended to restrict a bankruptcy court's discretion in deciding motions to dismiss under section 707(a).
The Court further held that in deciding a motion to dismiss "for cause" under section 707(a), a bankruptcy court may consider a debtor's substantial income and expenses together and ability to repay his debts together with other factors in assessing good faith. The Court noted that the consideration of income and expense factors is "consonant" with section 707(a) itself, as informed by precedent and the legislative history of section 707(a). The Court rejected the debtors' argument that the legislative history to section 707(a) indicates that the bankruptcy court may not consider a debtor's ability to repay his debts in deciding a motion to dismiss "for cause" under section 707(a). The Court concluded that although the legislative history of section 707(a) establishes that a debtor's ability to repay is an invalid cause for dismissal, it does not indicate that a bankruptcy court must ignore the economic reality of a debtor's financial situation in determining whether a valid "cause" for dismissal is present. The Court stated that an assessment of a debtor's good faith requires the consideration of all the facts and circumstances surrounding the debtor's filing for bankruptcy.
The Court though noted that a finding of lack of good faith should not be lightly inferred and that dismissal should be utilized only in egregious cases that entail concealed or misrepresented assets and/or sources of income, lavish lifestyles, and intention to avoid a large single debt based upon conduct akin to fraud, misconduct, or gross negligence. In re Zick, 931 F.2d 1124, 1129 (6th Cir.1991). The Court held that to avoid undercutting congressional intent, a bankruptcy court's ultimate finding of bad faith may not be based exclusively or primarily on a debtor's substantial financial means as otherwise dismissal would essentially be based upon a debtor's mere ability to repay which is expressly prohibited by the legislative history of section 707(a).
In this case, the Court stated that there was no evidence that the debtors' schemed to conceal or misrepresent income, inflated their expenses to hide income, filed misleading statements or schedules in an effort to defraud their creditors, unduly interfered with the judicial process, or engaged in any other misconduct. On the contrary, the Bankruptcy Court found that the debtors were straightforward in their schedules, with the Court, and their creditors and that the debtors did not time the filing of the case to shield a future source of income. Also the debt was accrued from a company which had a business plan with income projections that were not unreasonable. The Court of Appeals found that the debtors' substantial income and comfortable lifestyle were insufficient to demonstrate bad faith.
The Court of Appeals therefore upheld the Bankruptcy Court's denial of the motion to dismiss for lack of good faith under section 707(a).
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